Income-Tax General Information

Liability to Income Tax

Who pays income Tax?

All residents (including individuals and companies) are liable to income tax in Papua New Guinea on their world wide income. Non residents are liable to pay income tax on their PNG income.

Fiscal (Tax) Year
The PNG tax year is the calendar year running from 1 January to 31 December. Income tax returns must be based on that income period.

Taxpayers wishing to use a different accounting period may do so on application to the Commissioner General of Internal Revenue Commission. They must however agree to accept adjustments as needed which will equate their tax payments to those which would be payable if they were using a calendar year as their accounting period.

Lodgment of Returns of Income
Returns of income should be lodged by 28th Feb in the year next following the tax year. Returns should be made on the appropriate forms which are available free of charge from Internal Revenue Commission offices at various ports and GST offices or Post Offices throughout Papua New Guinea. In cases of taxpayer adopting Substituted Accounting Period (SAP), the returns will be due for lodgment within 60 days after the approved balance date. Where the returns cannot be lodged by 28th February, written application for extension of time should be made which will normally be allowed for a reasonable period.

If you received salary or wage income you generally do not need to lodge an annual income tax return unless you:

  • Have income from other sources of more than 100 Kina
  • Received a Housing Allowance where a Variation has been granted (click here for more information).
  • Received a Motor Vehicle Allowance where a Section 299E Variation has been granted (click here for more information).
  • Wish to claim a School Fee Rebate, or
  • You have been incorrectly taxed during the year of income.

However, if an employee incurred expenses in earning salary or wage income, and the expenses exceed K200 in any fiscal year, the employee may lodge an income tax return to claim a tax rebate calculated at 25% of the extent to which the expenses claimed exceed K200. For example, if expenses were K500 the employee would receive a refund of K75 (K300 x 25%).

Taxpayers who use a tax agent to prepare their income tax return will be required have their return lodged by their tax agent before an agreed time between the tax agent and the Commissioner General of Taxation

Joint Returns
Joint returns by a husband and wife are not possible under PNG Income Tax laws. Each individual is assessed and pays tax in his or her own right.

Calculation of taxable income

Broadly, income tax is calculated as follows:

Assessable income = gross income less exempt income
Taxable income = assessable income less allowable deductions
Tax payable = taxable income X tax rate less any credits or rebates.

Salary or Wage earners are subject to special rules. – add link to Salary & Wages

Gross Income

  • Gross incomes that are received using normal accounting practices. This includes such things as sales, rent, interest royalties etc. In addition the tax law may also include specific types of income (such as profits realized from the sale of assets acquired for the purpose of resale at a profit) as being assessable income.
  • Resident companies include the gross income from all sources. Non resident companies include income from Papua New Guinea sourced income.

Exempt Income.

  • Exempt income is income which is not subject to income tax in Papua New Guinea. Exempt income includes such things as education allowances, scholarships and bursaries, certain Papua New Guinea sourced dividends and income from activities where the law specifically exempts the income from tax.

Allowable deductions

  • Allowable deductions are those deductions that are permitted by the tax laws to be deducted from assessable income. In many cases the allowable deduction would be similar to the normal revenue expenses used to calculate net profit in the companies accounts. However, if the allowable deduction provided for in the tax law differs from accounting expenses, the deduction must be calculated using the appropriate tax law calculation.

Credits and Rebates

  • Taxpayers may, depending on their circumstances is entitled to claim a credit or rebate against the tax they would otherwise pay. An example of a credit they may claim is credit for foreign tax they have paid on dividends received from sources outside of Papua New Guinea. An example of a rebate is the school fee rebate that may be claimed by individuals with salary or wage income.

Losses: may be carried forward up to 20 years with effect from 1 January 2001. They cannot be carried back. Companies engaged in primary production such as production from mining and petroleum, farming and fishing operations, may carry losses forward indefinitely.

Capital Gains

  • There is no general capital gains tax in Papua New Guinea.