|The Investment Promotion Authority
The Government of Papua New Guinea
welcomes legitimate, non-speculative foreign investment and offers
assistance through the Investment Promotion Authority. Business people
investigating the investment potential of Papua New Guinea are advised to
contact the IPA in the first instance. The IPA was established by an Act
of Parliament to promote and facilitate investment in the country.
While there are few limits on the types
of investment possible by foreign investors, there may be specific laws in
place which investors must follow.
Foreign investors in resource-based
ventures are required, for example, to follow the laws of the government
departments specifically responsible for the resource. These relate to
investment in the mining and petroleum, agriculture, livestock, fisheries
and forestry sectors.
There are other laws and regulations
which will affect investors. These include laws of the National Government
which cover areas such as foreign exchange, taxation and customs matters.
Provincial governments and urban authorities may also require investors to
follow certain laws and regulations. It is the responsibility of investors
to comply with all relevant laws.
Investment & Export Promotion
The role of this division of the IPA is
to inform and educate the business community about investment
opportunities in Papua New Guinea. It also answers enquiries from the
public and facilitates business introductions through its database of
foreign and domestic investors. A monthly newsletter is produced and
highlights joint venture business opportunities. This division can assist
investors with preparation of project documentation.
Research and Information Services
Foreign enterprises (defined below)
wishing to carry on business in Papua New Guinea must lodge an application
for certification with this division. The process of certification is
explained later in this section. It is an offence for a foreign enterprise
to carry on business in Papua New Guinea without IPA approval. Investors
should note that these procedures are routine and must be undertaken to
comply with the requirements of the Investment Promotion Act. Foreign
investors, for example, may not conduct business in activities which are
reserved for Papua New Guinean citizens.
In Papua New Guinea, there are three
categories of business enterprises under the Investment Promotion Act -
citizen, national and foreign. A citizen enterprise is wholly-owned by a
citizen of Papua New Guinea, and includes the State.
A national enterprise is one which is
more than 50 per cent owned by a citizen of Papua New Guinea, unless it is
controlled by non-citizens.
A foreign enterprise is one which is 50
per cent or more owned or controlled by non-citizens.
The Government of Papua New Guinea is
currently reforming the rules and regulations in respect of certain
functions of the IPA. Investors are advised to contact the IPA for the
most up to date information on these aspects of the law.
Business Registration Division
This division is responsible for the
administration of Papua New Guinea’s key business laws with respect to
the registration of companies, business names and business groups, the
incorporation of associations and the registration of trademarks.
Business may be carried out in Papua New
Guinea in a number of legal forms. These include sole traders,
partnerships, private companies, public companies, branches of foreign
companies, joint ventures, business groups and trusts.
Each type of business organisation is
subject to particular regulations. Foreign investors usually establish a
private or public company or a branch of a foreign company. Before
commencing business in Papua New Guinea, it is necessary to incorporate a
company or register as a branch of a foreign company under the Companies
Foreign companies may obtain
registration by making an application in the correct form. Investors are
advised to seek independent professional advice about forming legal
structures which will best suit their needs. Investors should note that
even though a foreign company registered in Papua New Guinea is
incorporated in a foreign jurisdiction, it is still subject to the laws of
Papua New Guinea as well as those of the jurisdiction of its own country.
A PNG-registered company has Papua New
Guinea as its place of incorporation and is subject to the laws of Papua
A company incorporated in Papua New
Guinea is required to have two directors, one of whom must be resident in
the country. A foreign company registered in Papua New Guinea is required
to appoint an agent who is a resident in the country.
All companies carrying on business in
Papua New Guinea must register with the Registrar of Companies. It is an
offence for a company to carry on business without registration with the
Companies Office (within the Business Registration Division of the IPA).
The Trademarks Office exists to provide
protection for property rights in respect of intellectual property held by
persons both within and outside of Papua New Guinea who wish to carry on
business in this country. Businesses are encouraged to register their
trademarks in Papua New Guinea.
Applications for certification should be
lodged with the IPA using the prescribed form and accompanied by the
Investors are encouraged to contact the
IPA to receive the most up to date information on certification procedures
as reforms may result in procedural changes.
Currently, however, the application form
must be accompanied by supporting documentation, including the following,
Either the Certificate of
Incorporation or the Certificate of Registration as a foreign company;
Statement of criminal record for
natural persons and natural persons who are shareholders in a company
which is applying for certification;
Evidence of any change of names, if
Certificate of Registration of a
Business Name, if applicable;
A copy of the register of
shareholders and directors if the applicant is a company;
A copy of the register of directors
if the applicant is a corporate body;
Latest annual statement and the
balance sheet of the applicant, if applicable;
A copy of any agreement if a joint
venture is proposed; and,
Other documents that may be
requested by the IPA.
Investors may wish to expand or
diversify their business activities. In such cases, the terms of their
certificate may be varied by lodging an application for variation on the
Taxation, Customs and Excise
Ongoing comprehensive reforms of
taxation and trade policies have resulted in Papua New Guinea having one
of the lowest corporate income tax regimes in the region. Relative to
neighbouring countries, it provides a very competitive footing.
