Double Tax Agreements (Papua New Guinea) Order 2013

2013/276

Coat of Arms of New Zealand

Double Tax Agreements (Papua New Guinea) Order 2013

Jerry Mateparae, Governor-General

Order in Council

At Wellington this 17th day of June 2013

Present:
His Excellency the Governor-General in Council

Pursuant to section BH 1 of the Income Tax Act 2007, His Excellency the Governor-General, acting on the advice and with the consent of the Executive Council, makes the following order.

Order

1 Title
  • This order is the Double Tax Agreements (Papua New Guinea) Order 2013.

2 Commencement
  • This order comes into force on 18 July 2013.

3 Commencement of agreement
  • The agreement set out in the Schedule (the agreement) comes into force on the date provided for in Article 26 of the agreement.

4 Purposes
  • The arrangements specified in the agreement have been negotiated with the Government of the Independent State of Papua New Guinea for 1 or more of the purposes set out in section BH 1(2) of the Income Tax Act 2007.

5 Arrangements to have effect
  • The arrangements specified in the agreement have effect according to the tenor of the agreement.


Schedule
Agreement between the Government of New Zealand and the Government of the Independent State of Papua New Guinea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income

cl 3

The Government of New Zealand, and the Government of the Independent State of Papua New Guinea,

Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income,

Have agreed as follows:

Chapter I
Scope of the agreement

Article 1Persons covered

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2Taxes covered

  • 1. The taxes to which the Agreement shall apply are:

    • (a) In New Zealand: the income tax

      (hereinafter referred to as New Zealand tax);

    • (b) In the Independent State of Papua New Guinea: the income tax imposed under the law of Papua New Guinea, including:

      • (i) the salary or wages tax;

      • (ii) the additional profits tax upon additional profits from resource projects;

      • (iii) the dividend withholding tax upon taxable dividend income;

      • (iv) the foreign contractor withholding tax;

      • (v) the management fee withholding tax;

      • (vi) the business payments tax; and

      • (vii) the interest withholding tax

      (hereinafter referred to as Papua New Guinea tax).

  • 2. The Agreement shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of, the taxes listed in paragraph 1. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their taxation laws.

  • 3. Notwithstanding the provisions of paragraphs 1 and 2, the taxes covered by the Agreement do not include any amount which represents a penalty or interest imposed under the laws of either Contracting State.

Chapter II
Definitions

Article 3General definitions

  • 1. For the purposes of this Agreement, unless the context otherwise requires:

    • (a) the term Papua New Guinea means the Independent State of Papua New Guinea and, when used in a geographical sense, includes any area adjacent to territorial limits of Papua New Guinea in respect of which there is for the time being in force, consistent with international law, a law of Papua New Guinea dealing with the exploitation of any of the natural resources of the Continental Shelf, its sea bed and sub-soil;

    • (b) the term New Zealand means the territory of New Zealand but does not include Tokelau; it also includes any area beyond the territorial sea designated under New Zealand legislation and in accordance with international law as an area in which New Zealand may exercise sovereign rights with respect to natural resources;

    • (c) the terms a Contracting State and the other Contracting State mean Papua New Guinea or New Zealand as the context requires;

    • (d) the term person includes an individual, a company and any other body of persons;

    • (e) the term company means any body corporate or any entity which is treated as a body corporate for tax purposes;

    • (f) the terms enterprise of a Contracting State and enterprise of the other Contracting State mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

    • (g) the term tax means Papua New Guinea tax or New Zealand tax as the context requires;

    • (h) the term national means:

      • (i) any individual possessing the nationality or citizenship of a Contracting State;

      • (ii) any legal person, partnership, association or any other entity deriving its status as such from the laws in force in a Contracting State;

    • (i) the term international traffic means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

    • (j) the term competent authority means:

      • (i) in the case of Papua New Guinea, the Commissioner General of Internal Revenue or an authorised representative of the Commissioner General of Internal Revenue; and

      • (ii) in the case of New Zealand the Commissioner of Inland Revenue or an authorised representative.

  • 2. For the purposes of Articles 10, 11 and 12, dividends, interest or royalties arising in a Contracting State and derived by or through a trust shall be deemed to be beneficially owned by a resident of the other Contracting State where:

    • (a) such income is subject to tax in that other State in the hands of the trustee of that trust;

    • (b) with reference to dividends, the income would be subject to tax in the hands of the trustee of that trust but for an exemption that applies to those dividends under the laws of that other State.

