completing your form i – individual income tax return (2014) · individual income tax return...
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INTERNAL REVENUE COMMISSION
TAXPAYER GUIDE
COMPLETING YOUR FORM I –
INDIVIDUAL INCOME TAX RETURN (2014)
The Internal Revenue Commission requires individuals with certain types of income to submit an annual
income tax return on a standard form known as the Form I – the annual Income Tax Return for Individuals.
Others may choose to lodge a Form I (though it is not obligatory) in order to claim certain deductions and
rebates. This guide is designed to assist you in completing the Form I.
Note: The Form I 2014 relates to the year ended 1 January 2014 to 31 December 2014. Please note that the
numbering system has changed on the IRC forms due to the implementation of new taxation
administration software. All forms now observe the same format and dating system.
These instructions follow the format of Form I, providing information about how to complete each section
of the form. Guidance on how to complete each of the fields in the form is provided in the table below:
TAX RETURN ITEMS (ITEMS 1-13 & CHECKLIST) Use this section of the guide to complete the first part of Form I:
Guidance on how to complete each of the fields in the form is provided in the table below:
NAME AND ADDRESS OF
TAXPAYER
Name of Taxpayer Write your full name here.
Business or Trading Name If you are engaged as a Sole Trader earning business income, write the name of
your business (or Trading Name) here.
Contact / Representative The name of the primary contact for your tax affairs. This is the person to whom
the IRC will address any questions. You may write your own name, the name of a
friend or relative or the name of your tax agent if you have one.
Phone Number The telephone number(s) of the main contact.
E-mail address The e-mail address of the main contact.
Mailing Address Write your postal address in this block. Please note that if your address or other
details have changed since you first registered with the IRC you must complete a
TIN2 form and notify the IRC of the changes to your registration details.
Section No. If the address is in the format “Section Number / Lot Number” (such as addresses
in Port Moresby), use this area to write the section number.
Lot No. If the address is in the format “Section No. / Lot No.” write the Lot number.
Street / Suburb / District Depending on the format of your address write either the name of the street, the
name of the suburb or the name of the district in which your entity resides.
P.O. Box If you have a Post Office Box, list the details here.
Country This is the country in which you reside. Usually P.N.G.
Province This is the Province, State, or County, etc. in which you live.
City / Post Office If the address is in a city, list that city. If the address is for a PO Box at a Post
Office, write the name of that Post Office.
Care Of (C/-) If your mail is delivered to someone else and then forwarded to you, write the
name of the person / organisation receiving mail on your behalf.
TAX PAYER DETAILS
Are You a Resident of PNG? According to the Income Tax Assessment Act 1959 (As Amended), a resident is
defined as follows:
“resident” or “resident of Papua New Guinea”–
(a) in relation to a person, other than a company, means a person who resides in Papua
New Guinea, and includes a person–
(i) whose domicile is in Papua New Guinea, unless the Commissioner General is
satisfied that his permanent place of abode is outside Papua New Guinea; and
(ii) who has actually been in Papua New Guinea, continuously or intermittently,
during more than one-half of the year of income, unless the Commissioner General is
satisfied that his usual place of abode is outside Papua New Guinea, and that he does
not intend to take up residence in Papua New Guinea; or
(iii) who is a contributor to a prescribed superannuation fund or who is the spouse, or
a child under 16 years of age, of such a contributor;
For People Who Are Residents
This return should show income from all sources, both within and outside of
Papua New Guinea. Persons who disclose income from overseas and have paid
tax on that income will be entitled to a credit for the overseas tax paid. Persons
wishing to claim this tax credit should enclose a copy of the relevant Notice of
Assessment or other documents evidencing payment of the tax. By allowing this
tax credit, the income will not be fully taxed in both countries.
For People Who Are Non-Residents
This return should show any income that is sourced in Papua New Guinea,
excepting dividends or interest in respect of which withholding tax has been paid.
Dividend or interest withholding tax paid by non-residents is a first and final tax.
If it is claimed that any income is exempt by virtue of a Doubt Tax Agreement, the
reasons for this claim should be fully stated.
If Non Resident: Date of
arrival in PNG
If you do not meet the definition of a resident outlined above, write the date on
which you arrived in PNG.
Date of departure If you do not meet the definition of a resident outlined above, write the date on
which you departed PNG (if applicable).
Year last tax return was
lodged
If you have lodged tax returns in PNG previously, write the year for which you
last lodged a tax return. For example, if your last return was lodged for the period
1 January 2013 to 31 December 2013, write 2013 in this box.
Is this your last return in
PNG? Yes or No
If you are leaving PNG permanently and have no intention of returning or
needing to submit another tax return in PNG then tick “Yes”. If you anticipate
being in PNG for future tax years, tick “No”.
If Yes state why If you have ticked “Yes” for this question, write a short explanation of why this
will be your last return (e.g. retirement, leaving PNG, etc.)
Percentage of income
attributed to business
activities in the Autonomous
Region of Bougainville
If you work or earn income by other means in the Autonomous Region of
Bougainville (ARoB), write the percentage of income that is attributed to your
activities in ARoB, e.g. 25%.
Autonomous Region of Bougainville Taxpayers
Any person whose employment or principal income-earning activity is carried on
in the Autonomous Region of Bougainville is a considered an ARoB taxpayer.
Taxes paid are collected for the Autonomous Bougainville Government (ABG).
TAX PERIOD
Tax Period From This is the start date of the tax period on which you are reporting in this return.
For most taxpayers this will be the 1st of January of the previous year. For example
if you are completing this return in 2015 for the 2014 tax year, write 1 Jan 2014
here.
Tax Period To This is the end date of the tax period on which you are reporting in this return.
For most taxpayers this will be the 31st of December of the previous year. For
example if you are completing this return in 2015 for the 2014 tax year, write 31
Dec 2014 here.
PARTICULARS RELATING
TO SOURCES OF
INFORMATION
If the books of account kept
by (or on behalf of ) the
taxpayer are audited each
year, state the name and
address of the auditor
If you engage an auditor to review the financial records of your business activities
then write the name and address of the auditor here.
Are the figures in the return
in accordance’s with those
books? Yes or No
If you employ a tax agent to complete your income tax return, the tax agent states
here whether or not they believe that the information in this return is consistent
with the financial records that you have kept.
If no books of accounts have
been kept, upon what basis
or information has this
return been prepared?
If books of account were not kept, then a detailed description of the basis of the
financial information stated in the return must be provided here. If, for example,
due to the nature of the business, it is not possible to keep detailed records, this
needs to be stated and an explanation provided for what estimation method was
used to approximate your income and other financial information.
Is the income reported on an Accrual accounting is a method of measuring income by matching revenues and
accrual basis or a cash receipt
basis? Accrual Basis / cash receipt
expenses based on the economic events behind them rather than when the cash
transaction occurred. For example, if a computer is purchased for K900 today, it
might provide benefits to the purchaser for the next 3 years. It was used to earn
K500 of revenue this year. So in matching the revenue earned this year with the
expenses needed to generate that revenue, only the portion of the value of the
computer that is used up this year is counted. In this example, only K300 of the
cost of the computer would be matched to the revenue earned, yielding a profit of
K200 (i.e. K500 less the K300 for this year’s share of the cost of the computer).
Cash receipt accounting does not match revenue to expenses but simply captures
the cash transactions as they occur.
Write the method of accounting employed in calculating your income here.
Where the “Tax Agent’s
Certification” below is
signed, has the agent /
nominee satisfied themselves
from examining the
taxpayers books of account
and / or other records that
income from all sources for
the period has been disclosed
in this return? Yes or No
If a tax agent has completed the return, they must declare here whether or not
they believe that the details in this return are correct according to the taxpayer’s
records that have been examined. Tick the appropriate box (“Yes” or “No”).
DECLARATION BY
TAXPAYER
Signed This is where the taxpayer signs the return to confirm that they have made a
complete and truthful declaration in the tax return. Please note that the taxpayer
must sign the return even if a tax agent completed the return on their behalf
because the taxpayer remains responsible for the information provided to the IRC.
Date Write the date on which the declaration was signed.
TAX AGENT’S
CERTIFICATION
Complete this block if your tax return was prepared by a Tax Agent.
I / We Write the name of the individual(s) who completed the return.
Of Write the name of the Tax Agency for whom the Tax Agent works.
Signed This is where the Tax Agent signs the return to confirm that the details in the
“Particulars Relating to Sources of Information” are true and correct.
Date The date on which the Tax Agent signed the return.
Contact Person The representative of the Tax Agency to whom enquiries should be directed.
Phone Number The telephone number of the Tax Agency’s representative.
E-mail Address Write the e-mail address of the Tax Agency’s representative.
Tax Agent Number Tax Agents operating in PNG are required to be registered with the Government
of PNG. Write the Tax Agent Number provided by the IRC in this box.
TAX RETURN ITEMS
Item 1 – Salary or Wage
Income
This block contains a list of all the employment income that you earned during the
year. The information requested will be written on your Statement of Earnings
(SOE – S1 Form) received from your employer(s):
• TIN of Employer – this will appear in the top right hand corner of the
SOE. Note that this is not your personal TIN, but that of your employer.
• Name of Employer – write the business name of the entity that employed
you.
• Period of Employment – write the start and end dates of the period
during which you were employed by each employer. For example, 1 Jan
2014 to 31 Dec 2014.
• SWT Deducted – the SOE provides the amount of Salary or Wages Tax
(SWT) that was deducted from your pay by your employers. Write that
amount in this line.
• Gross Income Received – this is the amount of salary or wages that you
received before tax was deducted, as per your SOE. E.g. Maria earned
K10,000 from which K2,000 of SOE was deducted. Her net income was
K8,000 and her gross income received was K10,000.
• Total – add up the total of the column
Item 2 – Allowances paid by
Employers
In this section you must include all allowances paid by your employers.
Allowances are generally paid as cash in your fortnightly pay. Note that
allowances also form part of your assessable income. If tax was deducted from the
gross value of the allowances paid then declare them at Item 2. If you received
allowances from which no deductions of SWT were made, you must declare those
at Item 5.
Write the gross amount of allowances received in the column “Amount”, broken
up into the following categories:
• Housing Allowance
• Motor vehicle Allowance
• Telephone Allowance
• Entertainment Allowance
• Public Utilities Allowance
• Domestic Services Allowance
• Other Allowances
This information is available on the SOE provided by your employer. Any
allowances paid that do not fit into the first six categories should be listed under
“Other Allowances”. If you have deductions against these allowances, these
should be declared at Item 8. Add up the value of all allowances listed and
provide that total at the bottom right.
For People Receiving Allowances
All allowances, (with the exception of housing allowances paid to citizens
participating in an approved first time home buyer scheme), are now taxable.
However, in some cases, deductions can be claimed against the allowances so as
to reduce the tax payable. Because allowances are now taxable, people receiving
an allowance must lodge an income tax return. In addition, anyone who received
a housing allowance variation must lodge a return or no variation will be granted
next year. The amount of any allowance received and the nature of the allowance
should be shown on your statement of earnings. The amount shown there or
received, (if it is not shown) is entered in Item 2 of your Form I return.
Deductions are permitted to be claimed against some allowances where they have
been used for the purpose they were given, e.g. to purchase or rent housing in the
case of a housing allowance. No deductions are allowable for amounts paid from
the following allowances:
1. Entertainment Allowances;
2. Public Utilities Allowances;
3. Domestic Service Allowances.
Similarly, there may be no deduction against other types of allowances, such as
the risk allowances received by soldiers.
Where a deduction is claimed, the total amount claimed is entered in Item 7
against the item “total deductions claimed against allowances paid by
employers”. It is of utmost importance that anyone making a claim against their
allowance provides, in a separate schedule attached to the return, full details of
the expenditure met from the allowance. The types of details required are
described below. If no details are given with the return, we may ask for the details
or the IRC may simply disallow your claim.
Item 3 – Taxable benefits
received
In this section you must include all benefits provided by your employers. Benefits
are not paid as cash in your fortnightly pay, but rather they are costs that are paid
directly by your employer to a third party supplier, such as a landlord. Note that
benefits also form part of your assessable income. Write the gross value of benefits
received in the column “Value of Benefit”, broken up into the following
categories:
• Housing provide by employer – as per SOE
• Motor vehicle provided by employer – as per SOE
• Meals provided by employer – as per SOE
• Life or medical insurance paid by employer
• Employee shares / options given by employer
• Additional leave fares (over the exempted one leave fare)
• Any other benefits
Write the total value of all benefits received in the total box at the bottom right of
the block for Item 3.
Item 4 – Termination Pay-
outs
If, during the year of income, you received any termination or gratuity pay-outs
(as a result of ceasing employment), these must be included at Item 4. Provide the
details of each type of termination or gratuity pay-outs received:
• Termination pay-outs taxed at 2% - Your SOE or termination statement
will provide the details of pay-outs taxed at 2%. Provide the total in the
“Value of Benefit” column. If this included Superannuation pay-out, state
the date on which the Superannuation contributions commenced, e.g. 2
March 2003.
• If you received Superannuation pay-outs taxed at 8%, write the total
received in the “Value of Benefit” column. Your SOE or termination
statement will provide the details of pay-outs taxed at 8%. State the date
on which the Superannuation contributions commenced, e.g. 17 June
2011.
• If you received Superannuation pay-outs taxed at 15%, write the total
received in the “Value of Benefit” column. Your SOE or termination
statement will provide the details of pay-outs taxed at 15%. State the date
on which the Superannuation contributions commenced, e.g. 30
September 1995. Note that this includes any retrenchment payments
received (s46CA).
• All other termination payments received must be declared here. These are
fully taxed. Your SOE or termination statement will include the details of
other termination payments received.
