As per the tax laws of Papua New Guinea, a permanent establishment (‘PE’) is a place at or through which the enterprise carries on any business. The definition notably includes:

A place where substantial machinery or equipment is installed or is in use;
A construction project; and
A place where the enterprise is engaged in selling goods manufactured, assembled, processed, packed, or distributed by another enterprise if:
- either of them is managed, or controlled by the other enterprise, or holds capital in the other enterprise; or
- another enterprise is part of the management or control, or holds capital in the transacting enterprises.

A place where the business is carried on by the enterprise through an agent who does not habitually exercise the authority to conclude contracts on behalf of the foreign enterprise is not deemed to constitute a permanent establishment. A broker, general commission agent, or any other agent of an independent status is not deemed to constitute a permanent establishment for a foreign enterprise if such persons are acting in the ordinary course of their business as independent agents and receive compensation in line with market standards.

The law does not specifically define a ‘service PE’. However, an extended business travel of an employee may lead to a permanent establishment depending on the type of services provided and whether a double tax treaty is in force between Papua New Guinea and the jurisdiction of the employee. Some tax treaties (e.g., those with Canada, Australia, and Singapore) provide that an entity is deemed to have a service PE if the employees of the non-resident company continue to be physically present for a specific project or a connected project for a period exceeding 90 days or 3 months within any 12-month period. However, certain tax treaties (e.g., the one with Malaysia) do not contain a specific service PE clause.

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