CORPORATE TAXES SIGNIFICANT DEVELOPMENTS
Legislation introducing value-added tax with effect from July 1, 1999 was passed by Parliament. The rate is to be 10%. Existing provincial sale's taxes will be abolished from that date, and import duties on the minority of goods will be reduced to offset the introduction of VAT.
TAXES ON CORPORATE INCOME
%
Income tax:
Resident companies (other than petroleum, gas or mining companies) 25
Nonresident companies (other than petroleum mining companies) ..... 48
Petroleum mining companies ....................................... 50
Petroleum operations attributable to a frontier area project ...... 35
Gas mining companies ........................................... 30
Large-scale mining operations ..................................... 35
Small-scale mining operations ..................................... 25
Additional profits tax:
General mining companies ...................................... 35
Nonresident general mining companies ............................ 48
Petroleum mining companies ...................................... 50
Petroleum operations attributable to a frontier area project ...... 35
Gas mining companies ........................................... 30
Additional profits tax is calculated on net profit after deduction of income tax paid and does not apply until after full recovery of the investment has been achieved.
There is no undistributed profits tax.
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CORPORATE RESIDENCE
A company incorporated in Papua New Guinea is a resident of Papua New Guinea for income tax purposes. A company not incorporated in Papua New Guinea is a resident of Papua New Guinea if it carries on business there and either (1) its central management and control are in Papua New Guinea or (2) its voting power is controlled by shareholders who are residents of Papua New Guinea.
OTHER TAXES
Value-added tax at the rate of 10 %is to be introduced with effect from July 1, 1999.Various transitional provisions will apply during the first 9 to 12 months, which may affect business decisions. A nominal sales tax on certain goods and services is levied by most provincial governments but will be abolished on June 30, 1999 with the introduction of VAT. Customs duties are levied on imports, though in many cases the rate will be 0% from July 1, 1999. excise duties apply to alcohol, aerated drinks, tobacco, and a range of items deemed to be luxury goods, such as vehicles. Export taxes are levied on the export sales proceeds of metal ores and concentrates and on timber. There is a training levy of 2% on payroll, but this is reduced by the cost of eligible training activities.
There are no taxes on capital, although stamp duty is imposed on a variety of transactions at varying rates. These include transfers of real property (duty of up to 5%), transfer of marketable securities (duty at 1%) and loan agreements (duty at 0.1%).
BRANCH INCOME
Income of nonresident companies from Papua New Guinea sources is taxed at 48%, but there is no further tax on the remittance of branch profits.
INCOME DETERMINATION
Inventory valuation/inventories may be valued at cost price, market selling value or replacement price. LIFO is not permitted. Where, because of obsolescence or other special circumstances, inventory should be valued at a lower amount, such lower valuation may be approved by the Commissioner General. Livestock owned by primary producers receives
special treatment. Conformity of book and tax reporting is not required.
Capital gains/Capital gains are subject to income tax only where the property was acquired for the purpose of resale at a profit or as part of a profit-making undertaking or scheme.
Intercompany dividends/Resident corporations include all dividends in assessable income but may claim a rebate against the tax payable thereon, reducing the tax applicable to dividends to nil.
Foreign income/A PNG company is taxed on its worldwide income as earned.
Double taxation of foreign income is avoided by means of foreign tax credits. Double taxation agreements have been concluded with Australia, Canada, the People's Republic of China, Germany, the Republic of Korea, Malaysia, Singapore, and the United Kingdom. An agreement has been signed with Fiji but has yet to be enacted.
Stock dividends/Stock dividends (bonus shares) must be included in the recipient's assessable inc
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