State to standardise dividend withholding tax

THE Government proposes to standardise the dividend withholding tax to 15 per cent across all sectors of the economy effective January 1, 2017, according to a Deloitte PNG analysis on the 2017 budget.
The analysis report titled Papua New Guinea Budget 2017 Budget Alert said the current rate was 17 percent in the absence of a double tax agreement reducing this rate.
“However, dividends paid or credited by mining companies are currently subject to a 10 percent dividend withholding tax while petroleum and gas companies are not subject to dividend withholding tax,” it said.
“The proposed standard dividend withholding tax rate therefore means a significant increase in the tax costs to the resources sector.”
It said however this was to be balanced against the reduction in the corporate income tax rate of 30 percent.
Fiscal stability agreements will also play a part in this reform.
The report highlighted that under the changes, a company would only be required to withhold dividend withholding tax if it paid or credited a dividend or an amount deemed to be a dividend to a resident individual, a resident trust estate or a non-resident person.
It said in the other situations no dividend withholding tax applied.
“This means for instance that if a company in PNG pays a dividend to another company in PNG, then dividend withholding tax is no longer required to be withheld,” it said.