• Write the total of all pay-outs received in the box at the bottom right of
Item 4.
Item 5 – Untaxed salary /
wages
If you received Salary or Wages income that did not have tax deducted, the details
must be provided in Item 5:
• Name of employer – write the name of the entity by whom you were
employed.
• Type of income or benefit – provide a brief description of the nature of the
payments and the activity for which they were received e.g. “provision of
vehicle for private use”.
• Reason why tax was not deducted – provide a brief description of why no
tax was deducted from this income. If you are unsure, check with your
employer.
• Amount of income – write the amount of income (or the value of the
benefit) received. If you are unsure how to calculate the value of the
benefit, contact the IRC for assistance.
• Total untaxed salary or wage income – write the total value of all benefits
received in this box.
Item 6 – Calculation of net
salary and wage taxable
income
The information provided in this section is used to allow the IRC to confirm that
the appropriate amount of Salary or Wages tax has been calculated. The
information will also allow the IRC to determine the tax rate to apply to other
income such as business or rental income, or in situations where you are objecting
to your assessment such as when lodging a Housing Allowance Variation (HAV).
However, in some cases, the form will not provide the amount of the Salary or
Wages Tax shortfall or excess as not all of the necessary information is available.
In such cases, the IRC will request the additional information needed to complete
the assessment. For this reason, those taxpayers will need to wait until the IRC has
processed their return and sent a Notice of Assessment (NOA) to receive the
amount payable / refundable.
The following notes will help guide you through the completion of this section:
• Total Income From Salary And Wages – this is the sum of the salary and
wages received (total from Item 1), allowances (total from Item 2), benefits
(total from item 3), all other termination payments (fully taxed only –
from Item 4), and total untaxed salary or wages (total from Item 5).
• Estimated Expenses Against Housing Allowance – this box is only to be
completed if you lodged a Housing Allowance Variation (HAV) to have
your SWT deductions reduced. As part of the HAV, the taxpayer is asked
to provide an estimate of the expenses that will be incurred against their
housing allowance. Write the amount here that was declared on your
HAV (Form S7). Note, this is not the amount actually incurred.
• Actual Expenses Against Housing Allowance – write the amount of
expenditure incurred against your housing allowance here i.e. the amount
that you actually spent that can be deducted against your housing
allowance. Ensure that you have kept all receipts for this expenditure and
can provide them to the IRC if requested. Without substantiation, your
expenses will not be allowed as deductions against your income.
• Housing Allowance Deduction – this is the actual housing allowance
deduction that is allowed to be claimed. If the actual expenses incurred
exceed the housing allowance received then write zero here. i.e. the figure
must be either positive or zero.
• Net Total Income From Salary & Wages – take the Housing Allowance
Deduction (above) from the Total Income From Salary and Wages (at the
top of Item 6).
• Tax Payable on Net Total S&W Income – This field is marked for IRC
office use only as some taxpayers may not have the necessary information
to calculate this figure. However, taxpayers who have access to all 26
fortnightly payslips plus the personal income tax rate schedule will be
able to calculate this figure and may write it in this box if they wish to
calculate the amount of SWT excess / shortfall.
• Group Tax Deductions Made By Your Employer(s) – this is the total of all
SWT deductions made by your employer(s) during the year. This
information is available from your Statement of Earnings.
• Salary & Wages Tax Excess / (Shortfall) – This field can only be calculated
if the Tax Payable on Net Total S&W Income line has been completed. If it
has been completed then subtract the Group Tax Deductions Made by
Your Employer(s) from the Tax Payable on Net Total S&W Income to
calculate the SWT excess / shortfall.
Housing Allowances
The deduction to be made against housing allowances is “housing expenditure”,
which is defined in Section 4 of the Income Tax Act. Basically, it is any
expenditure (but also including depreciation) incurred by the allowance recipient
that is associated with their sole or principal residence, that would be deductible
under the Act if the allowance received had been instead rent in respect of an
income-producing property. Thus it would include rent if the allowance is used to
rent the property in which you live. If you were purchasing the property in which
you live, it would include:
1. Rates and taxes (but not water rates or cartage);
2. Interest on any loan to acquire the house (but not repayments of principal
on the loan);
3. Insurance on the house (but not the contents);
4. Repairs (but not improvements or extensions);
5. Body corporate levies (if the property is a flat or unit);
6. Depreciation on the house or unit (but not the contents). Further notes on
depreciation appear below.
7. However, the deduction claimed cannot exceed the amount of the
allowance.
Things that are not deductible as housing expenditure include:
a) Electricity expenses;
b) Water rates, including excess water rates and cartage of water;
c) Payments to domestic servants, e.g. maids (referred to as “haus meris” in
Tok Pisin), gardeners, security staff, etc.
d) Travelling expenses to and from the property;
e) Telephone, fax, or telex expenses;
f) Entertainment expenses;
g) Connection to and rental of pay-TV facilities (e.g. Hitron)
Item 7 – Deductions against
salary or wage income
This section allows you to provide information on deductions that may reduce the
amount of tax that you have to pay on your income:
• Details Of Deductions Claimed Against Allowances – provide the details
of any deductions claimed against allowances other than housing allowance.
• Value Of Deductions – write the value of the expenses occurred against
the allowance in this line.
• Total Deductions Against Allowances – add the figures in the “Value of
Deduction” column and write the total here.
• Other Salary Or Wage Expenses – If you wish to claim deductions for
other expenses incurred in gaining your Salary or Wage income, list the
expenses here and provide details. For example, Daniel is an accountant.
Daniel incurred expenses as part of his official duties for a professional
membership with CPA PNG. Daniel’s employer did not reimburse him
for this expense, so he may claim the cost of professional membership
here.
• Value Of Deductions – write the value of the expenses occurred against
the salary or wages in this line.
• Total Deductions Against Salary Or Wages – add the figures in the “Value
of Deduction” column and write the total here.
• Election Expenses – if you incurred expenses in running for election to
National Parliament, provide the total expenses here. Note that this only
applies to National Parliament, not Provincial or Local Government
elections. Write the amount of the expenses in the “Value of Deduction”
column and the same amount in the “Totals” column.
• Other Deductions Against Your Assessable Income – if you have any
other expenses that may be claimed against your assessable income, write
the amount in the “Value of Deduction” column and the same amount in
the “Totals” column.
• Gifts To Foundation For Law, Order & Justice; Sporting Bodies Or
Approved Charitable Organisations – If you made donations to any of
these qualifying organisations write the total amount in the “Value of
Deduction” column and the same value in the “Totals” column. If you are
uncertain as to whether your donations qualify, contact the IRC for
clarification.
• Total Deductions Excluding Educational Fees – sum the totals of
deductions against allowances, deductions against Salary &Wages,
election expenses, other deductions and gifts. Write the total in this box.
• Less S214(3) Deduction – this amount is made available as a deduction to
all taxpayers and is always to the value of K200. There is no need to
complete this field and the figure is pre-filled for you. However, if you
claim a s214(4) rebate then the s214(3) deduction is not allowed so this
figure should be reduced to zero. If you use the MS Excel version of the
form, this calculation is automatic.
• Net Deductions – the s214(3) deduction (K200) is deducted from the total
deductions calculated above (unless a s214(4) rebate is claimed) to give
you the net deductions figure. This is because the 200 kina deduction was
incorporated into the calculation of your fortnightly SWT deductions. If
the total deductions was less than or equal to K200 then write zero in this
box.
• s214(3) Rebate – if the net deductions is a positive figure, calculate 25% of
net deductions and write that amount in this box.
Notes on Expenses:
Motor Vehicle Expenses
If you receive a motor vehicle allowance and only use the vehicle for personal
travel (such as travelling to work, to go shopping, to visit friends, etc.) then no
deduction is allowable against your allowance. Similarly, if you used the
allowance to buy and/or run your spouse’s car, no expenditure would be
deductible. Expenditure is only deductible where the vehicle is used for purposes
associated with carrying out your duties as an employee and not your role as a
social being. Travelling to and from work is not considered to be associated with
your duties as an employee; they start when you get to work. Home is the place
you live and you travel there because you are a social being, not because your
employer compels you to.
Having arrived at work, you may have to use the vehicle in the course of your
duties; perhaps something has to be delivered to a customer, or a client has to be
visited; a prospective buyer shown a property, etc. Sometimes these things may be
done on the way to work or on the way home. Where your vehicle is used in such
circumstances, the expenditure incurred would be deductible against any
allowance received.
It would be highly unusual for an employee to use their vehicle solely in carrying
out their duties. With travelling to and from work being excluded, most would
not use their vehicle for what might be called “business purposes” at all. Where a
person uses their vehicle only partially in carrying out their duties as an
employee, it becomes necessary to calculate the proportion of total motor vehicle
expenses that is allowable. This is usually done by keeping a log book throughout
the year that contains the opening and closing odometer reading for each trip and
in which is recorded the kilometres associated with carrying out your duties as an
employee i.e. for “business trips”. The proportion of the expenses that is
deductible is simply the ratio of what is referred to as “business kilometres” to
total kilometres. Thus, if the kilometres travelled in carrying out your employee
duties (“business kilometres”) was 1,000 and the total kilometres for the year was
10,000, then 10% of the motor vehicle expenses incurred during the year would be
deductible.
Just as it is preferable to keep a logbook to record “business kilometres” so it is
desirable to record the motor vehicle expenses incurred during the year. The types
of motor vehicle expenses that might be incurred include:
• Repairs;
• Service;
• Fuel
• Tyres;
• Registration;
• Insurance,
• Depreciation;
• Lease premiums (if leased);
• Interest (if money was
borrowed to purchase the
vehicle).
The rate of depreciation on motor vehicles is:
• Prime Cost 20%
• Diminishing Value 30%
For an explanation of how prime cost and diminishing value works, see the notes
on housing allowance above. To take a simple example then, if total motor vehicle
expenses for the year was K1,000 and the ratio of “business kilometres” to total
kilometres was 20%, then K200 would be deductible, i.e. K1,000 x 20% = K200.
Telephone Expenses
If you received a telephone allowance and only use the telephone for social
purposes, no deduction is allowed against your allowance. As is the case with
motor vehicles, telephone expenses are only deductible when incurred to carry
out your duties as an employee. This means that, for example, the cost of calls
made to suppliers, to your employer or to clients, etc. would be deductible. In
circumstances where a home telephone is used by multiple family members it
may be difficult to accurately track the proportion of calls made as part of your
duties. In such cases, a reasonable estimate will need to be made. As a home
telephone is essentially a social device, the cost of installation is not deductible
and nor is telephone rental or sales tax. Only business calls are deductible.
Other Allowances
Most other allowances are likely to be income supplements paid because of the
conditions under which the work takes place. For instance, the risk allowances
paid to soldiers serving in combat zones. Expenditure incurred against such
allowances cannot be for “business” purposes and so there is no deduction
allowed against them.
Rebates of Salary or Wages Tax
A rebate of salary or wage tax may be allowable where the sum of the following
amounts exceed K200:
i) Expenses incurred in gaining your salary or wage income including
expenses incurred against allowances;
ii) Expenses incurred in standing for election to the National Parliament (not
Provincial or Local Governments);
iii) Agricultural Development Expenditure transferred to shareholders;
iv) Gifts made to the Foundation of Law, Order & Justice, sporting bodies, and
charitable organisations (approved by the Commissioner General). Gifts to
approved charitable organisations must exceed K50.
If you have incurred expenditure in excess of K200 in earing your Salary or Wage
income that would otherwise have been deductible if not for section 66A, you may
claim a rebate of 25% of the amount of allowable expenditure in excess of K200.
Note that Salary or Wage earners may not claim item iii) (Agricultural
Development Expenditure).
Note that if you claim a s214(3) rebate you must keep all of your receipts so that
you can substantiate your claim.
Double Claims
Taxpayers lodging this return may have income from several sources, e.g. salary
or wages, rents, from business, etc. Once a particular deduction has been claimed
against one source of income it cannot also be claimed against another source of
income.
Item 8 – School fee rebates
for dependents
Use this section if you are claiming rebates for the primary school or high school
educational fees paid directly by you on behalf of your dependents. If you
received an education allowance or subsidies / reimbursements for these
expenses, deduct those amounts from the school fees paid.
• Name of dependent – this is the name of the dependent who received the
education.
• Name of school – the school or educational institution attended by the
dependent.
• School fees – the total school fees paid for this dependent during the year.
• Amount of deduction – this is the total school fees paid, less any
allowances, subsidies or reimbursements received to cover this expense,
multiplied by 25%. For example, Pauline paid K1,000 in 2014 for her
daughter’s school fees. She received a K600 allowance from her employer
to cover her daughter’s educational fees. The remaining K400 is then
multiplied by 25% to give a deduction amount of K100. Note that the
maximum deduction per child is K750 (see notes below).
• Total school fee deduction – sum the figures in the “Amount of
Deduction” column and write the total in this box.
• Total salary or wages tax rebates – Add the s214 rebate (from Item 7) to
the total school fee deduction. However, this amount cannot exceed the
SWT deductions made by your employer (from Item 1). If the s214 rebates
exceed the SWT deductions, write the value of the SWT deductions here
for Total salary or wages tax rebates.
Definition of Dependent
A dependent is a child or student wholly maintained by you in respect of whom
you are incurring education expenses.
