Deloitte. Papua New Guinea Tax AlertPapua New Guinea sed See ees Seria ST eee Sa a ~ Goods and Services Tx (GST) on Government Contracts = Taxation Status of Aid Donors and Projects Sen oer) ee gee) See eee ee + 2022 Taxand statutory Compliance Calendar coe Sea Sa See es nnd Ce on neo Introduction Happy New Ye:pua New Guinea Management Fee Withholding Tax ‘The IRC has responded in writing to concerns raised with thelr Public Notice on the application of management fee withholding ‘ax (MFWT} and the outcomes under the Australian, Singaporean, New Zealand and Canadian tax reales with respect to MFWT (see the October 2021 Tax Alert; tins “www? dela tte com/auven! ney. guinea/papee/taxlaricles/png.tax.slerts him) @ IRC Announcements ‘The IRC response provides much mare detallon the reasoning for their postion as to the application ofthe tax treaties, While the IRC have essentially doubled down on their conclusions drawn in the Public Notice, they have encouraged recipients to respond to tretr letter and have suggested that acton on MEWT will be deferred ntl recipients have had tme to do so. They have also stated that the relevant competent authority (for income taxes) in the four affected countries willbe notified of the RC’ position. Goods and Services Tax (GST) on Government Contracts ~ Section 658 The IRC issued a GST notice in relation to the Government Contracts on 24 January 2622, The notice served as another reminder to all contractors or suppers of Government departments and agencies that these departments and agencies {are not exempt from the Goods and Services Tax (6ST) ‘The IRC noted all government contracts entered with a resident or ‘non-resident individual or company are fully taxable ard that the State does not enter into tax exclusive contracts or net contracts, All service providers are also generally required to charge 1034 GST (on their supplies except for certain suppliers that are specifically ‘exemptad 0° zero rated under the Goods and Services Act 2003 Under the operation of section 65, State agencies are required to withhold GST from the service providers and remit directly tothe. Incernal Revenue Corrmission For further clarification, please do not hesitate to reach out to our key contacts stated below, 1. Taxation Status of Aid Donors and Projects The Internal Revenue Corvmission has released a public notice (on 22 February 2022 addressing misunderstandings with regaras to Tex Exemptions applied to Aid Donors, Aid Projects ang Aid Personnel Organisations, projects and inaividuals can only apply for Tax ‘exemption upon having in possession che following. {@) Granted des grated Aid Status Certificate by the !lead of State, acting on Advice Te effect this, an Ald Status. Certificate is signed and issuedi by the Minister for DFAIT (6) Where an organisation has been granted the above aid status, ‘he Minister may grant persons engaged by or attached tothe cercfied organisation, designate aid status, For step b, the organisation with the Aid Status Certificate will have to apply the Project and individuals involves in the Project, tobe granted Designated Ald Status Certificate. This granting (of exemption wil also bein form ofa Cerificate, signed by the Minister for DFAIT and must be supported by the Gazettal othe Individuals names, passport detals, Project name and Project start and finish dates. {and ifyou do not have n possession an Aid Status Certificate or Designated Aid Status Certificate and supported gazettal notices, then you are not exempt from any taxes and you must be compliant with all ofyour responsibiltes under the Income Tax Act ‘The IRC has advised it wil be conduct ng compliance sudits within the Aid Donor Commurity and have suggested if you form part of the Aid Donor Commurity, to review your compliance history FF you require further clarfcation of this notice, please do not hesitate to reach out to any of our key contacts Istec below. 