  • 3. As regards the application of the Agreement at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Agreement applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

Article 4Resident

  • 1. For the purposes of this Agreement, the term resident of a Contracting State means any person who, under the laws of that State, is liable to tax therein by reason of domicile, residence, place of incorporation, place of management or any other criterion of a similar nature and also includes that State and any political subdivision or local authority thereof. This term however, does not include any person who is liable to tax in that State in respect only of income from sources in that State.

  • 2. Where by reason of the provisions of paragraph 1 a person, being an individual, is a resident of both Contracting States, then the status of that person shall be determined in accordance with the following rules:

    • (a) the person shall be deemed to be a resident of the Contracting State in which the person has a permanent home;

    • (b) if a permanent home is available to the person in both States, or in neither of them, the person shall be deemed to be a resident of the State with which the person's personal and economic relations are the closer (centre of vital interests);

    • (c) if the Contracting State in which the person's centre of vital interests cannot be determined, and the person has no permanent home in either State, the person shall be deemed to be a resident of the State in which the person has an habitual abode;

    • (d) if the person has an habitual abode in both Contracting States or in neither of them, the person shall be deemed to be a resident of the State of which the person is a national;

    • (e) if the person is a national of both Contracting States or is a national of neither Contracting State, the competent authorities of the Contracting States shall settle the question by mutual agreement.

  • 3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated. If the State in which the place of effective management is situated cannot be determined, or the place of effective management is in neither State, then the competent authorities of the Contracting States shall endeavour to determine by mutual agreement in accordance with Article 23 the Contracting State of which the person shall be deemed to be a resident for the purposes of the Agreement, having regard to its places of management, the place where it is incorporated or otherwise constituted and any other relevant factors. In the absence of such agreement, such person shall not be entitled to any relief or exemption from tax provided by this Agreement.

Article 5Permanent establishment

  • 1. For the purposes of this Agreement, the term permanent establishment means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

  • 2. The term permanent establishment includes especially:

    • (a) a place of management;

    • (b) a branch;

    • (c) an office;

    • (d) a factory;

    • (e) a workshop;

    • (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources including timber or other forestry products, and

    • (g) a farm or other place where agricultural, forestry, pastoral, plantation or other related activities are carried on.

  • 3. A building site, or a construction, installation or assembly project, or supervisory activities in connection with that building site or construction, installation or assembly project, constitutes a permanent establishment if it lasts more than 90 days.

  • 4. An enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if for more than 90 days in any 365 day period:

    • (a) it carries on activities in that State which consist of, or which are connected with, the exploration for or exploitation of natural resources, including indigenous and exotic timber or other forest products, situated in that State; or

    • (b) it operates substantial equipment in that State.

  • 5. An enterprise shall be deemed to have a permanent establishment in one of the Contracting States and to carry on business through that permanent establishment if services are furnished in that State, including consultancy services through employees or other personnel engaged by the enterprise for such purposes, and those activities continue for the same or a connected project within that State for a period or periods aggregating more than 183 days in any 365 day period.

  • 6. Notwithstanding the preceding provisions of this Article, the term permanent establishment shall be deemed not to include:

    • (a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

    • (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

    • (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

    • (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

    • (e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

    • (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

  • 7. Notwithstanding the provisions of paragraphs 1 and 2, where a person – other than an agent of an independent status to whom paragraph 8 applies – is acting on behalf of an enterprise and:

    • (a) has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise; or

    • (b) the person has no authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise belonging to the enterprise from which that person regularly delivers goods or merchandise on behalf of the enterprise; or

    • (c) manufactures or processes in a Contracting State for the enterprise goods or merchandise belonging to the enterprise,

    that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 6 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

  • 8. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, and conditions are made or imposed between that enterprise and the agent in their commercial and financial relations which differ from those which would have been made between independent enterprises, the agent will not be considered an agent of an independent status within the meaning of this paragraph.

  • 9. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Chapter III
Taxation of income

Article 6Income from immovable property

  • 1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture, forestry or fishing) situated in the other Contracting State may be taxed in that other State.

  • 2. The term immovable property shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include any natural resources, property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting immovable property apply, usufruct of immovable property, rights to explore for or exploit natural resources (including mineral deposits, oil or gas deposits or quarries) or indigenous or exotic timber or other forest products, and rights to variable or fixed payments either as consideration for or in respect of the exploitation of, or the right to explore for or exploit natural resources (including mineral deposits, oil or gas deposits or quarries) or indigenous or exotic timber or other forest products; ships, boats and aircraft shall not be regarded as immovable property.