Education Expenses
Salary or Wage earners paying school fees of a child or student who is wholly
maintained by them (i.e. is their dependent), are entitled to a rebate in respect of
those school fees. The rebate is limited to school fees paid to Primary or High
Schools (whether situated in PNG or overseas) and the amount that qualifies for
rebate is the net amount paid after deduction of any subsidies received, any
Education Allowances paid by your employer or anyone else, any amounts
reimbursed by your employer or anyone else, or any scholarship monies paid
towards fees. Amounts paid in respect of uniforms, excursions, textbooks,
travelling expenses, etc. should not be claimed; the deduction is limited to school
fees. The Commissioner General will calculate the rebate allowable. The rebate is
calculated at 25% of fees paid with a maximum of K750 per child. For example,
Mrs Wale paid K4,000 for her daughter’s school fees last year. The rebate is
calculated as the lesser of 25% of 4,000 (i.e. K1,000), but the rebate is limited to
K750, so Mrs Wale writes K750 for the rebate amount on her return.
Non-Salary or Wage earners get a deduction for education expenses and not a
rebate.
This deduction can be claimed against business or professional income or against
salary or wage income (for anyone with that kind of income who uses this return).
However, the same deduction cannot be claimed twice against both types of
income and those claiming the deduction against salary and wage income will
have their claim treated as a rebate against tax paid / payable.
Item 9 – Business income
payments from which tax
was deducted
If any of your income had Business Income Payments Tax (BPT) deducted from it,
provide the details at Item 9:
• Payer’s name – the name of the organisation that made the payment of
business income and withheld tax from it on your behalf.
• TIN of payer – the Taxpayer Identification Number of the entity that
withheld BPT on your behalf.
• Gross income – the income that you earned from this entity before tax was
deducted.
• Tax deducted – the amount of BPT deducted from your income by the
payer on your behalf.
• Total – the total BPT withheld by all payers on your behalf during the
year of income.
Note that copies of your P8 and PR2 statements must be submitted with your
Form I if you are claiming BPT credits. Your P8 and PR2 documents are available
from the payer.
Item 10 – Calculation of net
rental income
If you received rental income, provide the details in Item 10:
• Rental income:
a. Address of each property – the street address of the property for
which the rent is being disclosed.
b. Date acquired – the date on which the property was purchased.
c. Gross rent – the total rent received for the property, before any
expenses were deducted.
d. Total – the total gross rent from all properties that you own.
• Rental expenses – list the expenses that were incurred in earning your
rental income, broken down under the following categories:
a. Rates and taxes – If rates or property taxes were paid on the rental
properties, list the authority or authorities to whom the payments
were made, the amounts and the total paid.
b. Repairs – list the properties on which repairs were made, and
write the total value of repairs for each property. Add the value of
repairs undertaken on all properties and write the amount in the
total box. Note that repairs exclude improvements. Repairs
involve replacing existing materials with the same materials.
However if the change involves an upgrade to materials or an
expansion of the property, etc. then it cannot be claimed as a
repair expense.
c. Insurance premiums – Insurance policies taken out to cover
rented properties against fire, theft, etc. can be claimed as a
deduction. List the name of the insurer and the amount of the
policies. Add the value of all policies and write that figure in the
“Total” box. Note that this excludes any insurance premiums for
your personal property including your own residence, car, life
insurance, etc.
d. Interest – If you paid interest on loans taken out to buy rented
properties, list the names and addresses of the lenders and the
amounts paid in this section. Write the total interest paid in the
“Total” box. Note that this excludes interest on personal loans
including mortgages on personal property that you inhabit.
e. Commission – If you paid commissions to real estate agents with
respect to your rental properties, list the name and address of the
recipient plus the amount paid to each and total. Note that this
excludes commissions for private costs such as the commission
paid in the purchase of your own residence.
f. Depreciation – if you have depreciable assets that are used
directly to gain rental income, you may claim depreciation on
those assets. For example, buildings, fittings and appliances
would all qualify for depreciation if they are used to generate
your rental income. If you have such assets and are claiming
depreciation on them, provide the details in a separate schedule
(make a copy of Schedule 8) with the type of asset, depreciation
method, opening and closing values and depreciation claimed.
Copy the total depreciation for all assets from your attached
schedule into the box in Item 10. Note that if you have both
business assets that are depreciated and depreciable assets used
to generate rental income, then you will need to attach two
separate depreciation schedules.
g. Any other deductions related to rental income – If you have other
deductions that do not fit into any of the categories listed below,
provide the details and the deduction amounts here. Write the
total in the box on the right.
• Total rental expenses – sum all of the totals above for the various types of
rental expenses and write the total in this line.
• Net rental income (loss) – subtract the total rental expenses from the total
rental income and write the result in this line. If the result is positive then
this is income. If it is negative, then it represents a loss.
Item 11 – Calculation of
interest income
If you had interest payments that you received or were credited to you during the
period, provide the following details for each source of interest income:
• Name & address of each borrower or bank etc. – provide the name and
address of the entity that paid the interest. For example, ABC Bank,
Champion Parade, Port Moresby.
• Interest withholding tax – if Interest Withholding Tax (IWT) was
deducted from your interest payment, write the amount of IWT here.
Your bank or other party paying you interest is obligated to provide you
with a statement of interest paid and IWT deducted. If you have not
received such a statement, contact the entity paying the interest and
request one.
• Foreign tax paid – if the interest earned was paid by an entity from
abroad, foreign taxes may have been deducted prior to payment. If this is
the case, write the amount of foreign taxes paid in this column.
• Gross interest – this is the amount of interest paid inclusive of taxes (both
SWT and Foreign Taxes). For example, if you received K100 in interest but
had K15 in taxes withheld (as IWT applies at 15%), you would have
received K85 as a cash payment (or credit into your bank account),
however, in this field you need to write the tax-inclusive amount i.e.
K100. Be sure to include all interest received – even if a portion of the
interest is exempt from tax.
• Total – sum the figures in each of the last three columns and write the
total in the box at the bottom.
• Total interest – copy the total from the “Gross Interest” column to the box
on the bottom right.
• Exempt interest – If you received interest that is exempt from tax, write
the total of your tax-exempt interest here. This amount is deducted to
provide the total taxable interest.
• Taxable interest – subtract the exempt interest from the total interest
above to calculate the taxable interest. This amount is used later in your
tax assessment calculations.
Interest
Interest income must be declared even if no withholding tax was deducted. Where
Interest Withholding Tax (IWT) has been deducted this will be allowed as a credit
in the assessment.
Note: Non-residents who received PNG-sourced interest from which IWT was
deduced do not have to include this interest income in their Form I return.
Item 12 – Calculation of
dividend income
If you received dividend payments (or had dividends reinvested to buy more
shares) during the period, provide the following details for each source of
dividend income:
• Name of company or unit trust – write the name of each company or unit
trust that paid you dividends during the period.
• Dividend withholding tax paid – if Dividend Withholding Tax (DWT)
was deducted from your dividend payment, write the amount of DWT
withheld here. The company or unit trust paying you dividends is
obligated to provide you with a statement of dividends paid and DWT
deducted (Form D2). If you have not received such a statement, contact
the entity paying the dividends and request one.
• Foreign tax paid – if the dividend earned was paid by an entity from
abroad, foreign taxes may have been deducted prior to payment. If this is
the case, write the amount of foreign taxes paid in this column.
• Gross dividend – this is the amount of the dividend paid inclusive of taxes
(both DWT and Foreign Taxes). For example, if you received a dividend
of K200 but had K34 in taxes withheld, you would have received K166 as
a cash payment (or credit into your bank account), however, in this field
you need to write the tax-inclusive amount i.e. K200.
• Total – sum the figures in each of the last three columns and write the
total in the box at the bottom.
• Total dividends – copy the total from the “Gross Dividend” column to the
box on the bottom right.
• Exempt dividends– If you received dividends that are exempt from tax,
write the total of your tax-exempt dividends here. This amount is
deducted to provide the total taxable dividends.
• Taxable dividends subtract the exempt interest from the total dividends
above to calculate the taxable dividends. This amount is used later in your
tax assessment calculations.
Dividends
Most dividends are assessable, including dividends from foreign companies.
Exceptions include some liquidator’s distributions, some bonus share issues and
dividends from the Investment Corporation Fund. Tax credits are available in
respect of dividends where:
1. Dividend Withholding Tax has been paid (DWT);
2. Foreign Tax has been paid on overseas dividends.
Where a credit is claimed, proof of payment of the tax should be provided. In the
case of foreign taxes, a dividend slip is usually sufficient.
Effective 1 January 2006, resident individuals do not include dividend income
paid in 2006 on which DWT has been deducted as the DWT is the final tax.
Item 13 – Summary income
tax return
Income from sources other than salary / wages - This section brings together the
results from the various parts of the return that report income. If you have other
income (non-business and non-salary/wage) you will need to complete Schedule 2
and then copy the result here. If you have business income you will need to
complete Schedule 5 first and then copy the results here.
• Income / deduction item – this column lists the various sources of income
and deductions to use in calculating your net taxable income / loss.
• Item to complete – this column tells you which item or schedule within
the return needs to be completed based on the sources of income from
which you derived assessable income in the period.
• Amount transferred from item / schedule – write the amount that results
from the calculations in the item or schedule under the following
categories:
a. Gross profit from business / professional income - complete
Schedule 5A and transfer the result for non-primary production
income here.
b. Gross profit from produce account – complete Schedule 5A and
transfer the result for your primary production income here.
c. Other business income – complete Schedule 5B and transfer the
result for other business income here.
d. Total business income – sum the three boxes above to give total
business income.
e. Business deductions (total operating expenses) – If you had
deductions (expenses) against your business income then
complete Schedule 5C and transfer the result here.
f. Net business profit (loss) – subtract the Business Deductions
above from the Total Business Income and write the result here.
g. Net rental income – if you earned rental income, complete Item 10
above and copy the result here.
h. Interest income – if you earned interest income (taxable interest),
complete Item 11 and transfer the result here.
i. Dividend income – if you earned dividend income (taxable
dividends), complete Item 12 and copy the result here.
j. Other income – if you earned other income (from trusts,
partnerships etc.), complete Schedule 2 and copy the result here.
k. Total non-business income – sum the four boxes above and write
the total here.
l. Salary & wages income – if you earned salary or wage income,
complete Item 6 and copy the figure from “Net Total Income
From Salary & Wages” here.
m. Taxable income / loss – sum the following:
i. Net Business Profit (Loss);
ii. Total Non-Business Income; and
iii. Salary & Wages Income.
and write the total here.
n. Prior year losses utilised – if you have incurred a loss in a
previous tax year and that loss is available to offset current year
income declared in this return then write the amount here. You
will need to calculate the amount of the loss that is to be utilised
in this return and write the amount in this box. If you have losses
from previous years the IRC will utilise the oldest losses first
when processing your assessment. If the losses exceed the income
earned in the period, utilise only the amount of the loss needed to
offset your income and reduce it to zero for this return. Any
remaining losses may be carried forward and utilised in a future
period. If you have questions about claiming prior year losses,
contact the IRC for assistance.
Notes:
i. If you have salary or wage income and a loss (from
activities in PNG), the loss is converted to a rebate under
s214(4) and the loss cannot be carried forward to future
income years.
ii. If you received exempt income, the IRC will offset your
prior-year losses or current-year losses against this exempt
income before offsetting other income.
o. Net taxable income / loss – subtract the Prior Year Losses Utilised
from the Taxable Income / Loss above.
p. Notional tax on net taxable income – This box is for IRC office use
only. Tax agents may choose to use this box if they wish to
calculate an individual’s tax liability (or refund). If you use the
MS Excel version of the form, the calculation is automatic.
q. Notional tax on salary & wages income - This box is for IRC office
use only. Tax agents may choose to use this box if they wish to
calculate an individual’s tax liability (or refund). If you use the
MS Excel version of the form, the calculation is automatic.
r. Remaining tax payable on other income - This box is for IRC
office use only. Tax agents may choose to use this box if they wish
to calculate an individual’s tax liability (or refund). If you use the
MS Excel version of the form, the calculation is automatic.
s. s213D rebate on other income – if you earned income other than
from salary or wages and have dependents, complete Schedule 7
to calculate your s213D rebate. If you use the MS Excel version of
the form, the calculation is automatic.
t. Salary & wages tax excess / (shortfall) – if you earned salary or
wages, copy the result of the Salary and Wages Tax Excess /
(shortfall) from Item 6 and write it here.
u. Tax credit from BPT deductions – if you had Business Payments
Tax (BPT) withheld from any of your income, complete Item 9
and provide the detail of the BPT deductions. Copy the figure for
Total Tax Deducted in this box.
v. Other tax credits – if you have any other tax credits available,
such as from Interest Withholding Tax, Dividend Withholding
Tax, etc. then complete the appropriate items (Item 11, 12 etc.)
and write the sum of your other tax credits in this box.
w. Foreign tax credits – if your income included foreign-sourced
income from which tax was deducted, you may claim the foreign
tax credits here. Where certain conditions are met, you may also
be obligated to complete Schedule 6, the International Dealings
Schedule (IDS).
x. Salary & wages tax rebates – if you have deductions against your
assessable income and/or are entitled to rebates, complete Item 7.
If you have dependents and wish to claim the cost of their school
fees, complete Item 8. Sum the total rebates from Item 7 and Item
8 and write the result in this box.
y. Income tax payable (refundable) on total income – to calculate
this box, take the figure from “Remaining Tax Payable On Other
Income” and subtract the amounts from the six boxes below it i.e.
tax on other income less all credits and rebates. If you use the MS
Excel version of the form, the calculation is automatic. Note that
the result will not be possible if certain boxes above were not
completed (i.e. those marked as “IRC Office Use Only”).
z. S214(4) Rebate for Business or Other Loss – If you incurred a
business loss or other loss (such as for a rental property located in
PNG) i.e. your outgoings incurred in earning income exceed the
income earned, then you may be entitled to a s214(4) rebate. The
rebate is only provided so long as Salary or Wages Tax was paid
on salary or wage income earned. The rebate is calculated as the
difference between the tax on salary and wages alone and the tax
on your total income (including the loss and the K200 s214
deduction), using the annual tax rates published in the Income
Tax Act 1959 (as amended). If however, your PNG-sourced losses
are such that your income is reduced to zero (or an amount below
the tax-free threshold) once losses are applied, s214(4) allows for
the full amount of Salary or Wages Tax paid to be claimed as a
rebate by converting the loss to a rebate. Note that once you claim
the rebate, the loss is extinguished and cannot be carried forward
to future income tax periods. The rebate is limited to the amount
of Salary or Wages tax paid. If you did not earn salary or wages,
you may not convert your loss to a s214(4) rebate and your loss
will be carried forward to offset future income.
