Review of Papua New Guinea's tax laws and revenue administration

Tax measures in the 2016 National Budget were set in the context of a recently released report from the Taxation Review Committee on its comprehensive review of the tax law and revenue administration in Papua New Guinea. There have been few changes to tax laws in PNG, and the recommendations of the committee are being considered by the Treasury.

The budget introduced a goods and services tax (GST) import deferral scheme that allows approved importers to defer payment of import GST to the time of lodgement of their next GST return. The corresponding input tax credit can be claimed at the same time, resulting in a zero net cash outflow for approved importers.

The government also announced it would continue to support PNG’s membership of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. This will be done while the government suspends negotiations regarding any new double tax agreements until the “base erosion and profit shifting” report by the OECD has been fully considered by PNG.

Taxation Review Commitee

In October 2015 the government received the report from the Taxation Review Committee following two years of work by the body, and the Treasury is considering the recommendations of the report with a view to reforming measures being introduced from 2016.

The stated objectives of the review were to:

• Align PNG’s revenue system with its developmental aspiration of becoming a competitive middle-income nation in the “Asian century”;

• Improve the competitiveness and efficiency of PNG’s taxation system to encourage investment and employment growth, including overall economic development;

• Consider options to change the tax mix between the levels of taxation on land (including resources), capital and labour;

• Ensure that PNG’s tax system remains fair, simple, user friendly and equitable; and

• Improve taxpayer compliance by considering options to enhance services to taxpayers and reduce the cost of compliance through the use of modern technology. The Taxation Review Committee’s report suggested a timetable of five years to address the complex nature of the recommendations raised in the report. The committee also acknowledged the very real challenge of ensuring that the tax reform was backed by a solid policy foundation, recommending a number of new bodies be established to provide this guidance.

The issues slated for consideration in the budget process for 2016 and future years include:

• Changing the mechanism though which inputs to the resource sector are zero rated for GST to a system though which the supplies by the sector are zero rated. This would have the implication of a significant administrative change for those involved;

• Revision of the dividend withholding tax rate applicable to all dividends (including mining and petroleum sectors) to 15%, subject to any available tax treaty reductions;

• Introduction of a capital gains tax initially only to apply to real property, but including resource licences;

• Suspension of the infrastructure tax credit scheme;

• Amendment of the concessional tax treatment for housing;

• Restriction of the use of fiscal stability agreements;

• Application of an Additional Profits Tax at a rate of 35% to new mining, oil and gas projects;

• Review of the taxation of retirement benefits; and

• Application of excise to telecoms services. However, more positive items are also included on the list, including:

• Abolishing the training levy;

• Aligning the effective post dividend tax rate between local and domestic companies;

• Removing stamp duty; and

• Reducing the corporate income tax rate to 25% over time. In addition to legislative and technical changes the committee has also addressed the revenue administration system in PNG and made a number of recommendations for improvement in administration at the Internal Revenue Commission and Customs. The committee recommends the establishment of a Revenue Administration Board to oversee all revenue administration functions in PNG.

Tax Regime

PNG’s tax regime is based on the Income Tax Act, the GST Act, the Customs Act and the Excise Tax Act, and is supported by related legislation and regulations. Within the Income Tax Act, a specific set of rules applies to taxpayers operating in the natural resources sector (namely the mining, gas and petroleum segments), while the general provisions of the other laws apply to all other taxpayers as well as to those taxpayers engaged in mining, petroleum or gas operations.

Types Of Corporate Entity 

A number of different types of legal entities are available to those looking to do business in PNG. These include incorporating a PNG company (a “subsidiary”), registering as an overseas company in PNG (a “PNG branch”), entering into a partnership agreement, and establishing a trust. The choice of entity is generally based on the commercial goals of the enterprise, legal and regulatory requirements, and the consequences for taxation. Most foreign enterprises operating in PNG do so through a subsidiary or branch.

Companies Act Requirements

Where a company incorporated outside PNG commences to carry on business in PNG it is required on commencement to register as an overseas company under the Companies Act. For the purposes of the Companies Act the term “carrying on business” is given an extended meaning but otherwise has its ordinary meaning. As a general proposition, an overseas company that enters into a contract for work to be done in PNG and undertakes work there for a period of more than 30 days would be regarded as carrying on business in PNG for the purposes of the Companies Act.

Investment Promotion Act

Companies with foreign shareholdings of 50% or more (held or controlled by non-citizens of PNG) are required to be certified by the Investment Promotion Authority (IPA) before they can carry on business in PNG.

