The Income Tax Act 1959 is a foundational legislative framework in Papua New Guinea that governs the imposition, assessment, and collection of income tax. Below is an overview of its key features:

Key Provisions

1. Taxation Scope:
   • The Act imposes income tax on individuals and entities operating in Papua New Guinea, including residents and non-residents under specific conditions.
   • It includes provisions for taxing income derived from mining, petroleum, and gas operations.
2. Exemptions:
   • Various exemptions are provided, such as:
     • Income derived by non-residents from specific activities.
     • Salaries of certain officials and prescribed personnel.
     • Income from technical cooperation agreements and charitable institutions.
3. Administration:
   • The Commissioner General of Internal Revenue oversees the administration of the Act, with provisions for delegation and reporting.
   • Officers are required to maintain secrecy regarding taxpayer information, except in cases involving transfer pricing manipulation.
4. Accounting and Reporting:
   • Taxable income must be expressed in Papua New Guinea currency.
   • Specific rules govern accounting periods and the treatment of reinvested or credited income as taxable.
5. Special Provisions:
   • The Act includes detailed regulations for landowner resource trusts, unit trusts, and additional profits tax for resource projects.
   • Tax credits are available for royalties and development levies paid in mining and petroleum operations.

Legislative Updates

Since its introduction in 1959, the Act has undergone numerous amendments to address evolving economic activities and administrative needs.

For further details or specific sections of the Act, you can access the full text via resources like PacLII or official government websites.

Relation with Country by Country

The Income Tax Act 1959 (ITA59) in Papua New Guinea is closely related to Country-by-Country Reporting (CbCR) requirements, particularly in the context of multinational enterprises (MNEs) and tax transparency. Here’s how they are connected:

Relation Between ITA59 and CbCR

1. Legal Framework:
   • The ITA59 provides the overarching tax legislation under which income tax is assessed and collected in Papua New Guinea. It governs the taxable income of individuals and entities, including MNEs operating in the country.
   • CbCR requirements are implemented as part of Papua New Guinea’s compliance with international tax standards, particularly through its commitment to the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan. These reporting obligations are linked to the ITA59 as they help ensure accurate taxation of MNEs based on their global income.
2. CbCR Implementation:
   • Papua New Guinea began implementing CbCR requirements on January 1, 2017. MNE groups with consolidated annual group income exceeding PGK 2.3 billion must file CbC reports. These reports detail financial and tax data across jurisdictions to prevent profit shifting and ensure fair taxation.
   • Filing deadlines for CbCR are aligned with annual income tax return filing dates under the ITA59, such as February 28 or June 30, depending on the reporting fiscal year.
3. Transparency and Compliance:
   • The ITA59 includes provisions for information sharing and transfer pricing regulation, which align with CbCR objectives to enhance transparency in cross-border financial activities.
   • Papua New Guinea signed the Multilateral Competent Authority Agreement (CbC MCAA) in March 2023, enabling the exchange of CbC reports with other jurisdictions to enforce compliance under the ITA59 framework.
4. Administrative Coordination:
   • Notifications and filings required under CbCR are managed by the Internal Revenue Commission (IRC), which also administers the ITA59. This ensures that both domestic tax obligations and international reporting standards are integrated effectively.

In summary, while the ITA59 establishes domestic tax rules, CbCR requirements complement it by addressing international tax compliance for MNEs, promoting transparency, and preventing tax base erosion.