Doing business in Papua New Guinea (PNG) requires careful navigation of the country’s foreign investment laws and is overseen primarily by the Investment Promotion Authority (IPA). The process involves a two-part registration and certification requirement for foreign entities.
Here is a step-by-step guide on how to approach establishing a business in PNG:
1. Choose a Business Structure
The most common legal structures for foreign investors are:
- Private Company (Limited Liability Company – LLC): The most common entity. It is a separate legal entity from its owners. A PNG company must have at least one director and one shareholder, and while no resident director is required for the incorporation, one director must reside in PNG for an Overseas Company registration.
- Overseas Company (Branch Office): An extension of a foreign parent company. It is taxed on its PNG-sourced income.
- Representative Office: Only permitted to conduct non-trading activities like market research.
2. Business Registration and Certification
Foreign enterprises (defined as 50% or more owned or controlled by non-citizens) must complete a two-stage process with the Investment Promotion Authority (IPA):
A. Company Registration (Companies Act)
- This is the legal incorporation of the entity. You register the company name and structure with the IPA’s Companies Office.
- This can be done by incorporating a new PNG subsidiary or registering an Overseas Company (Branch).
- Timeline: Registration can often be completed within a few days online.
B. Foreign Enterprise Certification (Investment Promotion Act)
- A foreign enterprise must obtain an IPA certificate before commencing business activities in PNG. This is the crucial step for foreign investors.
- Key Requirements for Certification:
- Completed application form.
- A comprehensive Business Plan.
- A Budget/Cash Flow Forecast.
- Details on the positions and nationalities of staff to be employed (demonstrating a commitment to local employment/training).
- Value of initial capital investment.
- Evidence of the company’s good standing in its home jurisdiction.
- Capital Deposit: The IPA may require a prescribed capital deposit before issuing a Certificate:
- Corporate Body: PGK 100,000 (approx. USD 25,000 – check current exchange rate).
- Individual: PGK 50,000.
3. Tax Registration
After registering with the IPA, the next step is to register with the Internal Revenue Commission (IRC) to obtain a Tax Identification Number (TIN).
- You will be registered for the relevant tax accounts, which will primarily include Corporate Income Tax and Goods and Services Tax (GST).
4. Banking and Compliance
- Bank Account: Open a corporate bank account with one of PNG’s commercial banks (e.g., ANZ, BSP, Westpac). The bank will require your IPA Certificate and TIN.
- Taxes and Rates:
- Resident Corporate Tax Rate: 30% on worldwide income.
- Non-Resident Corporate Tax Rate: 48% on PNG-sourced income, although a Foreign Contractor Withholding Tax of 15% of gross receipts may apply to certain prescribed contracts.
- Goods and Services Tax (GST): 10%.
- Dividend Withholding Tax: Generally 15% for non-residents.
- Land Ownership: Foreigners are generally not allowed to own land in PNG; most businesses operate using long-term leases.
- Repatriation of Funds: The Bank of PNG (Central Bank) regulates the repatriation of funds. There is an annual limit, but exemptions can be requested with a tax clearance certificate.
- Visas and Permits: Ensure all expatriate staff have the required work permits and visas from the Immigration and Citizenship Authority (ICA).
5. Investment Incentives
PNG offers various tax incentives to encourage investment, particularly in non-mining/petroleum sectors:
- Accelerated Depreciation: Available for new industrial plant in sectors like manufacturing, construction, transport, storage, communication, and agriculture.
- Export Sales Exemption: Exemption on income from export sales of certain goods for a limited period.
- Double Deduction for Training: Employers can claim a double deduction for costs related to staff training and registered apprenticeships.
Recommendation: Given the legal complexities, two-stage registration process, and specific requirements for foreign enterprises, it is highly advisable to engage a reputable local legal firm or corporate service provider in PNG to manage the registration and certification process.