DOCUMENTS AND
INFORMATION TO BE
FURNISHED
This section provides a checklist that informs the taxpayer of which items and
schedules within Form I need to be completed and provided to the IRC.
Documents and Information
Required to be Furnished
with this Return
Work through the checklist in this section and answer each question with a Yes or
a No. Mark the appropriate box with an X like this:
Note that some boxes only offer a “Yes” option. In such cases, the information is
compulsory. The box is provided to allow you to quickly confirm that your return
includes all of the necessary information.
In some cases, such as those involving withholding taxes, you will be required to
provide copies of the documents relating that tax type. For example, if you had
BPT or Prescribed Royalty Tax deducted from your income, you will be required
to submit a copy of your P8 form(s) to the IRC as an attachment to your Form I.
TAX RETURN SCHEDULES 1 TO 10 The first portion of Form I covers the main elements of the Individual Income Tax Return and all items in
the first section are compulsory. However, other information will be required to process the assessment of
returns for taxpayers with more complex financial affairs. In such cases, taxpayers must complete a
schedule that provides the IRC with the information necessary to process the assessment.
Note: it is NOT necessary to lodge any schedules that are not relevant to your return. Only lodge those
where you have to enter information. Write your TIN at the top of the schedules that you complete in case
they are separated from the rest of your return.
Use this section of this guide to help with the completion of the Form I Schedules:
SCHEDULE 1 BALANCE SHEET
Balance Sheet Who should complete the Balance Sheet?
The summary balance sheet should be completed if you utilise assets such as
equipment in the course of earning your assessable income. There is no need to
list all individual assets or liabilities. Simply provide the total value of assets and
liabilities in the categories listed.
If you operate a sole trader business and you have completed financial statements,
attach a copy to this return instead of completing Schedule 1.
How to complete the Summary Balance Sheet:
The balance sheet provides a summary of your assets and liabilities. If you operate
a business as a Sole Trader, include any assets that are currently employed in that
business as well as your personal assets.
Current Assets refers to items that are transient or temporary in nature, such as
cash, debtors or inventory.
Fixed Assets are items that you own that have a more permanent or fixed nature,
such as property, equipment, etc.
Total Assets is the sum of the Total Current Assets and the Total Fixed Assets.
Current Liabilities refers to obligations that you have at present that are of a
transient or temporary nature, including accounts payable (outstanding bills),
taxes and fees.
Long-term Liabilities are obligations of a longer-term nature, including, loans,
mortgages, etc.
Total Liabilities is the sum of Total Current Liabilities and Total Long-Term
Liabilities.
Any asset or liability that does not fit into the categories listed on the balance
sheet should be included in the “other” section under the appropriate heading.
Note that the Summary Balance Sheet is only intended to provide a brief overview
of your assets and liabilities. If you have assets or liabilities that do not fit into the
specified categories, add their values and include them in the “Other” box for
each section.
There are specific rules and definitions that apply to certain elements of the
balance sheet:
Valuation of Trading Stock
The Income Tax Act (hereafter “The Act”) provides that the value of each article of
Trading Stock (not being Livestock) taken into account at the end of the year of
income shall be, at the option of the taxpayer:
a) Its cost price; or
b) Its market selling value; or
c) The price at which the stock can be replaced.
The abovementioned option shall be exercised by the taxpayer on the lodgement
of their first return showing income from a trading business and shall not be
varied at any time thereafter except with the approval of the Commissioner
General. Where no election is made by the taxpayer, the value of each article of
trading stock will be the cost price of the stock.
Valuation of Livestock
The value to be placed upon livestock on hand at the end of the financial year
shall be, at the option of the taxpayer:
a) its cost price; or
b) its market value.
As was the case for Trading Stock, the basis for valuation of livestock cannot be
changed from that of the previous year without the approval of the Commissioner
General. The value of livestock on hand should include all natural increase (stock
born during the year) at the values stated below.
Valuation of Natural Increase
Natural increase born during the financial year and still on hand at the end of that
year must be valued as follows:
a) at market value if other livestock are valued at market value; or
b) if other livestock is valued at cost, at a value not less than the following
amounts:
1. Sheep – 40 toea
2. Cattle or Horses - K2
3. Pigs – 50 toea
If a taxpayer fails to select a value for natural increase the Commissioner General
will treat the value as being the minimum value set out immediately above.
SCHEDULE 2 OTHER INCOME
Purchase of property with
the intention of resale at a
profit.
If you purchased land, shares, or other similar assets with the intention of
reselling them at a profit, then tick “Yes” and complete the questions below:
• Description of item sold – for each asset bought for resale, provide a
description of the item.
• Date purchased – write the date on which the item sold was initially
purchased.
• Date sold – write the date on which the item was sold.
• Profit – calculate the difference between your purchase price and the sale
price and write that amount in the “Profit” column.
• Total – sum the profit figures and write the total in this box.
Tips or Commissions Tips or commissions received for services rendered – if you received any tips or
commissions for any reason during the period, write the total amount received in
this box.
Share of Partnership Income
/ (loss)
If you are a partner in a partnership from which you received income (or shared
in a loss), complete the following details:
• Share of partnership income (loss) – Write the amount of income (or share
of loss) earned in this box.
• Name of partnership – write the name of the partnership
• TIN of partnership – the Taxpayer Identification Number of the
partnership
Partners in Partnerships
Because partnerships do not pay tax, it is necessary for partners to lodge returns
showing their share of the net partnership income or loss. This should be shown
in Schedule 2 under “Share of Partnership Income (Loss)”.
Distributions From a Trust If you received income from a trust of which you are a beneficiary, complete the
following details:
• Distributions from a trust – write the total income received by you as a
beneficiary of a trust (or trusts)
• Name of Trust – write the name of the trust here
• TIN of Trust – the Taxpayer Identification Number of the trust
Beneficiaries of Trusts
If you received income as a beneficiary of a trust, the income must be reported in
Schedule 2 under “Income as a Beneficiary of a Trust”.
The Act identifies four different categories of beneficiaries. They are:
1. Beneficiaries under intervivos trusts (those not created by will (deceased
estates) or by the Court) and to whom income is distributed or is applied for
their benefit.
2. Beneficiaries under intervivos trusts who are presently entitled to
undistributed trust income, i.e. the income of the trust is being accumulated.
3. Beneficiaries under trusts created by will (deceased estates) or by the Court.
4. Non-Resident beneficiaries.
Beneficiaries in category 1 above must return as income an amount equal to their
share of the trust distribution, less their share of the tax paid by the trustee, i.e. the
net amount received or applied for their benefit. Beneficiaries in categories 2 and 3
above must return as income an amount equal to their share of the trust
distribution but without a deduction for the tax paid by the trustee. Instead,
taxpayers in these two categories are entitled to a rebate equal to the lessor of the
tax the trustee had to pay in respect of the beneficiaries’ share of trust income.
Non-resident beneficiaries do not need to declare their share of a trust distribution
as income, as the trustee is required to pay (additional) tax on their behalf. The
share of income of beneficiaries should be show at Item 12 as “Other Income”
Other Income Not Disclosed
Elsewhere
If you received any other income (not declared elsewhere on the return), provide
the details here.
• Any other income (show details here) – provide a description of the source
of income and the amount earned.
• Total – sum the income from all sources listed in this table.
Recouped Lease Premiums
Where, after 1 June 1994, a previously leased asset, which has been acquired at its
residual value by either the taxpayer or an associate, is sold at a profit, that profit,
to the extent of the lesser of the lease premiums allowed or the profit made, is
assessable to the taxpayer who claimed the lease premiums. Any depreciation
recouped is also assessable. Any such assessable income should be reported in
Schedule 2 under “Other Income Not Disclosed Elsewhere”.
Total other income (loss)
Total other income (loss) is calculated by adding the following:
• Total profit from property purchased for resale;
• Tips or Commissions received
• Share of Partnership Income (loss);
• Income as a beneficiary of a trust; and
• Other income
Expenses incurred in earning
the above other income
If you have expenses that were incurred in earning the other income listed above,
you may claim a deduction for those expenses here (so long as they are legitimate
expenses that have not already been claimed elsewhere). Provide the following
details:
• Less other expense (not claimed elsewhere) – provide a description of the
expense and the amount.
• Total calculate the total of the expenses incurred and write that in this box.
Note that school fees may not be claimed in this section – they should be claimed
at Item 8.
Net non-salary or wage
income (loss)
To calculate Net Other Income (Loss), subtract the total of Other Expense from the
total Other Income (Loss).
SCHEDULE 3 LIVESTOCK ACCOUNT
If you are involved in primary production involving livestock (pigs, sheep, cattle,
etc.) you must provide the details of the changes in your livestock holdings during
the year.
Livestock Increases • Stock on Hand – write the type of livestock in the first column (e.g. pigs),
the number that you had on hand on the first day of the year, and their
value. The value will be measured either as cost (how much you paid for
the livestock) or market value (how much they are currently worth). For
example, if you paid K1,000 each for 3 pigs (total cost K3,000) that are now
worth K1,200 each at market, then if you value your stock at market value
then you would write “Pigs – 3 – K3,600” in this line.
• Purchases – list the various types of livestock purchased during the year,
the number of each type purchased and the total value of the stock.
• Natural Increase –if your stock numbers during the year increased due to
breeding, write the details here – the type and number of stock, e.g. if you
had 12 lambs born during the year, write “Sheep – 12”.
• Total – add up the values in the column on the right and write the total
here.
Note that if there is not enough space on the form (e.g. if more than three types of
livestock were owned during the year), the details should be provided on a
separate sheet and attached.
Valuation of Livestock
The value to be placed upon livestock on hand at the end of the financial year
shall be, at the option of the taxpayer:
a) Its cost price; or
b) Its market value.
As is the case for Trading Stock, the basis for the valuation of livestock cannot be
changed from that of the previous year without the approval of the Commissioner
General. The value of livestock on hand should include all natural increase (stock
born during the year) at the values stated below.
Valuation of Natural Increase
Natural increase born during the financial year and still on hand at the end of that
year must be valued as follows:
a) At market value if other livestock are valued at market value; or
b) If other livestock is valued at cost, at a value not less than the following
amounts:
i. Sheep – 40 toea
ii. Cattle or Horses – K2
iii. Pigs – 50 toea
If a taxpayer fails to select a value for natural increase, the Commissioner General
will treat the value as being the minimum value set out immediately above.
Livestock Decreases • Gross Sales – If you sold livestock during the financial year, write the type,
number sold and the gross sale value (i.e. the amount received for the stock
– before deducting any costs).
• Killed for Rations – if part of your holdings of livestock was used for your
personal food supply for you and your family, you must note the type of
livestock, the number killed for rations and the value of that livestock in
this section.
• Loss by Death, etc. – If your holdings of livestock were diminished by
death (such as due to disease or predators), theft, or other means, write the
type and number affected here.
• Stock on Hand – write the type of livestock in the first column (e.g.
poultry), the number that you had on hand on the last day of the financial
year, and their value. The value will be measured either as cost (how much
you paid for the livestock) or market value (how much they are currently
worth). For example, if you paid K10 for 3 chickens (total cost K30) that are
now worth K12 each at market, then if you value your stock at cost value
then you would write “Chickens – 3 – K30” in this line.
• Total – add up the values in the column on the right and write the total
here.
Profit / Loss Subtract Total 1 from Total 2 to calculate the profit / loss from livestock. Transfer
this amount to Schedule 5 for inclusion in your assessable income calculation.
SCHEDULE 4
RENTAL PAYMENTS
If you made payments to landlords or other parties for rental of property
(commercial or domestic), the details must be provided in Schedule 4.
Taxpayer Identification
Number
Write your Taxpayer Identification Number (TIN) in the top right hand corner of
the schedule in the nine boxes provided (one for each digit of your TIN). This is
the number that uniquely identifies your personal tax record.
Landlord / Recipient Write the name of the company or individual to whom you paid rent during the
year of income.
TIN of Recipient This is the TIN of the landlord / recipient to whom rent or lease payments were
made (whether a company or an individual). If you do not know the TIN of the
recipient, contact them to confirm their TIN. If they do not have a TIN, write “No
TIN” in this column. Note that all companies operating in PNG are obligated to
have a TIN. Failure to register with the IRC may result in severe penalties being
applied.
Total Rent Paid Write the total amount of all rental / lease payments made during the year to the
landlord / recipient.
Stamp Duty Payment
Receipt Number
All leases with a value of 500 kina or higher must be registered with the IRC and
are subject to Stamp Duty. Write the receipt number from your Stamp Duty
payment in this column. If the value of the lease was below the threshold for
Stamp Duty, write “Not applicable” in this column. Note that if the value of the
lease exceeds the Stamp Duty threshold but Stamp Duty has not yet been paid,
you must visit your nearest IRC office to have the lease assessed and pay the
appropriate Stamp Duty. Failure to do so may result in severe penalties being
imposed.
SCHEDULE 5 BUSINESS INCOME
If you earned income as a sole trader business (including a business with
employees), you must complete Schedule 5.
5A – BUSINESS /
PROFESSIONAL INCOME
If you earned income from a business involved in trading, complete this section.
