Disclosure Requirements

Taxpayers are required to submit an International Dealings Schedule ('IDS') to the tax authorities along with the tax return if, at any time during the year:

International cross-border related party transactions exceed PGK 100,000; or
Loans with related parties exceed PGK 2 million.

The information to be disclosed in the IDS includes details regarding the type and quantum of the international transactions, related party details, documentation coverage, and transfer pricing methodologies.

Standard Documentation

There is no specific statutory requirement to prepare and maintain transfer pricing documentation. However, taxpayers are expected to contemporaneously maintain documentation showing the justification for the arm’s length price by the due date for filing of tax return.

Country-by-Country (CbC) Reporting

Country-by-Country (CbC) reporting requirements apply in Papua New Guinea from the reporting fiscal years beginning on or after 1 January 2017. The primary reporting obligation falls on the ultimate parent entity (UPE) of the MNE Group that is resident for tax purposes in Papua New Guinea if the total consolidated group revenue exceeds PKG 2.3 billion or equivalent during the fiscal year immediately preceding the reporting fiscal year.

As per the domestic tax laws, secondary filing obligations apply to constituent (non-UPE) entities if certain conditions are met (given below). However, the tax authorities have notified that non-UPE companies in Papua New Guinea and foreign companies with a permanent establishment in Papua New Guinea are not required to submit the CbC reports in Papua New Guinea until further notice. Hence, the CbC reporting obligation applies only to UPEs in Papua New Guinea effective 1 January 2017, until further notice by the tax authorities.

Under the secondary filing obligation (currently suspended until further notice), constituent (non-UPE) entities are required to file locally in Papua New Guinea if:

The UPE is not resident in Papua New Guinea and is not obligated to file a CbC report in its jurisdiction of residence;
The UPE’s jurisdiction of residence has a current international agreement with Papua New Guinea but does not have a qualifying competent authority agreement in effect with Papua New Guinea by the time the CbC report is due; or
An agreement is in place, but there has been a systemic failure for spontaneous exchange of CbC reports with the UPE’s jurisdiction of residence, and the failure has been notified by the Papua New Guinea tax authority to the constituent entity resident in Papua New Guinea.

Where there are more than one constituent entity in Papua New Guinea of the same MNE Group and one or more of the conditions set out above apply, the MNE Group may designate one of such constituent entities to file the CbC report and notify the Papua New Guinea tax authority that the filing is done on behalf of all the constituent entities in Papua New Guinea.

Further, a Papua New Guinea constituent entity may not be required to file a CbC Report locally in Papua New Guinea, if the MNE Group has made available a CbC report with respect to the relevant fiscal year through a surrogate parent entity (SPE) (i.e., a constituent entity appointed as a sole substitute for the ultimate parent company to file the CbC report). The SPE must file the CbC report with the tax authority of its jurisdiction of tax residence no later than 12 months after the last day of the reporting fiscal year of the MNE Group. The following conditions are required to be satisfied:

The jurisdiction of tax residence of the SPE requires the filing of CbC Reports conforming to the requirements mentioned in the Papua New Guinea tax regulations;
The jurisdiction of tax residence of the SPE has a Qualifying Competent Authority Agreement in effect to which Papua New Guinea is a party on or before 12 months after the last day of the reporting fiscal year of the MNE Group;
The jurisdiction of tax residence of the SPE has not notified the Papua New Guinea tax authority of a systemic failure;
The SPE has notified in its jurisdiction of tax residence that it is designated as the SPE on behalf of the MNE Group; and
A notification has been provided by the Papua New Guinea constituent entity to the Papua New Guinea tax authority providing details of the SPE.

Where the CbC report is required to be filed locally in Papua New Guinea, the contents of the CbC report include the following for each jurisdiction:

Table 1:
- revenues (unrelated parties, related parties, and total);
- profit (loss) before tax;
- income tax paid (cash basis);
- income tax accrued - current year;
- stated capital;
- accumulated earnings;
- number of employees; and
- tangible assets - other than cash and cash equivalents.
Table 2:
- constituent entities resident in each tax jurisdiction (including Tax ID and address);
- jurisdiction of organization or incorporation if different from jurisdiction of residence; and
- main business activities of each constituent entity.
Table 3:
- additional information or explanation deemed necessary to understand the CbC report.

Where the CbC report is required to be filed locally in Papua New Guinea, the CbC report is required to be filed no later than 12 months after the last day of the reporting fiscal year of the MNE Group.

Further, a Papua New Guinea resident constituent entity of an MNE group is required to notify the Commissioner-General by 31 December of the reporting fiscal year as to whether it is the UPE of the MNE Group.

As per the domestic law, notification is also required, if the resident constituent entity is a SPE, or, if it is not the UPE or the SPE, the name, tax identification number and tax residency of the reporting entity of the MNE Group. However, this requirement is suspended since secondary filing obligations are suspended until further notice.

Language of Documentation

The CbC report is required to be submitted in English.

Penalties

There is no specific penalty for non-compliance with the transfer pricing requirements and the general penalty provisions apply (see Sec.14.4.).

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