The meaning of carrying on business for the purposes of the Investment Promotion Act, so far as is relevant, is identical to the meaning of carrying on business for the purposes of the Companies Act. It follows that this requirement applies whether an overseas company intends to carry on business in PNG through a subsidiary or through a branch.

Residence Rules For Corporate Tax

A company is deemed a resident for corporate income tax (CIT) purposes if it meets either the incorporation test or the management and control test.

• Incorporation test: A company incorporated in PNG is automatically regarded as a PNG tax resident. However, the law of another country and a relevant double taxation agreement (DTA) may result in a company also being treated as a resident in another country.

• Management and control test: A company is a PNG tax resident if it is managed and controlled in PNG, regardless of where it is incorporated.

Generally, a company is managed and controlled in PNG if key decisions affecting the company are made at directors’ meetings held in PNG. This includes a company incorporated outside PNG that trades in PNG and has its voting power controlled by resident shareholders.

Permanent Establishment

The concept of permanent establishment (PE) has limited significance in PNG’s domestic taxation law and is defined to mean a place at or through which a person carries on any business. Under domestic taxation law, PNG will seek to tax the income of a non-resident that is sourced in PNG whether or not that income is derived at or through a PE in PNG. Where PNG has entered into a DTA, the concept of PE becomes more important, as it will then be one of the factors determining PNG’s taxing rights over income sourced in PNG, particularly with respect to the business profits of a non-resident company. In general terms, PNG’s DTAs:

• Define a PE to be a fixed place at or through which the business of an enterprise is wholly or partly carried on; and

• Deem a PE to exist in various circumstances, including those relating to the presence of substantial equipment in PNG and the time spent by personnel of an enterprise furnishing services in PNG.

Corporate Taxation

Companies that are deemed resident of PNG are liable for income tax on their worldwide income. Companies that are not resident in PNG are only required to remit tax on income sourced in PNG. A non-resident’s PNG-sourced passive income, including dividends, interest and royalties, is generally only subject to withholding tax (WHT). Generally, the payer of the dividend, interest or royalty must withhold the relevant amount of the tax and remit this to PNG’s IRC.

PNG’s CIT is levied on companies on a flat rate basis. It is the operations of a company, rather than its taxable income level, that dictate the rate applied to its taxable income. Generally, trading profits and other income (except income that is specifically exempt) of resident companies in PNG are assessed tax at a rate of 30%, whereas non-resident companies that carry on operations in PNG are assessed tax at a rate of 48%. However, there are different tax rates for income derived from mining, petroleum and gas operations undertaken in the country.

Trading profits and other income from operations in PNG are liable for CIT at varying rates according to the source of income (see table):

1. Taxable income: Taxable income is defined as the sum of assessable income minus allowable deductions. In practice, profits are calculated for tax purposes by reference to the profits reported in the financial accounts. Accounts must be prepared in accordance with PNG accounting principles, which follow the International Financial Reporting Standards (IFRS).

2. Dividend income: Dividends are included in the assessable income of a resident company shareholder unless otherwise exempt from CIT.

• Inter-company dividends: Dividends received by a resident company from other companies, whether resident or non-resident, while being assessable to tax, are generally subject to a full tax rebate and are effectively received tax-free.

However, where a company has losses on other activities or losses carried over from earlier years, those losses are applied against dividend income before the calculation of the dividend rebate.

• Stock dividends: In most cases, the payment of a dividend by way of the issue of shares is subject to the same taxation treatment as the payment of a dividend by way of cash or the distribution of other property. However, dividends paid by the issue of shares wholly and exclusively out of profits arising from the sale or revaluation of assets not acquired for the purpose of resale at a profit are exempt from income tax and dividends WHT.

3. Interest income: Unless exempt under specific provisions, any interest paid or credited by a financial institution, the central bank or a company to a person who is resident in PNG is included in income, and the institution or person paying the interest in the account is liable to withhold and pay tax upon the amount.

4. Exchange gains: Generally, foreign exchange gains realised and derived from debts made on or after November 11, 1986 and denominated in a currency other than the PNG kina are included in assessable income. Realised foreign exchange gains on revenue items are also included in assessable income.

5. Foreign income: PNG resident companies are liable for CIT on their income from all sources, including income that is derived from foreign sources. However, a foreign tax credit may be available to offset foreign tax paid against the tax payable in PNG (see tax credits and incentives section).

There are no provisions in PNG that permit the deferral of the taxation of income derived outside PNG. Subject to the operation of a DTA, foreign-sourced income derived by a resident of PNG is subject to tax in PNG in the year in which it is derived whether or not that income is repatriated to PNG.