Trading Account (Non-
Primary Producers Only)
• Gross sales (cash & credit) – this is the total of business receipts that you
received from your customers / clients for your goods/services. Include all
sales made via cash (including cheques, EFTPOS, etc.) and those made on
credit - where the customer is yet to pay you for the goods/services
provided.
• Opening stock – this is the total value of all of the stock that you had on hand
on the first day of the financial year.
• Purchases – write the total value of stock purchased during the financial
year.
• Total - add the gross sales, opening stock and purchases and write the total
here.
• Closing Stock – this is the total value of all of the stock that you had on hand
on the last day of the financial year.
• Cost of Goods Sold (COGS) – write the total of the purchase price of the
goods that were sold during the course of the financial year in this box.
• Gross Profit – subtract closing stock and COGS from the total in the line
above.
• Closing stock valued at – This is the method used to calculate the values
reported in this schedule:
a. Cost – select this method if you valued your stock at the price
originally paid at the time of purchase.
b. Market Value – stock is valued at the current market price,
regardless of the amount originally paid.
c. Replacement Cost – stock is valued at the amount that it
would cost you to replace it. Note that this may be different
from the market value.
Further Information on the Valuation of Trading Stock
The Act provides that the value of each article of Trading Stock (not being
livestock) taken into account at the end of the year of income shall be, at the
option of the taxpayers:
a) Its cost price; or
b) Its market selling value; or
c) The price at which the stock can be replaced.
The above-mentioned option shall be exercisable by the taxpayer by the taxpayer
on the lodgement of their first return showing income from a trading business and
shall not be varied at any time thereafter except with the approval of the
Commissioner General. Where no election is made by the taxpayer, the value of
each article of trading stock will be the cost price of the stock.
Livestock Account If you are involved in primary production and keep livestock, you must complete
Schedule 3. Copy the profit or loss from the bottom of Schedule 3 here.
Produce Account (Primary
Producers Only)
If you are involved in primary production and grow crops or other produce (such
as vegetables) you must complete this section. Provide the following details:
• Gross sales (cash and credit) – this is the total of business receipts that you
received from your customers / clients for your produce. Include all sales
made via cash (including cheques, EFTPOS, etc.) and those made on credit -
where the customer is yet to pay you for the goods/services provided.
• Opening stock – this is the total value of all of the stock that you had on hand
on the first day of the financial year.
• Purchases – write the total value of stock purchased during the financial
year.
• Total - add the gross sales, opening stock and purchases and write the total
here.
• Closing Stock – this is the total value of all of the stock that you had on hand
on the last day of the financial year.
• Cost of Goods Sold (COGS) – write the total of the purchase price of the
goods that were sold during the course of the financial year in this box.
• Gross Profit – subtract closing stock and COGS from the total in the line
above.
5B – OTHER BUSINESS
INCOME
If you earned income from any other business or as a professional, complete this
section.
• Gross income from the profession of… - If you are a professional and you
earned professional services income, write the amount of income earned here
and specify the type of profession, e.g. accounting, surveying, doctor, etc.
Note that gross income is reported here - i.e. the amount that you earned
before taxes or expenses.
• Gross income from the business of… - if you have business income from a
source that has not already been declared elsewhere on this return, write the
gross income (i.e. before expenses or taxes) here. Write the nature of your
business on the dotted line, for example if you buy and sell betelnut, write
“Betelnut Trading”.
• Value of goods taken from stock for personal / family purposes – Some
taxpayers, such as storekeepers, food sellers, clothing sellers, etc. will take
some of the stock they purchase for their business for use by themselves or
their family. If your business income comes from trading in goods and some
of the goods purchased as stock for the business were actually used for
personal or family consumption or enjoyment, then write the value of the
goods taken here. For example, if your business buys and sells packets of
noodles that cost you K10 per case, and you took two cases from inventory
for use by you and your family at home, write K20 here.
• Insurance payments received – If you received an insurance payout related
to your business at any time during the financial year, write the amount
received here.
• Subsidy, grant, or bounty payments - If your business received subsidies
from government agencies (such as a farming subsidy received by a farmer),
grants (such as a grant from a Provincial Government to a commercial
entity), or bounty payments (such as for the eradication of pests), write the
total received here.
• Bad debts recovered – when a debt is written off because it is deemed
uncollectable, it must be declared in Schedule 9, Bad Debts Written Off.
However, if at any point during the financial year a bad debt that had been
written off in a previous financial year was recovered (for example, as the
result of a favourable outcome in a court case), write the total amount
recovered here.
• Royalties or franchise fees – If your business received royalties or franchise
fees write the total amount received here. Examples of Royalties are
payments received for the exploitation of natural resources such as timber
from forests, or payments received for the use of your intellectual property,
such as from books, music or photographs. Franchise fees are payments
received for the right to use the name, branding, etc. of a business. If you
received payments of this kind, include them in the total reported here.
• Commissions, discounts or rebates etc. – If your business received
commissions, discounts, rebates or other payments of this kind, report the
total received in this box. Commissions are payments made as an incentive
for achieving a business objective such as meeting a sales target. Discounts
received on goods that you purchased that were made using discounts
secured by virtue of your business relationship with a supplier. For example,
if you make large purchases each year from ABC department store and the
store grants you a discount for your personal shopping at that store, the
discount received forms part of your business income and should be
included in the total reported in this box. Rebates are payments received
from suppliers that are like a discount that is received after the sales
transaction has been completed. Sometimes, the rebate comes in the form of
a cheque that is posted to the purchaser some weeks after the time of
purchase. Rebates form part of your assessable income and need to be
included in the total reported in this line.
• Other business income – If you received any other business income that has
not already been reported in the categories above, write the total of that
income here.
• Total other business income – add up all of the values in 5B and write the
total in this line.
• Total business income – Add the following:
a. Gross Profit from Trading Account (from 5A);
b. Profit or Loss on Livestock (from 5A);
c. Gross Profit from Produce Account (from 5A); and
d. Total Other Business Income (from 5B)
and write the total in this box.
5C – BUSINESS
DEDUCTIONS
If you incurred expenses in the course of deriving your business income that have
not already been claimed elsewhere in this return then complete this section. Note
that expenses that were claimed at Item 10 (rental expenses) or Schedule 2
(expenses against other income) must not be claimed again here.
• Accounting or Tax Agent Fees – if you engaged an accountant or tax agent
to assist you with the completion of your accounting and taxation records,
you may claim the cost of those services in this line.
• Advertising and promotion – If you had expenses for advertising (such as
newspaper or television advertising) and promotion (including event
promotion, etc.) during the financial year, write the total of these costs for
the financial year in this line.
• Bad debts written off – If you have debts (such as amounts owing from
customers for goods that were purchased on credit) that were deemed
uncollectable during the financial year, complete Schedule 9, and provide
the details of all such debt write-offs, then copy the total from Schedule 9
here.
• Depreciation on plant or buildings owned by you and used in the
business – if your business utilises plant (such as machinery or
equipment) or buildings (e.g. a factory) in the course of generating your
business income, complete Schedule 8 and provide the details of the
depreciation on plant and buildings. Copy the total from Schedule 8 here.
• Insurance – if you made payments for insurance related to the operations
of your business, you may claim them as a business expense by writing
the total of insurance premiums paid in this line. Note that only legitimate
business expenses may be claimed, such as the insurance on business
premises (like a store or factory), or on trucks used in generating business
income. Private insurance policies such as life insurance, home insurance
and car insurance for your private vehicles must not be claimed as a
deduction.
• Interest paid on money used to purchase business, plant, or for working
capital – if you took out a business loan to finance your business
operations, you may claim the interest paid on that loan (or loans) as a
business deduction here. This deduction is limited to loans used to
purchase an established business, or to set up or expand a business, such
as to purchase plant or working capital (funds to begin or expand the
operations of the business). For example, Imelda borrows K10,000 to buy
a business as a mechanic. She spends K5,000 buying an established
business, K3,000 on a new hoist and other tools, and K2,000 on newspaper
advertisements to attract new customers. During the financial year,
Imelda paid K700 in interest on the loan. Imelda claims K700 as a business
deduction.
• Lease payments – if your business incurred costs for leasing buildings or
equipment, write the total of the lease payments in this line. Note that any
lease payments on private assets (such as a lease on a private vehicle) may
not be claimed as a deduction.
• Legal expenses – if you incurred legal fees in the course of conducting
your business, those expenses may be claimed as a deduction in this line.
Attach a list of the payments made, to whom and for what legal services.
Note that this deduction only relates to legal services engaged for
business purposes. Private legal expenses such as conveyancing for the
purchase of a private residence may not be claimed as a deduction.
• Motor vehicle expenses – if you made use of motor vehicles in the course
of running your business, claim the running costs here. Note that this
excludes private use, including daily travel from home to your place of
work and back.
• Printing, stationery and postage – costs incurred in running your business
for printing, stationery (pens, paper, staples, etc.), and postage may be
claimed as a deduction here. Note that this deduction relates to business
expenditure only. For example, stationery bought for your children to use
at home would be excluded, as would postage for private matters, such as
posting a birthday card to a friend.
• Rates and taxes on business premises – if you paid rates or taxes (such as
property taxes) on your business premises, claim the deduction for the
costs incurred here. Note that this excludes any private usage portion. If
for example, your business operates from your private residence, claim
only the portion of rates and taxes paid relating to business use. For
example, Mildred runs a business from her private residence. The
residence is 10 square metres in size and Mildred has converted 3 square
metres into an office that is used to run her business. She paid K1,000
during the financial year in rates and property taxes, so she can claim the
business portion (30%) as a deduction i.e. K300.
• Repairs and maintenance – if you incurred costs for repairs and
maintenance on business premises or plant (equipment such as canning
machines at a cannery), write the total cost in this line. Note that repairs
and maintenance costs may only be claimed as a deduction to the extent
that they relate to your business activities. For example, Fabian runs a
warehousing business and incurred costs for painting the warehouse
(K300), repairs on the generator (K200), and a refurbishment of the
bathroom of his private residence (K1,000). Fabian may claim the business
repairs and maintenance but not the repairs to his private residence so his
deduction is K500.
• Rental expenses – if you paid rent on your business premises, claim the
cost of the rent as a deduction in this line. Note that this only relates to
business expenses. If you paid rent on a property that was used for both
business and private use, you must apportion the rent deduction and only
claim the business portion.
• Salaries & wages, bonuses, commissions, allowances – payments to your
employees can be claimed as a deduction here. This includes all payments
that would normally form a part of the employees’ pay packets. Write the
total of all such payments to employees here.
• Other employee expenses not claimed elsewhere – if you incurred any
other expenses as a result of engaging employees, such as health
insurance or other benefits such as payments for rental of employees’
private residences, school fees, etc., write the total of such expenses in this
line.
• Total payments made to employees – add the two lines above and write
the result here. Note that the amount reported here must equal the total
reported on your Statement of Earnings (S1 or S1L) for Salary or Wages
Tax.
• Subscriptions to trade, business or professional associations – payments
made to subscribe to trade, business or professional associations may be
claimed as a deduction where they are legitimately linked to your
business activities. For example, if you earn business income as an
accountant then you may claim a deduction for a professional
membership such as CPA PNG. Note that the deduction is not available
for club memberships such as payment of membership to the Aviat Club
or Royal Papua Yacht Club.
• Telephone & electricity expenses – business-related telephone and
electricity expenses may be claimed in this line. Note that where the
telephone or electricity is for both business and personal use, the expense
must be apportioned. In such cases, document the method used to
determine the portion of business use. Only the business-use portion may
be claimed as a deduction.
• Travel & accommodation – travel and accommodation costs necessarily
incurred in carrying on your business may be claimed as a deduction in
this line. Note that the deduction applies to business travel only. For
example, during the financial year Kevin, who runs a catering business,
paid a total of K3,000 in airfares and K1,700 in hotels. K1,000 of airfares
and K500 of hotel costs related to a trip that Kevin took to Bali for a
vacation. The rest related to travel that he undertook in the course of
earning his business income. Kevin’s deduction is for the business portion
of his travel expenses only i.e. K2,000 + K1,200. Kevin writes K3,200 in this
line of his Form I return.
• Other business expenses not claimed elsewhere – if you incurred any
other costs relating to your business activities that have not been claimed
already elsewhere in this return, write the total of all such expenses here
and attach a list with the details of what the expenses were and to whom
they were paid.
• Total operating expenses – sum all of the figures in the column on the
right of this page and write the total in this line.
• Net business income (loss) – subtract Total Operating Expenses from
Total Business Income (from the previous page) and write the result in
this box.
Business Expenses
Under section 68 of the Act, all expenses incurred in gaining or producing
assessable income or necessarily incurred in carrying on a business are made
deductible, unless they are:
a) Private expenses;
b) Domestic expenses;
c) Capital expenses.
Examples of private expense would include “Bride Price” payments, the cost of
holidays, the cost of life insurance, etc. Domestic expenses would include the cost
of renting your family residence, the cost of feeding and clothing your family, etc.
Capital expenses would include the payment of the principal of a loan (although
interest payments might be deductible), the cost of plant or machinery (although
interest payments might be deductible), the cost of plant or machinery (although
depreciation will be allowable), the cost of improvements or alterations, etc. To
assist in the preparation of your return, your cheque butts (or electronic payment
slips) should fully state what the cheque / payment was drawn for and ideally a
separate account should be maintained to only bank business receipts and draw
business cheque.
Entertainment Expenses
From 1 January 1995 entertainment expenses became deductible only in very
limited circumstances. Those circumstances are:
1. Where the entertainment expenses are incurred because the taxpayer is in
the business of providing entertainment (as defined) i.e. they provide
food, drink, etc. but are paid for doing so i.e. restaurants, hotels, clubs, etc.
