Papua New Guinea’s Parliament unanimously passed the long-awaited Income Tax Bill 2025 on 20 March, marking a major milestone in the country’s tax reform agenda. The new Income Tax Act (ITA), effective from 1 January 2026, introduces several structural and compliance-related changes aimed at modernising Papua New Guinea’s tax system and aligning it with global practices.
According to Deloitte’s 2025 alert on the legislation, the final version reflects feedback from extensive industry consultation, including updates from the previous Version 15 draft circulated in late 2024.
Corporate and Group Taxation Adjustments
In a significant move for businesses, the Act allows tax losses to be transferred between resident group companies, capped at the recipient’s taxable income for the year. Group companies are defined as having 95 per cent common ownership. Additionally, the treatment of depreciable asset transfers within groups has been extended to include permanent establishments of foreign companies, provided the assets are PNG-based.
Residency and Withholding Tax Clarity
Earlier plans to redefine tax residency, which would have created added uncertainty, were rolled back in the final version. The Act now maintains the existing residency criteria from the 1959 Act. A controversial treaty override provision, which would have imposed technical fee withholding taxes even in the absence of a permanent establishment, has also been removed.
Resource Sector Reforms
The revised Act expands the definition of “Development Operations” to include post-license exploration. Resource companies can now transfer excess deductions even if project operations continue due to rehabilitation, and inter-entity transfers of deductions are allowed between group licensees.
Tax Return and Payment Deadlines
New deadlines include nine months for companies using registered tax agents, six months for other companies, and three months for individuals and trusts. Employers will benefit from a restoration of the previous rule, requiring employment income tax to be paid by the 7th of the following month instead of on the same day as payment.
Other Noteworthy Provisions
Political donations up to PGK 500,000 are now deductible, and so are election expenses. New schedules cover employment and business income withholding tax rules.
While supporting regulations are still pending, Deloitte advises businesses to begin preparations ahead of implementation. Deloitte will hold training sessions in Port Moresby and Brisbane in late March and early April to assist companies with compliance.
Sources:
- Deloitte LLP, Papua New Guinea Income Tax Bill 2025 – What’s changed in the final version, March 2025.
- Deloitte Training Circular, March 2025.
