Regulatory Guidelines

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 Division

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 Act.

Company Registration

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 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 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 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 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 new agreements.

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 New Guinea.

Tax Clearances

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 resident companies.

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 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 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 Tax

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 provinces.

Training Levy

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 payments.

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

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.

Overseas Shipping

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 losses.

Non-resident Insurers

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

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 Tax

Land taxes are imposed by about 12 provincial governments plus the National Capital District Commission at fairly nominal levels.

Stamp Duties

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).

Import Duties

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 for exporters;
  • 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 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 companies;
  • Marine propulsion engines and outboard motors up to 100hp when purchased and imported by Papua New Guinea registered companies.

Immigration Matters

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 Relations;
  • Copy of letter of offer to employee (stating salary range);
  • Company to provide guarantee of accommodation, transportation, etc. and eventual repatriation to country of origin.

(2) Full curriculum vitae

Full personal particulars of the applicant and his/her dependents, (if any/whether travelling/not travelling) as below:

  • Full name;
  • Date of birth;
  • Marital status;
  • Citizenship status during last ten years;
  • Educational qualifications (with copies of certificates to be attached);
  • Employment history (with copies of references to be attached).

(3) Copy of migration service fee receipt must be attached.

(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.

(7) Fees

The Department of Foreign Affairs and Trade will require payment of a fee in respect of:

  • Migration Service Fee for facilitation of visa by telex/facsimile
  • Employment Visa
  • Dependant Visa(s)

Work Permits

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.