2. Where the entertainment is provided by exhibiting or giving away to the
public specific goods or services produced or supplied by the taxpayer.
3. Where the entertainment, typically in the form of food or drinks is
provided non-selectively to members of the public whilst the taxpayer’s
products or services are being advertised or exhibited.
4. Where the entertainment is in the form of food or drink provided to
employees (otherwise than at an office party or social function) during
working days at staff canteens or dining rooms, or during a working
seminar or overtime.
5. Where the entertainment is provided to members of the public who are
sick, disabled, poor or otherwise disadvantaged.
Entertainment has been defined to include the provision of food, drink, or
recreation, as well as any related travel or accommodation. The effect of
limiting the deduction for entertainment is that expenses on business
lunches / dinners, entertaining existing / prospective clients or business
associates is no longer deductible. Nor is the cost of cocktail parties,
dinner parties, Christmas parties, etc. There is also no deduction for
entertainment allowances paid to employees.
Primary Production Expenditure
The Act makes the following expenditures specifically deductible to primary
producers – expenditure for:
a) The eradication or extermination of animal or vegetable pests from the
land;
b) The destruction and removal of timber, scrub or undergrowth indigenous
to the land;
c) The destruction of weed or plant growth detrimental to the land;
d) The preparation of the land for agriculture;
e) Ploughing and grassing the land for grazing purposes;
f) The draining of swamp or low-lying lands where that operation improves
the agricultural or grazing value of land;
g) Preventing or combatting soil erosion on the land otherwise than by the
erection of fences;
h) The construction of dams, earth tanks, underground tanks, irrigation
channels or similar structural improvements, or the sinking of bores or
well, for the purpose of conserving or conveying water for use in carrying
on primary production on the land;
i) The construction on the land of levee banks or similar improvements
having like uses;
j) The construction on the land of roads including bridges, culverts or
similar works forming part of a road.
k) The planting of the land with trees, including the purchase of seed,
seedlings, cuttings and similar materials; or
l) Where the Commissioner General is satisfied that the land is in a district
that is subject to the ravages of animal pests – the construction or
alteration of fences on the land being fences, the sole purposes of which, is
to prevent animal pests entering upon the land or any part of the land.
SCHEDULE 6 INTERNATIONAL DEALINGS SCHEDULE
If you had dealings with parties in foreign countries, complete the questions at the
top of Schedule 6 and then follow the instructions as to which parts of the
schedule need to be completed.
International Dealings
Schedule
“International related parties” means persons who are parties to international
dealings that can be subject to Division 15 Part III of the Income Tax Act (ITA) or
the associated enterprises article of a relevant double tax agreement. The term
includes the following:
• any overseas entity or person who participates directly or indirectly in your
management, control or capital
• any overseas entity or person in respect of which you participate directly or
indirectly in the management, control or capital
• any overseas entity or person in respect of which persons who participate
directly or indirectly in its management, control or capital are the same persons
who participate directly or indirectly in your management, control or capital.
“Related party international dealings” means international transactions,
agreements or arrangements between related parties. The term includes all
transactions between a Papua New Guinea (PNG) resident and international
related parties.
Ultimate holding entity of
the taxpayer
Write here the name of the ultimate holding entity that owns this entity or where
the ultimate holding entity is party to an offshore Joint Venture project and all
related parties to such arrangements be disclosed at this label. This may involve
tracing ownership through several intermediate holding entities.
Country of residence of the
ultimate holding entity
This is the country in which the ultimate holding entity resides.
Part A – International
Related Party Transactions
In Part A, provide the details of transactions (including loans) between your
enterprise and related international parties.
Question 1 The intent of this question is to verify that the entity is required to complete this
part of the international dealing schedule. If you are a relevant company you are
required to complete this part of the international dealings schedule if you:
a. Had international related party dealings that exceeded K 100,000 in value
excluding the capital value of any related party loans- complete questions 2
and 3 of the schedule, and/or
b. Had loans with international related parties whose aggregate capital value,
for both amounts borrowed and amounts loaned, exceeded K 2,000,000 at
any time during the year, complete questions 4 of the schedule.
Question 2 The intent of this question is to identify and quantify the taxpayer’s international
related party dealings. This includes identifying the countries where you have
related party dealings. In addition, the question helps us to understand the
transfer pricing methods you use and the extent to which you have transfer
pricing documentation to support those dealings.
a. Tangible Property The Kina amounts or values asked for in this question are all based on your
accounting records.
The definition of trading stock in Section 4 of the Income Tax Act 1959 should be
used to determine what trading stock is for the purpose of this question.
Any amounts paid for the use of tangible assets should be included at Rent. This
would include rent, hire and operating lease payments.
All other payments in relation to tangible assets should be included as Other. This
will include transfer of capital assets and consumables. Where amounts are
included at Other, you will need to provide a description of the dealings.
Purchases / Expenditure At labels A, F & K provide your gross purchases or expenditure for tangible
property obtained from international related party dealings.
Sales / Revenue At labels B, G & L, provide your gross sales or revenue from tangible property
provided to international related parties.
Method At labels C, H & M, record the code for the principal arm's length pricing method
used to value the transactions for this item.
Country At labels D, I & N, record the code for the country with the highest Kina value of
transactions for this item.
Documentation The IRC advocates a four-step process that links the arm's length principle,
questions of comparability and the transfer pricing methodologies. These are set
out in Internal Revenue Commission Taxation Circular No 2011/2.
The arm's length principle involves comparing what a business has done and
what a truly independent party would have done in the same or similar
circumstances. Companies are expected to prepare sufficient documentation to
support how they value international transactions with related parties.
At Labels E, J & O record the code for your estimates of the percentages of the
total Kina value of the related-party international dealings for which you have
written documentation to support the Four Step process.
• For the list of price methodology codes, see Appendix 1
• For the list of country codes, see Appendix 2
• For the list of percentage of dealings with documentation codes (and further
information), see Appendix 3
b. Intangible Property The Kina amounts or values asked for in this question are all based on your
accounting records.
The definition of Royalties in Section 4 of the Income Tax Act 1959 should be used
to determine what Royalties are for the purpose of this question.
Any amounts paid for the transfer of intangible assets should be included at
‘Transfer of intangibles’.
All other payments in relation to intangible assets should be included as Other.
Where amounts are included at Other, you will need to provide a description of
the dealings.
At labels A, F & K provide your gross purchases or expenditure for Intangible
Property obtained from, or Royalties paid to, international related parties.
At labels B, G & L, provide your gross sales or revenue from Intangible Property
provided to, or Royalties received from, international related parties.
At labels C, H & M, record the code for the principal arm's length pricing method
used to value the transactions for this item.
At labels D, I & N, record the code for the country with the highest Kina value of
transactions for this item.
At Labels E, J & O record the code for your estimates of the percentages of the
total Kina value of the related-party international dealings for which you have
written documentation to support the Four Step process.
• For the list of price methodology codes, see Appendix 1
• For the list of country codes, see Appendix 2
• For the list of percentage of dealings with documentation codes (and further
information), see Appendix 3
c. Financial Transactions The Kina amounts or values asked for in this question are all based on your
accounting records.
For the purposes of this schedule, interest, discounts and guarantees should be
given their ordinary meaning within the context of commercial and accounting
practices. This will include amounts paid in respect of loans redeemable
preference shares, promissory notes convertible notes and other interests that may
be considered to be debt.
Insurance includes activities associated with the management of insurance
contracts (predominantly undertaken through intermediaries). Effectively, the
expenditure and revenue will represent intermediaries' commissions for
providing an insurance management type service (e.g. placement of the insurance
portfolio to a third party; or providing back office functions).
All other financial transaction payments should be included as Other. Where
amounts are included at Other, you will need to provide a description of the
dealings. Amounts to be included here would include acquisitions or disposals of
ordinary shares, preference shares or other debt or equity instruments.
At labels A, F & K provide your gross purchases or expenditure for financial
transactions paid to, international related parties.
At labels B, G & L, provide your gross sales or revenue for financial transactions
received from, international related parties.
At labels C, H & M, record the code for the principal arm's length pricing method
used to value the transactions for this item.
At labels D, I & N, record the code for the country with the highest Kina value of
transactions for this item.
At Labels E, J & O record the code for your estimates of the percentages of the
total Kina value of the related-party international dealings for which you have
written documentation to support the Four Step process.
• For the list of price methodology codes, see Appendix 1
• For the list of country codes, see Appendix 2
• For the list of percentage of dealings with documentation codes (and further
information), see Appendix 3
d. Services The Kina amounts or values asked for in this question are all based on your
accounting records.
The definition of Management Fee in Section 4 of the Income Tax Act 1959 should
be used to determine what a Management Fee is for the purpose of this question.
This includes fees of a management or technical nature and would include fees for
administration services.
Marketing fees should be given its ordinary meaning within the context of
commercial and accounting practices. This will include fees for the promotion of
products and services as well as research into the market for products and
services.
IT and Communication includes fees for the provision of information technology
or communication services that are not included in Management Fees. This may
include provision of internet or communication network access.
Construction and engineering includes fees for the provision of Construction and
engineering services that are not included in Management Fees.
R&D (Research and Development) should be given its ordinary meaning within
the context of commercial and accounting practices. This will include fees for
contract research and development as well as amounts paid on a cost allocation
basis for research and development undertaken for the economic group.
All other payments in relation to services should be included as Other. Where
amounts are included at Other, you will need to provide a description of the
dealings.
At labels A, F, K, P, U & Z provide your gross purchases or expenditure for
financial transactions paid to, international related parties.
At labels B, G, L, Q, V & AA, provide your gross sales or revenue for financial
transactions received from, international related parties.
At labels C, H, M, R, W & AB, record the code for the principal arm's length
pricing method used to value the transactions for this item.
At labels D, I, N, S, X & AC, record the code for the country with the highest Kina
value of transactions for this item.
At Labels E, J, O, T, Y & AD record the code for your estimates of the percentages
of the total Kina value of the related-party international dealings for which you
have written documentation to support the Four Step process.
• For the list of price methodology codes, see Appendix 1
• For the list of country codes, see Appendix 2
• For the list of percentage of dealings with documentation codes (and further
information), see Appendix 3
e. Other The Kina amounts or values asked for in this question are all based on your
accounting records.
Revenue should be given its ordinary meaning within the context of commercial
and accounting practices. Items that appear here would normally be accounted
for in financial statements within the Statement of Profit and Loss. Where
amounts are included at Revenue, you will need to provide a description of the
dealings.
Capital should be given its ordinary meaning within the context of commercial
and accounting practices. Items that appear here would normally be accounted
for in financial statements within the Balance Sheet. Where amounts are included
at Capital, you will need to provide a description of the dealings.
At labels A & F provide your gross purchases or expenditure for other
transactions paid to, international related parties.
At labels B & G, provide your gross sales or revenue for other transactions
received from, international related parties.
At labels C & H, record the code for the principal arm's length pricing method
used to value the transactions for this item.
At labels D & I, record the code for the country with the highest Kina value of
transactions for this item.
At Labels E & J record the code for your estimates of the percentages of the total
Kina value of the related-party international dealings for which you have written
documentation to support the Four Step process.
• For the list of price methodology codes, see Appendix 1
• For the list of country codes, see Appendix 2
• For the list of percentage of dealings with documentation codes (and further
information), see Appendix 3
Question 3 The intent of this question is to ascertain what percentage of your total dealings
(i.e. related and unrelated parties) for the five categories used in Question 2 are
your international related party dealings.
(For example if for the year ended 31 December 2014 your total sales are K
10,000,000 (to your related and unrelated parties) but your international related
party sales are only K 3,400,000 than the percentage of your international related
party dealings to total dealings is 34%).
Question 4 This question collects information about your loan arrangements with
international related parties.
The Kina amounts or values asked for in this question are all based on your
accounting records.
A loan arrangement should be given its ordinary meaning within the context of
commercial and accounting practices. In general terms, a loan arrangement is
defined as a contract where the lender pays a sum of money in consideration of a
promise by the borrower to repay the money at some time in the future (and this
promise may/may not include the promise to repay interest on the money
borrowed). This may include amounts described as Redeemable Preference Shares
or Promissory Notes, where the economic substance of the loan is that of a debt
instrument.
Other financing arrangements that are economically in substance a loan
arrangement would be regarded as a loan for the purposes of this question. For
example securities loan arrangements where the collateral is cash, sale and
buyback arrangements to be settled in cash or repurchase agreements (repos) to
be settled in cash.
Whether a financing arrangement economically constitutes a loan arrangement is
a matter to be decided based on the facts and circumstances of each
case/arrangement, for example, whether the arrangement involves revenue assets
and/or constitutes an ordinary business activity undertaken by the taxpayer.
For the purposes of this question, for arrangements that are economically in
substance loans:
• the cash collateral or cash settlement amount would be considered the loan
amount
• any fees paid/received in respect of those arrangements would be considered
interest.
We recommend that you source appropriate guidance in light of the particular
facts and circumstances of your case.
To complete each part of this question you need to:
• identify all loan arrangements
• divide the loan arrangement into
o interest bearing loans
o interest free loans
• calculate the average balance of the loans, by
o adding up the loan balance amount at the start of the year and the loan
balance amounts at the end of each quarter
o dividing the result by five
• in respect of interest bearing loans, determine the amount of interest
expenditure or interest revenue in respect of these loans.
a. Interest-Bearing At labels A, F, K, P, U, Z, AE, AJ & AO provide the average balance of interest
bearing loans in relation to amounts borrowed from related entities (Label A, F, K,
P & U)) or loaned to related entities (Label Z, AE, AJ & AO).