2, Tax Criminals fraudulently evading billions to be hauled in from April The Commissioner General far RC, Mr. Sam Koim has announced inthe media on 21 February 2022 that the Internal Revenue Commission is improving on its compliance ectivties and will be prosecuting tax crime offenders who are not compliant and are evading tax. The tax office will alsa be Geregistering Taxpayer Identification Number (TIN) that have nat been active. The IRC aims to complete the identification and deregistration of inactive taxpayers by April2022. This exercise wil also assist the IRC Identify registered taxpayers who are operating but have not been complying 3.IRC on a path of Transformation The Internal Revenue Corvmission released on Monday, 21 February 2022 2 brief update an the Internal Revenue Commission's 2021 performance and strategic focus “or 2022 Despite the subaued economic cancitions and the coronavirus pandemic challenge, the IRC managed to cllect K9596 billon| Inthe year 2021, exceeding target by K375 milion. Some of the notable contributing factors to the exceptional performance Include: + Increase in salary and wages tax of K360 milion due to the itching off of urverified GST credit offsetting practices; + Increase in Mining & Petroleum taxes of K421 millon due ro favourable increases in gas and mineralprices + Increase in GST of KI20 milion due to implementation of S65A: + An extra KI10 milion in Debt Swap contribution; andPapua New Guinea IRC Announcements (cont) + Increase in prescribed royale withnolding tax of by KS milion {due to changes in the administration of payments. The IRC Media release noted the key achievements of 2021 as, follows + Con‘iguration of @ST section 65A into the Finance Department's Integrated Financial Management Sysiem (IFMS) system; + Fist ever Government debt to taxpayer tax debt swap, arrangement successfully aciitated; + Signing of the Mukilateral Convention on Mutual Administrative assistance in Tax Matters; ard +The launching ofthe new MyIRC website and online payment portal In 2022, the RC wil focus on raising tax revenue projection of 10.509 bilion to fund the National Budget, an increase of 16% from 2021 projections. Some of main initiatives for 2022 will include: + Design and Implement GST Monttoring Systern (GMS) ~system to tenable IRC to collect GST atthe point of sale + Procurement and Installation of an Integrated Tax Administration system (ITAS) + Rollout of GST Section 65A to subnational governments and ‘major contracting companies; + Design and implementation of the SWT collection at source; + Quick Response (QR) Coding ofall Tax Certincate + Implementation of new or Indy ganisational design and structure istry Coding and Benchmarking: + Building Data Analytics Capability, + Improve Tax Payer Idenefcation process + Tax Crime Investigation and Prosecution; and + Continuation ofall other effective colection measures 4, Tax Compliant Companies to Participate in State Contracts (On 4 February 2022 a memorandum of understanding (MOU) was signed ty the Internal Revenue Commission and the National Procurement Commission (NPC), The MOU is a shared initive by booth state agencies to boost revenue collection through improved tax compliance measures, The key measure ito ensure that the PNG Government only contracts with tax compliant businesses, ‘The NPC has taken steps to vet some ofthe bids including the referral of questionable Certificate of Compliance (CoC) cases to the IRC. As of 31 January 2022, NPC has issued a Circular stating that it sa mandatory requirement forall Companies tendering for tate contracts to be tax compliant, including having avalia Tax Identification Numer (TIN) and proving a valid CoC. Large Project Companies have been informed by NPC that they vill ot bbe considered for a State Tenaer if they are not tax compliant incluging having outstanding taxes. To assist, the IRC has noted that there will be a CoC lookup feature that will be provided on the [MyIRC ontine plavform soon, The IRCis working an 3 QR Coding, projec for seltvalidation of CoCs using a motile ahone App. Final the MOU also covers NPC's obligations under the GST on €5A Notice for payment of GST on State Contracts directly tothe IRC. Tne Commissioner Generalof the IRC nated that the on €5A project has resuked in a total revenue collection of KI86 milion to dat. @ 2022 Tax and Statutory Compliance Calendar Filing reqiuremene jn Feb ape May un Jul Aug Sep Ot Nv ee Foreign Conaractor withheking Tax 9 cot, QAer -2BMay 214un 21gul Aug -21-Sep —2Oet_« Nov 2t-Dec Ban OuN=F1 =i reauitedPapua New Guinea 2022 Tax and Statutory Compliance Calendar (cont.) Filing regiurement Jan Feb Mar Apr May un Jul_—Aug— Sep Oct Nowe Dien Wr hoking Tox OW) = rien 2MFo> 2'Mor Zier 2BMay Dun 2tsul ZBAkig Sep Oa ZN Z1-DeC Pan Trerest Wipotig Tak) = mare ene 2isfeb 2Mor Zitye TBMay Zin 2a DA DESEO ZOE _2I-N Peon ‘Wanagerect Fea whaling Tax eee Die 21Mar 2Apr DAMay 21a DIS PANE LSE PLO PEN -PI-DHE PHN ‘er-reient Roya trol Tae Saoetiegnen™ vectnonkanos — aoe re roan pe THRth Tox Agee Everson Tae re son THR wth Tax Agent sensor = ronnonasb | stl