  • 3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

  • 4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

  • 5. Any interest or right referred to in paragraph 2 of this Article shall be regarded as situated where the property to which it relates is situated or where the exploration or exploitation may take place.

Article 7Business profits

  • 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to:

    • (a) that permanent establishment; or

    • (b) sales within that other Contracting State of goods or merchandise of the same or a similar kind as those sold through that permanent establishment. It is understood that the profits of an enterprise shall include profits attributable to sales of goods and merchandise referred to in this subparagraph only when the competent authority of the Contracting State in which a permanent establishment of the enterprise is situated considers that the enterprise has entered into an arrangement in relation to the sales of those goods or merchandise to avoid taxation of those profits in that Contracting State.

  • 2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

  • 3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere.

  • 4. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

  • 5. Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person in cases where the information available to the competent authority of that State is inadequate to determine the profits to be attributed to a permanent establishment, provided that the law shall be applied, so far as the information available to the competent authority permits, consistent with the principles of this Article.

  • 6. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

  • 7. Where:

    • (a) a resident of a Contracting State beneficially owns (whether as a direct beneficiary of a trust or through one or more interposed trusts) a share of the profits of a business of an enterprise carried on in the other Contracting State by the trustee of a trust other than a trust which is treated as a company for tax purposes; and

    • (b) in relation to that enterprise, that trustee has or would have, if it were a resident of the first-mentioned State, a permanent establishment in the other State,

    then the business of the enterprise carried on by the trustee through such permanent establishment shall be deemed to be a business carried on in the other State by that resident through a permanent establishment situated in that other State and the resident’s share of profits may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

  • 8. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

  • 9. Nothing in this Article shall affect any provisions of the laws of either Contracting State at any time in force as they affect the taxation of any income from any form of insurance.

  • 10. Nothing in this Article shall affect the operation of the law of Papua New Guinea relating to the taxation of income derived by a foreign contractor from a prescribed contract, where, in accordance with this Agreement, that contractor is a resident of New Zealand with a permanent establishment in Papua New Guinea, provided that if the relevant law in force in either Contracting State at the date of signature of this Agreement is varied (other than in minor respects so as not to affect its general character) the Contracting States shall consult with each other with a view to agreeing to any amendment of this paragraph that may be appropriate.

Article 8Shipping and air transport

  • 1. Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

  • 2. Notwithstanding the provisions of paragraph 1 and Article 7, profits of an enterprise of a Contracting State derived from carriage by ship or aircraft of passengers, livestock, mail, goods or merchandise which are shipped or embarked in the other Contracting State and are discharged at a place in that other State, or for leasing on a full basis of a ship or aircraft for purposes of such carriage, may be taxed in that other State.

  • 3. The provisions of paragraphs 1 and 2 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

  • 4. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall include:

    • (a) profits from the rental on a bareboat basis of ships or aircraft; and

    • (b) profits from the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers), used for the transport of goods or merchandise;

    where such rental or such use, maintenance or rental, as the case may be, is incidental to the operation of ships or aircraft in international traffic.

  • 5. The term operation of ships or aircraft shall mean the business of transportation by sea or air of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of ships or aircraft.

Article 9Associated enterprises

  • 1. Where

    • (a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

    • (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

    and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

  • 2. Nothing in this Article shall affect the application of any law of a Contracting State relating to the determination of the tax liability of a person, including determinations in cases where the information available to the competent authority of that State is inadequate to determine the income to be attributed to an enterprise, provided that that law shall be applied, so far as it is practicable to do so, consistent with the principles of this Article.

  • 3. Where a Contracting State includes in the profits of an enterprise of that State - and taxes accordingly - profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other.

Article 10Dividends

  • 1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

  • 2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State the tax so charged shall not exceed 15 per cent of the gross amount of the dividends. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

  • 3. The term dividends as used in this Article means income from shares and other income treated as income from shares by the laws of the Contracting State of which the company making the distribution is a resident.

  • 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

  • 5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11Interest

  • 1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

  • 2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the interest.

  • 3. Notwithstanding the provisions of paragraph 2 the Government of a Contracting State shall be exempt from tax in the other Contracting State in respect of interest derived by the Government from the other State.

  • 4. For the purposes of paragraph 3, the term Government:

    • (a) in the case of Papua New Guinea, means the Government of the Independent State of Papua New Guinea and shall include:

      • (i) the Bank of Papua New Guinea;

      • (ii) the Provincial Governments;

      • (iii) the Local Level Governments, and

      • (iv) any institution carrying on functions of a governmental nature as may be agreed from time to time between the competent authorities of the Contracting States;

    • (b) in the case of New Zealand, means the Government of New Zealand and shall include:

      • (i) the Reserve Bank of New Zealand;

      • (ii) local authorities, and

      • (iii) any institution carrying on functions of a governmental nature as may be agreed from time to time between the competent authorities of the Contracting States.