At labels B, G, L, Q, V, AA, AF, AK & AP provide the interest paid to related
entities in relation to the amounts borrowed (Label B, G, L, Q & V) or interest
received from related parties in relation to the amounts loaned (Label AA, AF, AK
& AP).
At labels C, H, M, R, W, AB, AG, AL & AQ record the code for the principal arm's
length pricing method used to value the transactions for this item.
At labels D, I, N, S, X, AC, AH, AM & AR, record the code for the country with
the highest Kina value of transactions for this item.
At Labels E, J, O, T, Y, AD, AI, AN & AS record the code for your estimates of the
percentages of the total Kina value of the related-party international dealings for
which you have written documentation to support the Four Step process.
• For the list of price methodology codes, see Appendix 1
• For the list of country codes, see Appendix 2
• For the list of percentage of dealings with documentation codes (and
further information), see Appendix 3
b. Non-Interest-Bearing At labels A, E, I, M, Q, U, Y & AC provide the average balance of non-interest
bearing loans in relation to amounts borrowed from related entities (Label A, E, I
& M) or loaned to related entities (Label Q, U, Y & AC).
At labels B, F, J, N, R, V, Z & AD record the code for the principal arm's length
pricing method used to value the transactions for this item.
At labels C, G, K, O, S, O, W, AA & AE record the code for the country with the
highest Kina value of transactions for this item.
At Labels D, H, L, P, T, X AB & AF record the code for your estimates of the
percentages of the total Kina value of the related-party international dealings for
which you have written documentation to support the Four Step process.
• For the list of price methodology codes, see Appendix 1
• For the list of country codes, see Appendix 2
• For the list of percentage of dealings with documentation codes (and
further information), see Appendix 3
Part B – Foreign-Sourced
Income Information
In Part B, provide the details of income earned through international branches or
foreign entities in which your enterprise has an interest. This Part is for the
purpose of understanding your interests and dealings with overseas entities and
branches that you control.
Question 5 Did you have an overseas branch or a direct or indirect interest in a foreign
company or trust? If you answer yes, you must complete questions 6 to 8 of Part B
of the Schedule. If you answer no, then you do not need to complete the
remainder of the schedule.
Question 6 Record the number of foreign entities that are your associates for this question.
The definition of associate in section 4 of the Income Tax Act 1959 should be used
to determine whether to include an entity as an associate.
Question 7 Record the number of foreign branches you held during the year for this question.
A foreign branch will exist where its business is carried out through a permanent
establishment as defined in section 4 of the Income Tax Act 1959.
Question 8 If your enterprise derived any foreign-sourced income during the year, mark the
“Yes” box at Question 8 and then write the amount of income earned from foreign
sources below.
If you answer ‘yes’, you need to provide the total amount of gross assessable
foreign income. This amount should not be reduced by any foreign tax paid on
this income. You should include at this question any assessable foreign source
capital gains. Include any foreign dividends or interest you received even if
included in the income declared in Schedule 3 and 4 or any other part of the
Company tax return.
The Kina amount is based on your tax records. Foreign income is income derived
from sources in a foreign country. A receipt sourced from a foreign country is
foreign income only if it is income according to PNG income tax law. Its
characterisation under the tax law of the foreign country is irrelevant.
This question is intended to help us to quantify the significance of Papua New
Guinea taxpayers’ international dealings.
SCHEDULE 7 DEPENDENTS
If you have dependents and wish to claim the Dependent Rebate, complete
Schedule 7.
Details of Dependents Complete the table in Schedule 7 to provide the details of the dependents for
whom you are claiming the Dependent Rebate:
• Type of Dependent – This column lists the 5 categories of dependents for
whom the Dependent Rebate can be claimed:
o Spouse;
o Children under 16;
o Student children aged 16-25;
o Parents of taxpayer or of spouse; and
o Invalid relatives over 16 years.
Write the details of your dependents in the appropriate category and then
complete the next four columns in the table for each dependent. Note that
you may only claim a maximum of 3 dependents for tax purposes so if
you have more than three dependents, you need only provide details for
three of them.
Note that if you are claiming invalid relatives over 16 years of age as
dependents you must attach a medical certificate signed by a Government
Medical Officer stating that the relative is permanently incapacitated and
unable to work.
• Full Name – write the full name (first, middle and last names) of each
dependent listed.
• Date of Birth – write the date of birth of each dependent listed. The date
should be in the format day / month / year.
• Separate Net Income for the Year – the Separate Net Income (SNI) of a
dependent is a broader term than Assessable Income and will include
exempt income and income from any other sources as well as those
included in Assessable Income. If the SNI of a family member exceeds
K1,040 per annum, you may not claim them as a dependent.
NB: SNI does not include academic scholarships or bursaries.
• Wholly Maintained Dependents – if the dependent is wholly maintained
by you i.e. nobody else assisted with the costs of living for the individual,
then write “wholly”. If, however, the cost of living of the dependent was
covered by yourself in combination with one or more others, then provide
the details. For example, Maria cares for her elderly mother and pays half
of the cost of providing food, clothing, etc. for her mother. Her sister,
Ruth, pays the other half of the cost of living. Maria writes her mother’s
name and other details in the row of the table relating to “Parents of
taxpayer”, and then notes in the column on the right that she pays 50% of
the living costs of her mother.
Note: to meet the definition of “wholly maintained”, a dependent must be
living at the same residence as the taxpayer.
• Number of dependents claimed for tax purposes – if you have one, two,
or three dependents who qualify as dependents for tax purposes, write
that number here. If you have more than three qualifying dependents,
write “3” as three is the maximum number of dependents that can be
claimed for tax purposes.
• If claiming parents / parents-in-law, where do they live – if, in the table
above, you listed a parent (or the parent of your spouse) as one of the
three dependents for tax purposes, then complete this question. Write the
name of the town or city where the dependent lives. If you have more
than one dependent in this category, write where each lives. For example,
Geoffrey lists his father as a dependent in Schedule 7. Geoffrey’s father
lives in Goroka, so he writes “Goroka” in this box.
Note that only parents (or parents-in-law) residing in PNG can be
claimed. If you have a parent or parent-in-law living abroad, you may not
claim a dependent rebate for them. For example, Andy supports his father
who lives in Buka and his mother who lives in Cairns, Australia. Andy
may list his father as a dependent on his return; however he may not
claim a dependent rebate for his mother, because she lives abroad.
• If in the Village, how much did you give them this year – if the answer to
the previous question is “In the village” (i.e. you wrote the name of a rural
village outside of the main city centres like Port Moresby, Lae, Kokopo,
etc.) then specify the amount of money that you provided them with
during the year, in kina. If you are uncertain of the exact amount
provided to the relative, make an estimation and document the basis for
your estimation.
Notes
If your salary or wage income is more than K17,428, then additional dependent
rebates are not allowable.
Rebates in Respect of Dependents
A taxpayer whose income consists solely of Salary or Wages, from which Salary or
Wages Tax (SWT) has been deducted in accordance with their S3 form (Salary or
Wages Declaration), will already have had their tax adjusted for the dependents
claimed; the rebate is built into the Salary or Wage tax scales. Ordinarily, they will
not be entitled to an additional rebate for dependents.
However, persons whose income is solely from sources other than Salary or
Wages, or whose Salary or Wage income does not exceed K17,428 and have non-
Salary or Wage income too, may be entitled to an additional rebate in respect of
their dependents. The maximum sum of rebates allowable is K1,050 and the
maximum number of dependents who can be claimed is three (3). The rebates
allowable are calculated as follows:
i) Rebate for the first nominated dependent – 15% of the tax assessed,
subject to a maximum rebate of K450 and a minimum rebate of K45;
ii) Rebate for the other two nominated dependents – 10% of the tax assessed,
subject to a maximum rebate of K300 and a minimum rebate of K30 per
dependent.
The full amount of the rebate is only available where the dependent is wholly
maintained for the full year and the net income of the dependent does not exceed
K1040 during the year. A partial rebate is allowed where:
i) The dependent is only maintained for part of the year (in which case the
rebate is only allowed for the relevant portion of the year);
ii) Two or more persons contribute to the maintenance of the same
dependent (in which case the rebate is apportioned between those two
persons);
iii) A dependent child (not being a student) turns 16 years of age during the
year (in which case the rebate is allowed up to the date of the 16th
birthday);
iv) A dependent student child turns 25 years of age during the year (in which
case the rebate is allowed up to the date of the 25th birthday);
v) A person claimed as a spouse only became a spouse during the year, i.e.
they became married either formally or by custom, during the year (in
which case the rebate is only allowed from the date of marriage);
vi) The person being claimed earned salary or wages in excess of K40 during
any fortnight (in which case no rebate can be claimed in respect of those
fortnights).
A rebate will not be allowed unless the details on Page 3 are completed in full.
Subject to their net income not exceeding K1,040, rebate are allowable for any
three of the following persons:
1. Your spouse;
2. An unmarried child, who is less than 16 years of age;
3. A student child, who is less than 25 years of age and is receiving full-time
education at a school, college or university;
4. An invalid relative, who is over 16 years of age, is your child, brother, or
sister, and has been certified permanently incapacitated for work by a
medical officer of the Public Service.
5. Your parent or a parent of your spouse, provided they live in Papua New
Guinea.
Calculation of s213D
Dependent Rebate
If you have salary or wage income of no more than K17,428 and you also earn
other income, then you are entitled to claim a rebate for your dependents under
s213D.
Schedule 7 contains a box labelled “For Office Use Only” that is used by the IRC
(or your tax agent) to calculate your s213D rebate. The rebate is limited to a
maximum three dependents and a maximum rebate of K1,050 per annum. There is
no need to complete this box unless you would like to calculate your own tax
payable / refundable result. If you are using the MS Excel version of Form I, the
s213D rebate is calculated automatically.
SCHEDULE 8 DEPRECIATION SCHEDULE
If you used assets (such as computers, buildings, vehicles, plant and machinery,
etc. – to the extent that they are not claimed in other parts of the return such as in
Schedule 5C) in the course of earning your business income, claim the
depreciation for the business use of those assets in Schedule 8.
Depreciation Schedule 1. Details of Asset – Type, Location, etc. – for each asset, provide a
meaningful description of the asset, the location and any other details
that help to identify the assets. For example, “Laptop Computer, Lae
office, Serial No. TK419”.
2. Depreciation method – note the depreciation method used to calculate
the depreciation for each asset, e.g. Prime Cost, Diminishing Value,
etc. See below for further information on depreciation.
3. Opening Value – the book value of the asset on the first day of the
financial year (i.e. the cost price less accumulated depreciation from
prior years). If the asset was purchased during this financial year,
then write the purchase price.
4. Closing Value – the book value of the asset on the last day of the
financial year (or at the time of disposal).
5. Depreciation Claimed –the difference between the opening and
closing values. For example, Dudley runs a cafeteria and is
depreciating his espresso machine. The machine cost K1,000 last year
and depreciated by K100 in the previous financial year. The opening
value for the machine is K900. During this financial year, the
depreciation charge is K200, so the closing value is now K700. Dudley
writes K200 in the column for “Depreciation Claimed”.
6. Total – sum the depreciation claimed from all assets listed and write
the total here.
Note that depreciation may not be claimed for buildings outside of PNG.
Depreciation
Depreciation is not really expenditure; however, “housing expenditure” has been
defined in such a way as to include it. But the depreciation allowable is restricted
to depreciation on the house or unit itself and the fittings therein. It does not
include depreciation on the contents of the house, e.g. such things as furniture,
stoves, refrigerators, etc. that make up a normal household. Further, as
depreciation is not allowable in respect of land, where the property purchased
consisted of land with an existing home upon it, it is necessary to apportion the
cost price between the land and building components. Where separate values
have not been specified in the contract of sale, a realistic assessment of both
components will need to be made.
There are two methods of calculating depreciation and the taxpayer may elect to
use either one of them: They are:
1. The diminishing value method;
2. The prime cost method.
A taxpayer may elect to use either method in relation to each purchase of plant
but having commenced to depreciate and item of plant using one method, that
method cannot be change for that item of plant unless approval is given by the
Commissioner General. Unless a taxpayer elects otherwise, the diminishing value
method will be used. Taxpayers may pool assets with the same depreciation rate.
Under the diminishing value method, the depreciation allowed is one and a half
times the rate of depreciation allowable under the prime cost method. With
depreciation being calculated on the written-down value of the plant, this method
will initially allow a greater deduction for depreciation. The written-down value
is cost price less accumulated depreciation (depreciation already allowed as a
deduction). Under this method, the depreciation allowed varies and diminishes
each year, with depreciation being claimed on the written-down value of the
previous year.
Under the prime cost method, depreciation is calculated as a percentage of the
original cost price and a fixed deduction for each item of plant will be allowed
each year.
The rates of depreciation are as follows:
TYPE OF STRUCTURE PRIME COST DIMINISHING VALUE
Brick, stone or concrete
structures
2% 3%
Other structures 3% 4.5%
The rates of depreciation to be applied to plant for income tax purposes are set out
in the Schedule of Rates for Annual Depreciation. It is not practical to detail those
rates here, so if you are unsure of the rates of depreciation for a particular item of
plant, you should ask an enquiry officer from the Internal Revenue Commission.
Special rates or loadings to the standard rates apply in the following cases:
i. Certain new plant – 20% loading;
ii. Improvements to plant to conserve fuel – 20% loading;
iii. New non-oil-fired plant – 30% loading;
iv. Conservation of existing oil-fired plant to non-oil-fired plant – 30% loading.
v. Industrial plant not previously used in PNG – 100% write-off, unless write-
off would create a tax loss, in which case the write-off is limited to the
amount that would reduce taxable income to nil.
vi. Plant used directly for the purposes of agriculture production – 100%
write-off.
vii. Plant used solely for commercial fishing purposes – 100% write-off.
