3 September 2014
The income tax treaty between Indonesia and Papua New Guinea entered into force on 5 March 2014. The treaty was signed 12 March 2010, and replaces the 2003 tax treaty between the two countries, which never entered into force.
The treaty covers Indonesian income tax, and Papua New Guinea salary tax; additional profits taxes on mining, petroleum and gas operations; withholding taxes on dividends, foreign contractors, management fees and interest; and business payments tax.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting State furnishes services (excluding technical services defined below) in the other State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 120 days in any 12 month period.
The treaty includes the provision that technical fees are subject to withholding tax of up to 10%. Technical fees include payments of any kind in consideration for services of a technical, managerial or consultancy nature.
Both countries apply the credit method for the elimination of double taxation.
The treaty applies from 1 January 2015. It replaces the 2003 tax treaty between the two countries, which never entered into force.
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