6. Deductions: General deduction provisions provide that all losses and expenditures, to the extent that they are incurred in gaining or producing the assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing that income, are allowable deductions.

However, the general deduction provisions do not allow a deduction to the extent that a loss or expenditure is an outgoing of capital, or of a capital, private, or domestic nature, or incurred in relation to the gaining or production of exempt income.

7. Exchange losses: Generally, foreign exchange losses realised and derived from debts made on or after November 11, 1986 and denominated in a currency other than the PNG kina are an allowable deduction. Realised foreign exchange losses on revenue items are also allowable deductions.

Interest Expenses - Thin Capitalisation

A deduction is generally available for interest incurred on an arm’s-length basis, subject to meeting the general principles and conditions for deductibility. Where interest is incurred in connection with the construction or acquisition of an item of plant or a capital asset, that interest is not immediately deductible. Rather, such interest is deemed to form part of the cost of that asset itself. In the case of plant, this interest will form part of the base from which future depreciation deductions are claimed.

PNG’s thin capitalisation rules apply to PNG companies across all industries with a debt-to-equity ratio of 3:1 for taxpayers in the natural resource sector (namely mining, oil and gas) and a ratio of 2:1 for all other taxpayers. The thin capitalisation rules do not apply to licensed financial institutions. If the ratio is breached, a proportion of interest paid will be denied as a tax deduction.

Capital Gains

There is no general capital gains tax in PNG. However, profits arising from the sale of property acquired for the purpose of resale at a profit, or from the carrying out of a profit-making scheme, are taxable as ordinary income.

Net Operating Losses

Domestic trading losses may be offset against all income received in the same accounting period or carried forward and offset against future trading profits. The limitation period on the carrying forward of losses is generally 20 years. Losses may not be carried back against prior years’ profits. Primary production losses and resource project losses may be carried forward without a time limitation, although, again, they may not be carried back (see tax credits and incentives section). The deduction of losses is subject to a 50% or more continuity of shareholding and control test, or a continuity of business test where there is a breach of the ownership test.

Foreign losses incurred by a resident taxpayer from a source outside PNG (other than in relation to export market development) are not deductible against assessable income derived within PNG. In practice, overseas losses can be carried forward and offset against overseas income for up to 20 years.

Payments To Foreign Affiliates (Management Fees)

The deduction available to a taxpayer for management fees paid to an associated person is limited to the greater of:

• 2% of the assessable income derived from PNG sources by the taxpayer; or

• 2% of the total allowable deductions, excluding management fees incurred by the taxpayer in PNG. The limitation is applicable to both resident and non-resident taxpayers. Special rules apply to mining, petroleum and gas companies. These limits may not apply where the recipient of the management fee is resident in a country with which PNG has a DTA or where it can be demonstrated that the management fee arrangements do not have the purposes or effect of avoiding or altering the income tax payable in PNG.

Withholding Taxes

As with most jurisdictions around the world, withholding taxes comprise an important part of PNG’s tax revenue collection regime. Details of PNG’s major withholding taxes are provided below.

Dividend (withholding) tax: Dividends, including those paid to residents, are generally subject to a 17% dividend withholding tax, except dividends paid by mining companies, which attract a 10% withholding tax, and dividends paid out of petroleum or gas income, which are exempt from income tax and dividend withholding tax. Dividends paid to any of the country’s superannuation funds are exempt from the withholding tax.

Interest (withholding) tax: Where interest is paid or credited by any person to a non-resident or to a resident, a 15% withholding tax must be deducted. The withholding tax acts as a final tax for non-residents and the rate may be reduced where the recipient is a resident of a country with which PNG has a DTA. The withholding tax does not apply to interest paid to a non-resident lender by companies engaged in mining, petroleum or gas operations in PNG.

Royalty (withholding) tax: Tax is imposed on royalties and similar payments made to non-residents who do not have a permanent establishment in PNG. The tax must be withheld by the payer on behalf of the payee and remitted to the IRC. The tax payable on royalties to a party who is not an “associated person” is the lesser of:

• 48% of the net royalty – i.e. gross royalty, less applicable expenses; and

• 10% of the gross royalty. Royalty payments to a non-resident “associated person” are liable for a withholding tax of 30% of gross payments (subject to any DTA), with no option to adopt the net income basis.