All income tax returns are based on the
income period 1 January to 31 December, unless approval is granted from
the Internal Revenue Commission (IRC) to adopt a substituted tax year.
Losses may be carried forward for up to seven years for normal businesses
and indefinitely for primary industry businesses. They cannot be carried
When royalties are paid by a resident to
an overseas recipient they are subject to a withholding tax of varying
rates depending on how the royalty is paid. These rates may be modified by
double tax treaties.
In its efforts to limit double taxation
of incomes in Papua New Guinea, the Government has struck a number of
agreements with key trading partners and continues to negotiate new
Companies engaged in business in Papua
New Guinea must appoint a public officer who is the representative of the
company in all its dealings with the IRC. The public officer need not be
an employee or shareholder of the company but must be resident in Papua
Individuals leaving the country do not
require tax clearance. However, amounts of money exceeding K50,000 per
person, per year, can be remitted only after a tax clearance certificate
has been obtained, certifying that no taxes are outstanding and all tax
requirements to date have been met. In most cases, two weeks notice should
be given. If money is being sent to a tax haven country, all amounts of
money, irrespective of size, require tax clearance.
Adult residents of Papua New Guinea may
remit up to the foreign currency equivalent of K500,000 each calendar year
for any purpose, subject to taxation clearance. Certain categories of
transactions do not count towards the remittance allowance. These include,
for example, payments which are trade related involving the physical
movement of goods.
Taxation of Companies
The world-wide income of resident
companies and the Papua New Guinea-sourced income of non-residents is
Companies incorporated in Papua New
Guinea or companies which carry on business in Papua New Guinea and whose
management and control is located in Papua New Guinea are resident
The tax laws define taxable income not
as accounting profit, but as "assessable income, less all allowable
Since there are a number of items of
both income and expense which require treatment for taxation purposes
which are different from accounting practice and convention, taxable
income frequently differs from accounting profit.
The main items of difference are
depreciation, mining expenditure, valuation of inventories, provisions for
such expenses as doubtful debts and deferred employee benefits, management
fees, dividends and royalties and expenses for which there is a double
Specific time periods cover write-offs
under the mining and petroleum provisions in the Income Tax Act, as well
as a limit of 11 years in which exploration expenditure can be accumulated
before a Special Mining Lease (SML) or Petroleum Development Licence (PDL)
Losses in primary production can be
carried forward indefinitely. For a corporation to be able to carry
forward losses, there must be continuity of either ownership or nature and
conduct of business.
Income Tax Rates
The rates of company tax are:
Resident companies not engaged in
mining or petroleum operations - 25 per cent
Non-resident companies, including
those engaged in mining operations - 48 per cent
Resident mining companies - 35 per
Petroleum companies, resident and
non-resident - 50 per cent
Dividend Withholding Tax
Whenever a Papua New Guinea resident
company (other than a petroleum company), pays a dividend it must deduct
17 per cent dividend withholding tax (dwt) and remit it to the IRC. The
dwt is legally a tax on the recipient of the dividend and its subsequent
status therefore depends on the status of the recipient.
Sales and services taxes, imposed on
consumer goods and services, are levied by provincial governments. They
provide a major source of revenue. The average tax is three per cent.
Present tax reforms will see sales taxes replaced by a Value Added Tax
(VAT) to be introduced in the near future. A formula on the collection of
the provinces’ share of the VAT is expected to be discussed with the
All businesses whose annual payroll
exceeds K100,000 are subject to a two per cent training levy. Internal
expenditure on training is allowed as a deduction to reduce calculated
Natural Resources Tax
Mining operations are required to pay a
royalty of 1.25 per cent on the f.o.b. export sales value of mined
products or net smelter returns. For petroleum products, it is based on
the net wellhead value.
Export duties are imposed on exports of
logs and fish, including shellfish, at varying rates.
Income Reporting System
Certain types of income must be reported
to the IRC by 15 March in the following year. The system applies to
certain business payments in a range of industries.
Management Fee (Withholding) Tax
All management and administration fees
paid overseas for services performed outside Papua New Guinea are subject
to a 17 per cent withholding tax. The tax does not apply to non-residents
who are operating through a permanent branch in Papua New Guinea. In
certain cases the tax does not apply where a double tax agreement is in
force between Papua New Guinea and the recipient country.
Foreign Contractor (Withholding) Tax
When a person or company in Papua New
Guinea engages a non-resident contractor to carry out building or
construction work in Papua New Guinea they are required to pay withholding
tax of 12 per cent.
When freight is paid to an overseas ship
carrying goods within or from Papua New Guinea, a withholding tax is
deductible amounting to 2.4 per cent of the goods’ freight charge.
Timber and Logging
Timber and logging companies are allowed
to deduct the capital costs incurred in the building of access roads, the
provision of housing and amenities for employees and the provision of
structural improvements for the secondary processing of timber.
The total cost is deductible over either
the term of the timber lease or 15 years, whichever is the lesser.
