🇵🇬 PG – Papua New Guinea Passes Landmark Income Tax Reform, Effective 2026

PORT MORESBY – On March 20, 2025, Papua New Guinea’s Parliament approved the New Income Tax Bill 2025, replacing the Income Tax Act 1959 with a fully modernized framework aimed at simplifying compliance and aligning with global tax standards. The law will come into effect on January 1, 2026, pending final certification and the release of supporting Regulations.

This reform marks a historic overhaul of one of the world’s oldest tax statutes and reflects PNG’s intent to build a more efficient, transparent, and globally coherent tax system.

1️⃣ Key Goals and Structural Changes

The primary objectives of the new legislation are:

• Streamlining: The Bill reduces the length of the 1959 Act by 80% and halves the number of sections.
• Plain language drafting to improve accessibility for taxpayers and administrators.
• Substantive reforms that go beyond simplification, addressing long-standing policy gaps and modern economic realities.

The law introduces both major and minor policy shifts, alongside technical amendments to resolve inconsistencies that have built up over decades of piecemeal updates.

2️⃣ Effective Date & Transition Mechanisms

The new Act will take effect January 1, 2026, allowing a 12-month transition period. Key transitional features include:

• Comprehensive transitional rules to ensure smooth adoption
• Planned amendments to the Tax Administration Act, expected post-certification
• Yet-to-be-published Regulations to provide implementation detail on compliance, substantiation, and administration

3️⃣ Key Reform Areas

The legislation introduces updates across a range of tax domains:

Transitional Provisions

Designed to minimize disruption and allow businesses to adapt from the 1959 regime to the modernized framework.

Employment Income

While details remain unspecified, reforms are expected to adjust how salaries, benefits, and withholding are treated.

Business Income

Modernized tax treatment for profits, deductions, and allowances, likely tailored to PNG’s evolving business environment.

International Taxation

Alignment with OECD standards, potentially involving transfer pricing, cross-border taxation, and double tax agreements.

Sector-Specific Rules

Industry-tailored measures—particularly for mining, energy, and agriculture—reflect PNG’s economic priorities.

Capital Gains Tax

Potential introduction or refinement of capital gains rules, a shift with implications for investment and asset transfers.

Operational Regulations

The upcoming Income Tax Regulations will outline reporting, documentation, and enforcement mechanisms essential for practical compliance.

4️⃣ Policy Intent and Broader Reform Context

Though driven by simplification, the Bill’s scope signals broader fiscal modernization, including:

• Closing loopholes and improving revenue efficiency
• Encouraging compliance through clarity and administrative consistency
• Increasing alignment with international tax norms

The reform is part of a wider governance initiative, with updates to related legislation expected to follow.

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