The definition of “associated person” is detailed and widely drawn. Broadly, it encompasses relatives, partners, companies under effective common control, and related trust interests. There is also a 5% withholding tax on mining, petroleum, timber and fishing royalties to landowners.

Management fee (withholding) tax: A 17% withholding tax applies to management fees and technical fees paid to non-residents. The withholding tax only applies to the amount allowable as a tax deduction. The tax must be remitted to the IRC within 21 days after the month in which such fees are paid or credited.

Foreign contractors withholding tax (FCWT): There are specific provisions included within the Income Tax Act which deal with the taxation of non-residents, other than individuals, who conduct certain contract activities in PNG. Such non-residents are referred to as “foreign contractors”.

The contract activities include undertaking installation and construction projects or providing professional and consultancy services in PNG, and equipment lease and charter payments. Income derived from these contacts is subject to foreign contractor withholding tax on a deemed taxable income equal to 25% of the gross contract income, which is taxed at the rate of 48%. This equates to a withholding tax of 12% of gross income.

If the IRC is satisfied as to the actual net profit, then it will, on application by the foreign contractor, allow the foreign contractor to be taxed on the basis of the taxable income determined under normal principles. Where the foreign contractor is taxed on the actual taxable income, the amount which is deductible for general administration and management expenses (other than expenses relating directly to the derivation of the PNG income) may not exceed the lesser of:

• 5% of the gross income from the contract; or

• the same proportion of the worldwide general administration and management expenses as the gross income from the contract bears to the worldwide income. The PNG contracting entity must provide the IRC with a copy of a relevant contract within 14 days of its signing following which the foreign contractor’s withholding tax can be deducted from payment to the foreign contractor. A foreign contractor tax file number application must be lodged with the IRC at the same time. Where tax is withheld from the foreign contractor, the deductions are to be remitted to the IRC within 21 days after the end of the month in which the payment was made.

Non-Resident Insurer's Tax

Premiums paid to non-resident insurers in respect of insurance contracts on property situated in PNG or insured events that can only occur in PNG are subject to tax in PNG. The tax is calculated on a deemed taxable income equal to 10% of the gross premium, which is taxed at the non-resident tax rates of 48% ( companies) or 30% (unincorporated associations). Tax treaties may limit the rate of tax applied.

Overseas Shipper Tax

Income derived by overseas shippers or charterers carrying passengers, livestock, mail or goods out of PNG is liable to taxation in PNG. The tax is calculated on a deemed taxable income equal to 5% of the gross income, which is taxable at the non-resident rate of 48% in the case of companies.

The IRC may exempt the overseas shipper from such tax if the shipper’s home country itself exempts PNG shippers from a similar tax.

Double Tax Agreements

PNG has concluded DTAs with Australia, Canada, China, Fiji, Germany, Indonesia, Korea, Malaysia, New Zealand, Singapore and the UK. However, as of May 2016, Germany had not yet ratified the treaty. Furthermore, PNG has negotiated but not yet ratified a DTA with Thailand (see table on next page).

Rates of tax imposed on payments to non-residents and the liability of non-residents to PNG tax may be affected by a DTA, and these rates are summarised below. PNG domestic legislation provides an exemption from withholding tax for interest and dividends under certain circumstances. The higher rates quoted are the maximum rates allowable under the DTA; however, the domestic exemption may still apply under some circumstances.

Transfer Pricing

Where transactions involving non-residents are held not to be at arm’s length, the IRC may impose an arm’s length consideration for income tax purposes and determine the source of any income arising from such transactions.

Corporate taxpayers (including companies, superannuation funds, associates and unit trusts) which have transactions or dealings with international related parties that exceed PGK100,000 ($34,100) in an income year, or have aggregated loan balances with international related parties in excess of PGK2m ($683,000) at any time during an income year, are required to prepare and lodge an International Dealings Schedule (IDS) with their income tax return for that year of income. The IDS requires disclosures to be made of the nature of the transactions with international related parties, the underlying transfer pricing methodologies followed to determine transfer prices and the nature of documentation supporting those pricing methodologies.

Business Income Withholding Tax

Payers who make an “eligible payment” of PGK5000 ($1710) or more in relation to one contract are required to register with the IRC as a paying authority and attend to the obligations imposed on it under the act. Broadly, eligible payments are payments for services including construction, road transportation, motor vehicle repairs, joinery services, hiring or leasing of equipment, and security services.

Where a business income payee enters into a contract with a paying authority to perform work or becomes entitled to receive a business income payment and does not produce a certificate of compliance, a 10% business income withholding tax is required to be deducted by the paying authority based on the gross payment. Furthermore, the withholding tax deducted must be remitted to the IRC within 14 days after the end of the month in which the tax was deducted.

