Papua New Guinea (PNG) is a resource-rich nation with a growing economy and a workforce split between a modern sector and a large informal agricultural base. PNG has progressive income taxes and mandatory retirement fund contributions. 

The Internal Revenue Commission (IRC) administers taxes. The two most important taxes are the Salary or Wages Tax (SWT), a pay-as-you-earn (PAYE) income tax, and payments into the national retirement fund, known as superannuation.

A new Income Tax Bill 2025 has been passed and will kick in on January 1, 2026. This new law shows that the country is moving toward a more modern and strict regulatory environment, so it’s more important than ever to understand current rules.

This guide provides an overview of PNG’s payroll and personal income taxes, explaining what employers and employees need to pay, how the system works in 2025, and how to remain compliant. By the end of this guide, you’ll also see how partnering with an Employer of Record can simplify tax and payroll, and how to hire employees in Papua New Guinea.

What is Payroll Tax in Papua New Guinea?

The primary payroll tax in Papua New Guinea is in the form of social benefits handled through mandatory superannuation (retirement fund) contributions for most formal employees. Any employer with 15 or more employees must participate in an authorized superannuation fund.

The main private-sector funds are NASFUND (for private companies) and Nambawan Super (for public servants). If your PNG operation has fewer than 15 staff, contributions are optional (though some small firms opt in to attract talent). Superannuation membership is compulsory for PNG citizen employees working more than 3 months; non-citizen employees may join voluntarily.

Employer Contribution

8.4% of the employee’s base salary. To stay compliant, employers are required to pay these withheld taxes to the IRC by the due date (usually within 7 days after the month’s end for monthly reporting). They also need to keep records of wages and taxes withheld. 

While PNG law does not explicitly require payslips, it’s considered best practice to provide them so that employees can see their gross pay, tax deductions, and net pay. Heavy penalties (fines up to PGK 500,000 or even jail) can apply for failing to contribute on time.

Employee Contribution

Employees are also responsible for contributing their 6% share of superannuation. Employees should ensure they are registered with the tax authorities by obtaining a Taxpayer Identification Number (TIN) when they start work. They must provide accurate personal information and declare their residency status to their employer. 

Filing can reconcile any overpayments or allow the claim of any eligible rebates (PNG previously had rebates for dependents built into the system, though these were simplified in recent budgets).

One tricky part for employers is figuring out exactly what “pay” to use for superannuation calculations. Nasfund rules state that contributions are based on gross salary, wages, and leave pay. However, payments for overtime, bonuses, and certain allowances are excluded. 

Employers need a good payroll system that can tell the difference between earnings subject to superannuation and those that aren’t. Businesses can outsource payroll burdens in PNG to get comprehensive, legal services. Want to see the costs of hiring up front? Use our free global payroll calculator to make calculations.

Income Tax in Papua New Guinea

Personal income tax in PNG is on a progressive scale. The first (Kina) PGK 20,000 annual income is tax-free for residents.

Taxable Income (PGK) Rate (%)
Up to 33,000 30%
33,001 – 70,000 35%
70,001 – 250,000 40%
Above 250,000 42%

Non-residents’ income is taxed from the first kina at 22%, with the same upper rates capping at 42%. PNG’s income tax rules provide limited personal deductions or credits. Superannuation contributions are made from after-tax salary, but when employees withdraw from an authorized fund, any portion of employer contributions or fund earnings can receive concessional tax treatment. 

Specifically, long-term fund members enjoy reduced tax on superannuation payouts. For instance, after 15 years of contributions, a lump sum withdrawal is taxed at only 2%.

A company might have to offer a much higher gross salary to get a non-resident employee the same take-home pay. When structuring compensation packages, getting advice from an international recruitment agency in Papua New Guinea can be a huge help.

Business Taxes in Papua New Guinea

Companies looking to establish a long-term presence in the PNG market might think about setting up a local legal entity. Be aware that this decision opens up a new set of tax and administrative duties beyond payroll.

