The business-friendly environment has attracted foreign investors to start a business in Papua New Guinea (PNG). The government has introduced numerous amendments to the Investment Promotion Act 1992 such as the promotion of local-foreign partnerships. In addition, in order to encourage foreign investors in setting up company in PNG, tax incentives were also introduced to assist businesses. Hence, setting up company in PNG is ideal. In this article, our team at Tetra Consultants has highlighted an ultimate guide on setting up company in PNG before you register company in PNG.
Types of companies in PNG:
Before proceeding with setting up company in PNG, it is important to understand the different types of companies in PNG:
Limited Liability company
The limited liability company is a separate legal entity where the shareholder is not liable for debts, losses or legal action taken against the business. It is required to have one director and one shareholder. There is no requirement for minimum share capital. In order to have more than half owned by foreign investors, an Investment Promotion Authority (IPA) certificate is required. In this case, the director can be of any nationality and a local resident director is not required.
Wholly foreign-owned entities
This allows for full foreign ownership where the director can be of any nationality and a company secretary is not required. An IPA certificate is also required for this entity.
A branch office is an extension of a foreign parent company abroad and can only conduct businesses similar to the parent company.
The parent company is liable for the debts incurred by the PNG branch office.
A representative office is only allowed to conduct market research and marketing for the parent company in PNG. It is popular if foreign investors are looking to promote their presence before setting up company in PNG.
Cost to register company in PNG:
The cost to register company in PNG is 500 Kina.
Annual return filing requirement in PNG:
Under the Companies Act 1997, it is required to file an Annual Return annually. It includes a summary document of the directors, secretary, shareholders and share capital at a point in time. This applies to all companies operating in PNG including offshore companies incorporated in PNG.
Tax obligation in PNG:
PNG has a relatively high corporate tax rate of 30%. It applies to all businesses including offshore businesses. With such a high corporate tax rate, it is ranked 136th overall with regard to corporate tax rate internationally.
The value-added tax (VAT) is at the rate of 10% ranking 47th internationally.
The interest withholding tax rate is approximately 15% applying to limited liability companies as well.
The royalties withholding tax rate is 10%.
Business registration in PNG:
If you have decided in setting up company in PNG, you may proceed with the process of registering a business in PNG:
Step 1: Choosing a suitable corporate entity
After accessing your business goals and activities, you can choose the most suitable corporate entity for your business. This is the most common entity for foreign investors is the limited liability company.
Step 2: Reservation of company name
You may then register your business name with the Investment Promotion Authority company registry. Upon approval of the Investment Promotion Authority company registry, the name can only be reserved for up to two months.
Step 3: Preparation of the required documents to register the company in Papua New Guinea
In the process of registration, you would have to prepare and submit the necessary documents.
It is required to submit a budget forecast, business plan, value of an initial capital investment and copies of agreements if applicable. However, Memorandum and Articles of Association is not required unlike most jurisdiction
If the shareholders of the business are natural persons, the following will have to be submitted for each shareholder:
- Police Clearance Report/Character Check Report
- Notarized Passport copy
- Visa Copy (if the residence is in Papua New Guinea)
- Work Permit (if employed in Papua New Guinea)
- Bank Statement
If the shareholders of your business are corporate entities, the following will have to be submitted for each corporate entity:
- Latest audited financial statement for the shareholding company
- Latest audited financial statement for the ultimate holding company
- Register of shareholders and directors
- A copy of the Certificate of Incorporation
- Other relevant supporting documents
Step 4: Registration with the Investment Promotion Authority
After preparation of the PNG IPA company registration form and other incorporation documents, you may proceed to register your business with the IPA.
Step 5: Tax registration
In order to comply with the tax obligation, you are required to obtain a Taxpayer Identification Number with the Internal Revenue Commission (IRC).
If your business operations involve trading such as importing or exporting of goods, it is required to register with the Commissioner of Customs and Excise.
Step 6: Corporate bank account opening
All registered companies in PNG are required to have a corporate bank account.
Most of the time the corporate bank account opening does not require a physical presence and thus directors and shareholders will not need to travel down. However, otherwise might occur.
The information of what you need to know before setting up company in PNG may seem intimidating. With Tetra Consultants by your side, the registration process of your business in PNG will be smooth and hassle-free. Our comprehensive service package includes planning and strategizing with our clients to select a suitable business entity, completing the registration process, obtaining required licenses, opening a corporate bank account, and ensuring your compliance with the government regulations.
Contact us to find out more about setting up company in PNG and our dedicated and experienced team will revert within the next 24 hours.