Tax Credits & Incentives 

Foreign tax credit: A foreign tax credit may be available to offset foreign tax paid against PNG tax payable. The foreign tax credit is limited to either the foreign tax paid or the average PNG tax payable on that foreign income, whichever is less. There is no mechanism to carry forward excess foreign tax credits for utilisation in a subsequent year.

R&D deduction: A 100% tax deduction is available for approved expenditures on research and development (R&D). The deduction is available to all sectors and segments of the PNG economy.

Broadly, R&D expenditures are defined as systematic, investigative, and experimental activities that involve innovation or a high degree of technical risk carried out for the purpose of acquiring new knowledge, or creating new or improved materials, products, devices, processes or services. To qualify, the expenditure must be incurred in accordance with an approved R&D expenditure plan.

Incentive rate for large-scale tourist accommo- dation facilities: A 20% tax rate applies to income derived by a taxpayer from the operation of a large-scale tourist accommodation facility or a substantially improved large-scale tourist accommodation facility. The rate applies for 14 years after the end of the year of income in which the taxpayer first derives income from the facility. This incentive only applies to facilities where construction commenced between January 1, 2007 and December 31, 2011.

Double deduction for staff training costs: Certain staff training costs, including the cost of full-time training officers and tourism training, are eligible for a double deduction. The total tax saving is limited to 75% of the expenditure incurred.

Double deduction for export market development costs: Expenditures incurred in the promotion for sale outside PNG of goods manufactured in the country or incurred in the promotion of tourism are eligible for double deduction. The total tax saving cannot exceed 75% of the expenditure incurred.

Tax credit for infrastructure development: A tax credit is available to companies engaged in agricultural, mining, petroleum, gas and certain tourism activities that incur expenditure on a prescribed infrastructure development.

In the case of taxpayers that are engaged in mining, petroleum and natural gas operations, the tax credit is limited to a total of 0.75% of the assessable income or the amount of tax payable for the year (in respect of that mining, petroleum, or natural gas project), whichever is less. Excess expenditure over the 0.75% or tax payable may be included in the following year’s tax credit claim.

Unutilised credits can generally only be carried forward for two years. In the case of taxpayers engaged in agricultural production, the credit is limited to 1.5% of the assessable income or the amount of tax payable for the year, whichever is less.

A prescribed infrastructure development includes a school, aid post, hospital road and other capital assets that have been approved as such by the Department of National Planning and the IRC. It cannot be an expenditure required under the Mining Act or the Oil and Gas Act.

A 1.25% tax credit scheme also exists in respect of expenditure incurred in connection with the emergency repair of the Highlands Highway.

Agricultural production extension services deduction: A 150% deduction is available for expenditure on services provided free of charge to smallholder growers, including the provision of advice, training, and technical assistance in relation to primary production and delivered for the purpose of assisting growers with production, processing, packaging and marketing issues.

Other Tax Incentives

Other tax incentives available in PNG include:

• Primary production – 100% deduction for most capital expenditure on primary production;

• Exemption of income derived from the export of certain manufactured goods;

• Immediate deduction for the costs of acquiring and installing solar heating plants;

• A 10-year tax exemption for qualifying new business located in prescribed remote areas of PNG; and

• A specific deduction for environmental protection and clean-up costs.

Taxation Of Other Entities

Partnerships: A partnership is defined to include any association of persons in receipt of income jointly. The members of a partnership include their individual share of the profit or loss of the partnership in their own tax returns. The partnership itself is not subject to tax, although it is required to file a tax return.

Joint ventures: Unincorporated joint ventures are permitted to carry on mining and petroleum operations and the respective joint venture partners are assessed on their individual share of income on a project basis. Joint venture operators of a resource project are required to submit a “consolidated financial statement” for the joint venture as a whole, within two months of the end of the year of income. This consolidated financial statement must enumerate details of all expenditure incurred throughout the year.

Furthermore, each joint venture partner will be required to reconcile their tax return to the consolidated financial statement. The joint venture itself is not subject to tax and is not required to file an income tax return.

Trusts: A trustee of a resident trust estate is taxed on the net income of the trust estate at the rate of 30%. The beneficiaries of a trust estate are also subject to income tax on their entitlement to the net income and on actual distribution.