To operate as a local company, you must register with the Investment Promotion Authority (IPA), the government agency that handles business registrations. This process can take time and comes with various fees and legal steps. Once your entity is set up, it falls under PNG’s corporate tax system.   

The Corporate Income Tax (CIT) rate for a resident company is a flat 30% on its net taxable profits. If you’re a non-resident company operating in PNG, the CIT rate is much higher at 48%. On top of CIT, a registered business also has to deal with the Goods and Services Tax (GST) system.

The standard GST rate is 10%, which has its own rules for registration, collection, payment, and reporting. The administrative work involved in running a local entity includes filing annual corporate tax returns, making regular provisional tax payments during the year, and keeping detailed financial records in case of an audit by the IRC. Choosing this path is a major commitment that requires a lot of resources in terms of money, time, and staff.

Changes to PNG’s Tax System in 2026

The new Income Tax Act 2025 is Papua New Guinea’s biggest tax overhaul in over 60 years. Key changes:

  • Capital Gains Tax (CGT): For the first time, there is a 15 % tax on profits from selling “taxable” assets like resource rights, certain shares, and options. For assets owned before 1 January 2026, owners can pick either the market value on 1 January 2026 or what they paid for it as their cost base.

    There is no adjustment for inflation, which might lead to higher taxes in future years. Asset owners have to file a CGT return for each taxable sale. If you sell at a loss, you can carry the loss forward to offset future gains.

  • Tax on Non-residents: The old law charged a 15% Foreign Contractors Withholding Tax (FCWT) on gross income for non-residents. The new law replaces this with a 30 % tax on net income if a non-resident has a permanent establishment (PE) in PNG.

    If a non-resident does not have a PE, they still pay taxes through withholding on dividends, interest, royalties, and technical services.

    The law has clear rules for what counts as a PE—for example, having an office, having a project that lasts more than a few months, or using large equipment for more than 90 days.

  • Employment Taxes: Most rules stay the same. Employers still withhold tax, and employees who only have employment income usually don’t have to file a return. However, if the employer under-withholds, the tax authority can issue an assessment to the employee.

    Non-cash benefits still have special values, and perks like housing and school fees remain concessionally taxed. The law also covers employee share schemes and changes some valuation methods for benefits.

Employer of Record (EOR) in Papua New Guinea

Trying to manage Papua New Guinea’s payroll taxes, superannuation system, and corporate rules can be a major headache for any company, especially if you’re new to the market. 

Juggling compliance for both the IRC and Nasfund, understanding the different tax rules for residents and non-residents, and dealing with the heavy administrative load of setting up a local company can pull your focus away from growing your business’s revenue 

This is where an Employer of Record (EOR) comes in to make your life easier.

How an EOR Works

An EOR service in PNG lets you hire employees without creating your own local legal entity. The EOR already has a fully compliant, registered business in the country and uses it to legally employ staff on your behalf. This completely bypasses the long and expensive process of registering with the IPA and building a local business from scratch.

By acting as the legal employer, the EOR takes on all the responsibility for payroll and tax compliance:

  • Calculating the correct SWT for each employee
  • Managing the contributions to Nasfund
  • Ensuring all payments get to the IRC and Nasfund on time

This shifts legal and financial risks of non-compliance away from your business, protecting you from potential fines.   

An EOR also keeps up with the upcoming 2026 tax reforms, so your operations stay compliant without you having to constantly track new regulations.

The benefits of using an EOR become crystal clear when you compare it to the old way of setting up a local company:

Feature EOR Solution (RemotePeople) Local Entity Setup
Market Entry Speed Immediate Weeks to Months
Upfront Cost Low (setup fee) High (registration, legal fees)
Payroll & Tax Compliance Managed by EOR Full internal responsibility
Superannuation (NASFUND) Managed by EOR Full internal responsibility
Legal Risk Assumed by EOR Assumed by your company
Corporate Tax Liability None 30% CIT on profits
Operational Focus Core Business Growth Local Administration & Compliance

By partnering with RemotePeople in Papua New Guinea, you can turn a new, complex regulatory environment into a simple, strategic advantage.

Start early and start correctly. Get started with an EOR today.