A guide to the double taxation agreements Papua New Guinea has with other countries and the application tax rates. Provided by KPMG’s Port Moresby office.

The PNG Government has concluded nine bi-lateral tax treaties, called Double Tax Agreements or DTAs. These generally allocate taxing rights over specific types of income derived by residents of the two respective treaty partner countries. Such DTAs apply to income taxes and other like taxes, such as salary and wages tax, but do not apply to GST. PNG has concluded a DTA with each of the following countries:

• Canada
• Australia
• Singapore
• United Kingdom
• Malaysia
• China
• Republic of Korea
• Fiji
• New Zealand
• Indonesia

Rates of tax applicable to residents of DTA countries, for the types of payments listed below, are the lesser of the domestic rates in the PNG tax law or the rates listed in each DTA. The current rates of tax applicable are:

These DTAs generally provide that income derived by a resident entity of one country, from sources in the other country, will not be taxable in that other country unless the entity is considered to be operating through a permanent establishment (or branch) in that other country. However, each DTA also contains its own unique definitional rules as to what constitutes a permanent establishment for these purposes.

The operation of the DTA framework has another practical application in PNG tax administration. Many PNG-based businesses engage foreign contractors and consultants to assist their businesses for short or even extended terms. A specific tax regime, called the foreign contractor tax provisions (see withholding and other taxes), applies to such engagements and some of these DTAs provide exemptions from this tax regime for short term and/or low value assignments.

This guide to Papua New Guinea’s tax system is produced by KPMG’s Papua New Guinea office and is reproduced here with permission.