Subsite counting Pavods (SAP) Due months ater sor and & lowed? morthsexersionoftims— ted on Tax Ages esperar programme Payment Balance 0 ays ater sung Note of Asessmentor eater ups loggemert ofthe return dees ‘eursryy Coury Ror (2022 yes endh-ifrequre ue 12 months ater alae datePapua New Guinea (@ 2022 Tax and Statutory Compliance Calendar (cont.) Filing reqiurement Jan Feb Mar Apr May un Jul_—Aug— Sep Oct Nowe statutory Compliance -roual Report ofRepatrgetes— Dec Yar seo roval General Meetrg 30.un prowl eu DDuewgthe month alocated by the Companies Ofce Pa ptanual reports "Within 6 months of date cericaon and every 6 mit theveaer * Taxpayers that are not on the IRC Tax Agent extension programme + Partnership and Individual tx returns due on same dates +#** Form CRI - Application or transfer of a Cretit from one period to the next, or from one sax account to another are due by the payment date for the tax period date) The 2019 Budget stated thatthe NRI returns were to move to a payment basis of 21st day of the month following payment. However, this Isyet to be legislaces. 2 The fixed instalment dates of April 30, july 31 and October 31 for the payment of provisional tax were replaced in the 2021 Budget in November 2020, with references to number of cays from the beginning of the fiscal year. To ensure there was no clash withthe 31 March due date for resource companies to provide estimates oftheir taxable income, whilst stil catering for taxpayers with substituted accounting periods, new references of *20, 210 and 300 days were inserted @® raxinsignts Transfer cing Guidelines for Multinational Enterprises and Tax Administrations (On 20 January 2022, the OECD released the 2022 edition of the Transfer Pricing Guidelines for Multinational and Tax Administrations, ‘The previous edition ofthe transfer pricing (TP) guidelines was released in 2077, The 2022 edition consolidates the changes tothe 2017, edition ofthe guidelines ico a single publication, Detailed information ofthe TP guidel nes ana changes can be found inthe OECD webs te immigration Updates REV Extensions ‘As per National Office of the Controller's Notice No.2 for International Travel Measures, effective 16 February 2022: + No approvals required from National Office ofthe Controller for expatriates traveling into PNG whe are fully vaccinated using one of the approved vaccines; + Allincoming passengers into PNG will need to do a covid!9 test 72 hours prior to arrival into PNG; + Quarantine isnot required unless the incoming passenger tests poskive on arrival at Jacksons Inernational airport, Where quarantine is required, the incoming traveller will have to meet their onn cost {0 quarantine at any of the approved hotels for quarantine PNG Immigration has advised via email (no formal notice put outyet as) that going ‘orward there will rot be any REV Extensions done, since they have now done away with quarantine requirements, Therefore, REVs will only be val for 30 days and all REV holders rst exit before or on the 30th day. PNG Immigration have also advised that all expatriates who hold a PNG employment visa and have been offshore ‘or more than 6 months, will need to reapply for their employment visa before traveling back to PNG as their visas have become invalid, This means they willneed to ‘also provide fresh new police report and medical reports for approval and issuance of visa to be in ne with their current work permits.hal +7 February is tre due date for Salary & Wages ing Tax (SW ‘ebruary isthe due date far Goods and Services Tax (GST) + 28 February's the due date forall Annualreconclliat ons - refer above tax calendar. 022, + Anqual Returns with fing month in February are due by 28 February + 28 Februaryis the due date forall Annualrecanciliat ons + Annual Returns with fing month in February are due by 28 February 2022, +7 March isthe due date for Salary & Wages Witvholding Tax (SWT) + 21 March isth ds and Serves 7)For more details please contact your key Deloitte contacts or any of the following: Leadership contacts ‘Andrew Harris Sanchika Sutharshan Partner Partner Taxand Business Services i Tax and Business Services Tel/Direct: 675 308 7010 TelDirect -675 308 7160 andrewharris@delaite com pg ssutharshan@aeloite.com pg Declan Mordaunt ‘Maygen Turliu Senior Counsel Directar Tax and Business Services Tax and Business Services Tel/Direct: +675 308 7037 TevDirect: -675 308 7017 dmordaunt@deloitte.com.pg BS) miuriu@detoitte com pg Deloitte. 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