In this context, “loading” means that additional depreciation as a percentage of
the original cost price is allowable. From January 1, 1980, depreciation cannot be
claimed on buildings situated outside Papua New Guinea.
Disposal, Loss or Destruction of Plant
Where property is disposed of, lost or destroyed at any time during the year of
income, any amount by which the written-down value exceeds the consideration
received or insurance claims recovered is an allowable deduction. If the
consideration received or claims recovered exceeds the written down value, the
excess, to the extent of the depreciation allowed over the years as a deduction, is
required to be included in assessable income. As an alternative, the excess to be
included in assessable income (the balancing charge) will be deducted from that
reduced written-down value or from the cost of replacement plant, less the
balancing charge. An election to have the excess treated as a balancing charge
must be lodged with the return.
SCHEDULE 9 BAD DEBTS WRITTEN OFF
Bad Debts Written Off If you have debts (such as amounts owing from customers for goods that were
purchased on credit) that were deemed uncollectable during the financial year,
complete Schedule 9, and provide the details of all such debt write-offs:
• Debtor – the party owing you money – usually a client / customer who
received goods or services on credit
• Reason for write-off – provide a brief description of the rationale for
writing off the debt, e.g. debtor has left the country and all avenues to
pursue them have been exhausted.
• Date of write-off – the date on which the decision was taken to cease debt
collection activities for this debtor. Write the date in the format day /
month / year.
• Amount written off – the value of the uncollectable debt being written off.
For example, XYZ Systems Inc. has been trying to collect a debt of K10,000
kina owed to them by a former customer, EFG Properties Ltd., a company
that has recently gone bankrupt. After 18 months of attempting to collect
the debt, the General Manager decided that it would be written off as EFG
Properties Ltd. has been liquidated and no further creditors would be
paid out. XYZ Systems Inc. reports the amount of K10,000 in this column.
• Total – add up the figures in the Amount Written Off column and write
the total here.
SCHEDULE 10 PAYMENTS TO RELATIVES
Statement of Salary or other
payments to relatives of the
taxpayer or associated
persons
If you made payments to relatives of yours or to associated person, you must
complete Schedule 10. Provide the following details:
• Full name of each employee – provide the full name (first, middle and
surname) of each relative or associate who received salary or other
payments from you during the financial year.
• Date of birth (if under 18) – if the employee is under 18, provide their date
of birth in the format day / month / year.
• Nature of duties – provide a brief description of the duties undertaken by
the employee e.g. bookkeeping, cleaning, etc.
• Relationship to taxpayer – provide the type of relationship of the
employee to the taxpayer e.g. De facto spouse, uncle, cousin, etc.
• Number of weeks employed – the number of weeks during the course of
the financial year in which the employee was employed in the business of
the taxpayer. Round to the nearest week. For example, Rose’s brother
worked for 4.5 weeks during the year for her business. Rose writes “5” in
this column.
• Number of hours per week – the number of hours of each week during
which the relative or associate was employed. For example, Rose
employed her brother for 4.5 weeks during the year and he worked an
average of 10 hours per week. Rose writes “10” in this column.
• Total paid – the total salary or other payments made to the employee
(relative or associate) during the financial year. This figure includes taxes
deducted. Be sure to include all salaries, commissions and allowances
when calculating the total amount paid to the employees.
• Tax deducted – if tax was deducted from the employee’s salary or other
payments, write the total amount of taxes (SWT) deducted on behalf of
the employee during the financial year.
• Amount claimed at schedule 5C – write the amount that was listed as a
deduction for employee costs in 5C that relates to the individual listed.
NOTES
Further Enquiries
If you need any further information to complete this return you can contact an Enquiry Officer of the Internal
Revenue Commission by ringing 322 6509. Personal enquiries can be made at the Ground Floor, Revenue Haus, Port
Moresby, while written enquiries should be addressed to the attention of the Enquiry Officer, Internal Revenue
Commission, PO Box 777, Port Moresby.
Voluntary Disclosures
If the returns you have lodged in previous years have not disclosed income from all sources or have over-claimed
deductions and you voluntarily disclose this information to us, before we ourselves commence enquiries, omitted
income penalty will be charged at 15% of the additional tax payable. If you do not voluntarily disclose and the
Internal Revenue Commission finds out, the penalty can be up to 200% of the tax avoided.
Important
This return should be lodged with the Internal Revenue Commission, PO Box 777, Port Moresby, PNG. The return is
due on the 28th of February of the year following the period to which the return applies. If you cannot lodge your
return by the due date, write to the above address and request an extension of time (to a specific date) to lodge it.
APPENDIX 1: ARM’S LENGTH METHODOLOGIES
The arm’s length pricing methodologies should be identified using the codes listed below
Arm’s length pricing method Code
Comparable uncontrolled price (CUP) method 1
Resale price method 2
Cost P-plus method 3
Transactional Net Margin method (TNMM) 4
Transitional Profit Split method 5
Other method 6
No transfer pricing method used 7
APPENDIX 2: COUNTRY NAMES AND CODES Note: Guernsey, Jersey and Isle of Man each have a separate country code.
Country Code Country Code
Afghanistan AFG Liberia LBR
Aland Islands ALA Libya LBY
Albania ALB Liechtenstein LIE
Algeria DZA Lithuania LTU
American Samoa ASM Luxembourg LUX
Andorra AND Macau MAC
Angola AGO Macedonia, The Former
Yugoslav Republic of
MKD
Anguilla AIA Madagascar MDG
Antarctica ATA Malawi MWI
Antigua and Barbuda ATG Malaysia MYS
Argentina ARG Maldives MDV
Armenia ARM Mali MLI
Aruba ABW Malta MLT
Australia AUS Marshall Islands MHL
Austria AUT Martinique MTQ
Azerbaijan AZE Mauritania MRT
Bahamas BHS Mauritius MUS
Bahrain BHR Mayotte MYT
Bangladesh BGD Mexico MEX
Barbados BRB Micronesia, Federated States of FSM
Belarus BLR Moldova MDA
Belgium BEL Monaco MCO
Belize BLZ Mongolia MNG
Benin BEN Montenegro MNE
Bermuda BMU Montserrat MSR
Bhutan BTN Morocco MAR
Bolivia BOL Mozambique MOZ
Bosnia and Herzegovina BIH Myanmar (was Burma) MMR
Botswana BWA Namibia NAM
Bouvet Island BVT Nauru NRU
Brazil BRA Nepal NPL
British Indian Ocean Territory IOT Netherlands, The NLD
British Virgin Islands VGB Netherlands Antilles ANT
Brunei Darussalam BRN New Caledonia NCL
Bulgaria BGR New Zealand NZL
Burkina Faso BFA Nicaragua NIC
Burundi BDI Niger NER
Cambodia KHM Nigeria NGA
Cameroon CMR Niue NIU
Canada CAN Norfolk Island NFK
Cape Verde CPV Northern Mariana Islands MNP
Cayman Islands CYM North Korea PRK
Central African Republic CAF Norway NOR
Chad TCD Oman OMN
Chile CHL Pakistan PAK
China CHN Palau PLW
Christmas Island CXR Palestinian Territory, Occupied PSE
Cocos (Keeling) Islands CCK Panama PAN
Colombia COL Papua New Guinea PNG
Comoros COM Paraguay PRY
Congo, Democratic Republic of
(was Zaire)
COD Peru PER
Congo, People's Republic of COG Philippines PHL
Cook Islands COK Pitcairn Island PCN
Costa Rica CRI Poland POL
Cote D'Ivoire (Ivory Coast) CIV Portugal PRT
Croatia (Hrvatska) HRV Puerto Rico PRI
Cuba CUB Qatar QAT
Cyprus CYP Reunion REU
Czech Republic CZE Romania ROU
Denmark DNK Russian Federation RUS
Djibouti DJI Rwanda RWA
Dominica DMA St Helena SHN
Dominican Republic DOM St Kitts and Nevis KNA
East Timor (Timor Leste) TLS St Lucia LCA
Ecuador ECU St Pierre and Miquelon SPM
Egypt EGY St Vincent and The Grenadines VCT
El Salvador SLV Samoa WSM
Equatorial Guinea GNQ San Marino SMR
Eritrea ERI Sao Tome and Principe STP
Estonia EST Saudi Arabia SAU
Ethiopia ETH Senegal SEN
Falkland Islands (Malvinas) FLK Serbia SRB
Faroe Islands FRO Seychelles SYC
Fiji FJI Sierra Leone SLE
Finland FIN Singapore SGP
France FRA Slovakia (Slovak Republic) SVK
French Guiana GUF Slovenia SVN
French Polynesia PYF Solomon Islands SLB
French Southern Territories ATF Somalia SOM
Gabon GAB South Africa ZAF
Gambia GMB South Georgia and the South
Sandwich Islands
SGS
Georgia GEO South Korea KOR
Germany DEU Spain ESP
Ghana GHA Sri Lanka LKA
Gibraltar GIB Sudan SDN
Greece GRC Suriname SUR
Greenland GRL Svalbard and Jan Mayen
Islands
SJM
Grenada GRD Swaziland SWZ
Guadeloupe GLP Sweden SWE
Guam GUM Switzerland CHE
Guatemala GTM Syria SYR
Guernsey GGY Taiwan TWN
Guinea GIN Tajikistan TJK
Guinea-Bissau GNB Tanzania, United Republic of TZA
Guyana GUY Thailand THA
Haiti HTI Timor-Leste (East Timor) TLS
Heard and McDonald Islands HMD Togo TGO
Holy See (Vatican City State) VAT Tokelau TKL
Honduras HND Tonga TON
Hong Kong HKG Trinidad and Tobago TTO
Hrvatska (Croatia) HRV Tunisia TUN
Hungary HUN Turkey TUR
Iceland ISL Turkmenistan TKM
India IND Turks and Caicos Islands TCA
Indonesia IDN Tuvalu TUV
Iran IRN Uganda UGA
Iraq IRQ Ukraine UKR
Ireland IRL United Arab Emirates ARE
Isle of Man, The IMN United Kingdom GBR
Israel ISR United States USA
Italy ITA United States Minor Outlying
Islands
UMI
Ivory Coast (Cote D'Ivoire) CIV United States Virgin Islands VIR
Jamaica JAM Uruguay URY
Japan JPN Uzbekistan UZB
Jersey JEY Vanuatu VUT
Jordan JOR Vatican City State (Holy See) VAT
Kazakhstan KAZ Venezuela VEN
Kenya KEN Vietnam VNM
Kiribati KIR Wallis and Futuna Islands WLF
Korea, Democratic People's
Republic of (North Korea)
PRK Western Sahara ESH
Korea, Republic of (South Korea) KOR Yemen YEM
Kuwait KWT Zambia ZMB
Kyrgyzstan KGZ Zimbabwe ZWE
Laos LAO
Latvia LVA If not listed OTH
Lebanon LBN
Lesotho LSO
APPENDIX 3: PERCENTAGE OF DEALINGS COVERED The fourth column – Documentation, at Question 2 and 4 of the International Dealings Schedule requires estimates
of the percentages of the total Kina value of the related-party international dealings for which you have written
documentation you consider sufficiently explains how the outcome of your dealings satisfy the arm’s length principle.
The type of documentation required in international dealings is discussed at paragraphs 198 to 219 Taxation Circular
No 2011/2.
The Internal Revenue Commission does not expect taxpayers to prepare or obtain documents beyond that needed to
make a reasonable assessment of whether they have complied with the arm's length principle in setting prices or
consideration. The amount and type of documentation that should be created or obtained over and above that
created in the ordinary course of business will depend on the facts and circumstances of each case.
The issue is a practical one having regard to what a prudent business person would do in the same circumstances,
and taxpayers need to exercise commercial judgment in assessing their own compliance with the arm's length
principle.
To determine the code for the percentage of your dealings with international related parties
In the item provided in the fourth column – Documentation, at Question 2 and 4 specify the code for the percentage
of your dealings with international related parties for which you have supported the arm's length outcome with written
documentation. Enter the relevant code from the table below.
Example:
If after exercising commercial judgment you have decided to aggregate and test the arm’s length nature of
multiple international related party dealings through the application of the transactional net margin method (code
5 from Appendix 1) on a whole-of-entity basis, then you would:
• write “5“ at column 4 Documentation at Questions 2 and 4 to indicate that 100% of your transactions have been documented.
• If, in exercising your commercial judgement you decide not to apply a whole of entity transactional net margin method analysis, you could test and document your international related party dealings separately and use one of the following numeric codes to state the percentage of the total of the Kina value for which you have documentation.
Percentage Code
0% 1
1% to less than 25% 2
25% to less than 50% 3
50% to less than 75% 4
75% to less than 100% 5
100% 6
You may calculate the percentage on the basis of a reasonable estimate.
A statistical sample may be an appropriate method of calculating the relevant percentage, provided the sample
selection and mathematical consideration are consistent with generally accepted statistical methods.
Keep your working papers if you have used a sampling process to make this estimate.
HOURS FOR PAYMENT: 8:30 A.M. TO 3:30 P.M. MONDAY TO FRIDAY.
CHEQUES SHOULD BE MADE PAYABLE TO “COMMISSIONER GENERAL INTERNAL REVENUE” AND
MARKED 'NOT NEGOTIABLE'.
PAYMENTS MAY BE MADE ELECTRONICALLY THROUGH YOUR BANK WITHOUT NEEDING TO VISIT AN
IRC OFFICE. FOR DETAILS SEE www.irc.gov.pg
PAYMENTS MAY ALSO BE MADE VIA EFTPOS. TAX FORMS AND GUIDES ARE AVAILABLE FOR DOWNLOAD
FROM THE IRC WEB SITE www.irc.gov.pg