In addition, timber companies which
reafforest logged areas qualify as primary producers and are allowed a
deduction for the full cost of reafforestation, in the years in which the
expenditure is incurred, as well as the indefinite carrying forward of
Papua New Guinea businesses insured with
non-resident insurers are required to pay tax on premiums paid to the
insurer at the rate of 4.8 per cent of the gross premium.
Taxation of Individuals
The Papua New Guinea-sourced income of
non-resident individuals and the world-wide taxable income of resident
individuals are taxed.
The Income Tax Act includes as a
resident, anyone who has been in Papua New Guinea for more than six months
during the year, whether continuously or intermittently, unless the person
did not intend becoming a resident (the person did not enter Papua New
Guinea with the intention of staying for more than six months).
Income Tax Rates
The top marginal tax rate is 35 per cent
for those earning incomes above K20,000 per annum.
All remunerations paid by way of
allowance to an employee for services rendered are fully-taxable in the
hands of the employee, unless specifically exempted by the Income Tax Act.
Provisional tax is levied on non-salary
or wages income to ensure that, as far as possible, all income is taxed in
the year in which it is earned. Every taxpayer who earns in excess of K100
from non-salary or wages sources has a liability to pay provisional tax.
Land taxes are imposed by about 12
provincial governments plus the National Capital District Commission at
fairly nominal levels.
The National Government imposes duties
on documents evidencing certain transactions. The rates vary with the type
Customs and Excise
The Internal Revenue Commission uses the
Harmonised Commodity Description and Coding System (H S Tariff).
All importers of goods are equally
liable to import duty, irrespective of the country of origin. The same
tariff is therefore applied to all countries.
All import and export duties are
specified under the Customs Tariff Act 1990 but there are provisions to
allow for exemptions or reductions to import and export duties after
special consultants have investigated the warranting of such action.
The Government has been concerned at
past excessive levels of protection for some domestic producers. Tariff
reforms began with the 1996 National Budget. It was announced that the
reforms will lead to significantly lower tariff bands for raw materials
and inputs, intermediate products and final products, and a moderate
protective tariff rate.
This tarrif reform exercise is allied
with the introduction of the Value Added Tax.
The tariff reforms will take place over
the next three years. The main policies include:
Maintain general imports at 11%
until the introduction of a VAT;
Emphasise the duty drawback system
Phased reductions from 8% to 5% in
1997 for a range of business inputs;
Maintain a 40% protective rate for
viable infant industries;
Move from non-tariff protection to
the 40% protective rate;
Customs duties are imposed on most
imports other than rice (part of the Papua New Guinea’s staple diet),
medical supplies and certain newspapers, magazines and children's books.
Also exempt from import duties are certain specified goods, including:
All aircraft, helicopters,
spacecraft, air-cushion vehicles, hovercrafts, aircraft engines and
all other parts specifically designed when purchased and imported by
Papua New Guinea registered companies, holding PNG airline operator’s
All cruise ships, excursion boats,
ferry boats, tankers, refrigerated vessels, other vessels for the
transport of goods, hovercrafts, fishing vessels, tugs, dredgers,
floating or drilling platforms (except pleasure yachts and sports
boats) when purchased and imported by Papua New Guinea registered
Marine propulsion engines and
outboard motors up to 100hp when purchased and imported by Papua New
Guinea registered companies.
The requirements for entry permit
applications are listed below. These are the main guidelines for employers
recruiting non-citizens for employment purposes in Papua New Guinea. The
following information will be required by the Papua New Guinea Department
of Foreign Affairs and Trade.
(1) Written sponsorship letter by employer stating:
|Offer of job highlighting position number, title
and period of contract approved by the Department of Industrial
|Copy of letter of offer to employee (stating
|Company to provide guarantee of accommodation,
transportation, etc. and eventual repatriation to country of
(2) Full curriculum vitae
Full personal particulars of the applicant and
his/her dependents, (if any/whether travelling/not travelling) as
|Date of birth;|
|Citizenship status during last ten years;|
|Educational qualifications (with copies of
certificates to be attached);|
|Employment history (with copies of references to
(3) Copy of migration service fee receipt must be
(4) Original copy of maintenance guarantee bond.
(5) For employment for periods six
months and over, a copy of work permit from the Department of
Industrial Relations is necessary.
(6) For short term employment for
periods up to three months, a copy of letter of approval from the
Department of Industrial Relations is required.
Note: For Government contracts, aid
organisations and churches (all religious workers - ministers of
religion, pastors, nuns and brothers) a copy of letter of exemption
from the Department of Industrial Relations is required.
The Department of Foreign Affairs and Trade will
require payment of a fee in respect of:
|Migration Service Fee for facilitation of visa by
| Dependant Visa(s)|
It is necessary for foreigners to apply
for a work permit for each non-citizen employee employed in Papua New
Guinea. The work permit application must be accompanied by a training and
localisation program in accordance with the Employment of Non-Citizens
Act. This program is to monitor the entry of all immigrants in to Papua
New Guinea, approve the positions in which they can work and ensure that
there is a program for the transfer of skills to Papua New Guinean
Each work permit is for a particular
"position" and is generally valid for a period of three years.
During this period it is possible to replace the employee working in that
position without obtaining approval for a new position.