Double Taxation Agreement Papua New Guinea

The salaries of all work performed in PNG are normally taxable in PNG. Unless the person is eligible for discharge under the personal service section under an applicable double taxation agreement, the number of days provided in PNG is irrelevant. PNG has entered into double taxation agreements to avoid double taxation and to allow cooperation between PNG and foreign tax authorities to enforce their respective tax laws. In double taxation agreements, there are reliefs that, under certain conditions, would not be subject to the PNG payroll and wage tax for residents of other countries/jurisdictions. There is potential for a stable establishment as a result of extensive business travel, but this would depend on the nature of the services provided and whether or not the worker`s country or jurisdiction has entered into a double taxation agreement with PNG. Superannuation is a mechanism that forces individuals to save money for retirement. It is mandatory for employers to contribute a minimum contribution of 8.4 per cent of the worker`s salary (limited to 15 per cent of salary) to an authorized superannuation fund. The minimum contribution of workers is 6 per cent of their salary. Superannuation contributions are not mandatory for expatriates. When companies become global, few companies seem to understand the risks that business travel can entail. Income from work is generally considered Png-related compensation when the person provides the services while physically in PNG. A foreign tax credit may be available to offset foreign taxes paid by the PNG tax payable. The foreign tax credit is limited to the lower amount of foreign tax paid or the average PNG tax due on that foreign income.

The operation of the DBA framework has another practical application within the PNG tax administration. Many PNG-based companies hire foreign entrepreneurs and consultants to support their businesses for short or even extended periods of time. These obligations are subject to a specific tax regime, called tax rules applicable to foreign contractors (see withholding and other taxes), and some of these DBAs provide for exemptions from this regime for short-term and/or low-value transfers. Effects on transfer pricing could occur to the extent that the worker is paid by a company located in one region, but services are provided to the company in another country, i.e. a cross-border benefit is granted.

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