Landowner Resources Trusts: Where interests in various natural resources projects are held in trust for landowners, a trust may be approved by the Minister of Finance to be a Landowner Resources Trust. Net income derived by the Landowner Resources Trust is taxed at the rate of 25%. The tax is payable by the trustee. Distributions of income and capital by a Landowner Resources Trust to its beneficiaries are exempt from income tax in the hands of the beneficiaries.

Superannuation funds: A superannuation fund is resident if it is established or managed in PNG. The taxable income of a resident superannuation fund is subject to tax at the rate of 25%. Dividends paid to a superannuation fund qualify for the dividend rebate and are exempt from dividend withholding tax if the fund is an authorised fund. Where an employer’s contributions to a superannuation fund exceed 15% of an employee’s fully taxed salary or wages, the excess contribution is included as assessable income of the superannuation fund.

Individual Taxation

PNG taxation applies to individuals. However, the scope and tax rates that apply are dependent on the resident status of the individual and the source from which their income is derived. For individuals who are residents of PNG, PNG taxation applies to their worldwide income at marginal tax rates.

For non-residents, however, only income that is sourced in PNG is subject to PNG tax, and at different tax rates to those which residents are subject to. In broad terms, an individual will be treated as a resident of PNG in a given year of income if they spend, continuously or intermittently, more than six months in the country during that year.

Assessable income: Each resident individual is assessed separately; there is no joint assessment for husbands and wives. Taxpayers who have only employment income and are fully taxed at source by virtue of the salary or wages tax do not need to complete an annual income tax return. Taxpayers with other income such as interest, dividends, rental income, trust distribution or partnership income must disclose this in an annual income tax return.

Benefits provided to employees: Certain benefits provided to employees are taxed in the hands of the employees at “prescribed values”. These benefits include accommodation, housing allowance, motor vehicle, education expenses, leave fares, meals, telephone, cash allowances and contributions by employer to an approved or overseas superannuation fund. Other fringe benefits such as the provision of entertainment, club subscriptions, domestic electricity and domestic services are not deductible to the employer for income tax purposes.

Other Taxes

Goods and services tax (GST): Broadly, PNG’s GST is imposed at the rate of 10% on the supply of most goods and services in PNG. The GST Act which came into force in 2003 defines the term “supply” as including all forms of supply, such as the sale, transfer, hire or lease of goods, and the provision of services. A supply for GST purposes falls into one of the following three categories:

• Taxable supply – which attracts GST at the rate of 10%;

• Zero-rated supply – which attracts GST at the rate of 0%; or

• Exempt supply – which is not subject to GST. Where a taxable or zero-rated supply is made, a registered person is entitled to a credit for the input tax paid on goods or services used in making the supply. Where an exempt supply is made, GST is not charged in respect of that supply. However, no entitlement exists to allow a recovery of any input tax that is paid on goods or services used in generating the supply.

Businesses having an annual turnover of PGK250,000 ($85,300) or more are required to register for GST, while businesses with annual income of less than PGK250,000 ($85,300) can register voluntarily. Persons or companies that are not registered are not permitted to charge GST.

Training Levy: All businesses whose annual payroll exceeds PGK200,000 ($68,300) are subject to a 2% training levy, which is calculated on the sum of the taxable salary/wages, including benefits, of all personnel. The levy is assessed on an annual basis. The amount of the levy payable is reduced by the amount of qualifying training expenses incurred in the training of citizen employees.

Customs duties: Customs duties are imposed on the cost, insurance and freight (CIF) value of imports at varying rates. With the introduction of GST, the majority of manufacturing inputs attract no duty. Duty is now primarily imposed on items which are produced locally in PNG. Duty can be deferred where goods are to be imported and re-exported within 12 months (or some other period as approved by the Collector of Customs) subject to the approval of the Collector of Customs. A bond must be provided.

Excise Duties: Excise, at varying rates, is imposed on certain locally manufactured and imported goods (primarily alcohol, tobacco and fuel products), as well as on goods deemed to be luxury items.

Stamp duties: Stamp duty applies at varying rates on documents and certain transactions. Of particular note is duty charged on the conveyance of real property, which rises to a maximum of 5% where the value of the real property being transferred exceeds PGK100,000 ($34,100). The duty is payable by the purchaser, and a 5% duty on the unencumbered value of land may also be payable where there is a transfer of shares in certain landholding companies.

Other dutiable transactions include share transfers (including some share buy-backs), subject to a rate of 1%. Leases of goods are also subject to stamp duty at a rate up to 1% of the rentals payable, depending on the term of the lease in question. Furthermore, stamp duty is payable on documents executed outside PNG that relate to property or matters done or to be done within the country.