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
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
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
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
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 Act.
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 New Guinea.
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 prescribed fee.
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, where appropriate:
Either the Certificate of Incorporation
or the Certificate of Registration as a
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 appropriate;
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
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 prescribed form.
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 back.
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
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 taxed.
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
The tax laws define taxable income not
as accounting profit, but as "assessable
income, less all allowable deductions".
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
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 deduction.
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) is granted.
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 cent
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
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
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
Foreign Contractor (Withholding)
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'
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 losses.
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
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
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
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
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 of document.
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
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
Maintain general imports at 11% until the
introduction of a VAT;
Emphasise the duty drawback system for exporters;
Phased reductions from 8% to 5% in 1997
for a range of business inputs;
Maintain a 40% protective rate for viable
Move from non-tariff protection to the 40%
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 licence.
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 shipping
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.
Written sponsorship letter by employer
Offer of job highlighting position number,
title and period of contract Industrial
approved by the Department of Relations;
Copy of letter of offer to employee (stating
Company to provide guarantee of accommodation,
transportation, etc. and eventual repatriation
to country of origin.
Full curriculum vitae
Full personal particulars of the applicant
and his/her dependents, (if any/whether
travelling/not travelling) as below:
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 be attached).
Copy of migration service fee receipt must
Original copy of maintenance guarantee
For employment for periods six months and
over, a copy of work permit from the Department
of Industrial Relations is necessary.
For short term employment for periods up
to three months, a copy of letter of approval
from the Department of Industrial Relations
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
Migration Service Fee for facilitation
of visa by telex/facsimile
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 citizens.
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.