  • 5. The term interest as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as all other income treated as income from money lent by the laws, relating to tax, of the Contracting State in which the income arises, but does not include any income which is treated as a dividend under Article 10.

  • 6. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with:

    • (a) such permanent establishment or fixed base; or

    • (b) business activities referred to in sub-paragraph 1(b) of Article 7.

    In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

  • 7. Interest shall be deemed to arise in a Contracting State where the payer is a resident of that State. Where, however, the person paying the interest, whether the person is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by or deductible in determining the profits attributable to such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

  • 8. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

  • 9. The provisions of this Article shall not apply if the debt-claim in respect of which the interest is paid was created or assigned mainly for the purpose of taking advantage of this Article.

Article 12Royalties

  • 1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

  • 2. However, such royalties may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties.

  • 3. The term “royalties” as used in this Article means payments or credits of any kind received as a consideration for:

    • (a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right;

    • (b) the use of, or the right to use, any industrial, scientific or commercial equipment;

    • (c) the supply of knowledge or information concerning technical, industrial, commercial or scientific experience;

    • (d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in subparagraph (a), any such equipment as is mentioned in subparagraph (b) or any such knowledge or information as is mentioned in subparagraph (c);

    • (e) the use of, or the right to use:

      • (i) cinematograph or motion picture films; or

      • (ii) films or video tapes in connection with television; or

      • (iii) tapes or compact disks in connection with radio and television broadcasting; or

    • (f) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph.

  • 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with:

    • (a) such permanent establishment or fixed base; or

    • (b) business activities referred to in sub-paragraph 1(b) of Article 7.

    In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

  • 5. Royalties shall be deemed to arise in a Contracting State where the payer is a resident of that State. Where, however, the person paying the royalties, whether the person is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and the royalties are borne by or deductible in determining the profits attributable to such permanent establishment or fixed base then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

  • 6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties paid, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

  • 7. In this Article, a reference to royalties paid or to the payment of royalties includes royalties credited or the crediting of royalties.

Article 13Alienation of property

  • 1. Income or gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

  • 2. Income or gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such income or gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, may be taxed in that other State.

  • 3. Income or gains from the alienation of ships or aircraft operated by an enterprise of a Contracting State in international traffic and movable property pertaining to the operation of such ships or aircraft shall be taxable only in the State of which the enterprise is a resident.

  • 4. Income or gains derived by a resident of one of the Contracting States from the alienation of shares or comparable interests in a company, the assets of which consist directly or indirectly wholly or principally of immovable property in the other Contracting State of a kind referred to in Article 6 and, as provided in that Article, situated in that other State, may be taxed in that other State.

  • 5. Nothing in this Agreement affects the application of the laws of a Contracting State relating to the taxation of gains of a capital nature derived from the alienation of any property other than that to which any of the preceding paragraphs of this Article apply.

Article 14Independent personal services

  • 1. Income derived by an individual who is a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless such services are performed in the other Contracting State and:

    • (a) a fixed base is regularly available to the individual in the other Contracting State for the purpose of performing the individual's activities; or

    • (b) income is derived by the individual from a resident of that other Contracting State and exceeds an amount of US$10,000 or its equivalent in Papua New Guinea Kina in any 365 day period; or

    • (c) the individual is present in the other State for the purpose of performing those services or activities for a period or periods exceeding in the aggregate 183 days in any 365 day period commencing or ending in the year of the income concerned.

    If the provisions of subparagraphs (a), (b) or (c) are satisfied, the income may be taxed in that other State but only so much of it as is attributable to activities performed during such period or periods or from that fixed base.

  • 2. The term professional services includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

Article 15Dependent personal services

  • 1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

  • 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

    • (a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any 365 day period commencing or ending in the income year concerned, and

    • (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

    • (c) the remuneration is neither borne by nor deductible in determining the profits attributable to a permanent establishment or a fixed base which the employer has in the other State.

  • 3. Notwithstanding the preceding provisions of this Article, remuneration derived by an enterprise of a Contracting State in respect of an employment exercised aboard a ship or aircraft operated in international traffic shall be taxable only in that State.

Article 16Directors' fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in that person’s capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17Entertainers and sportspersons

  • 1. Notwithstanding the provisions of Articles 7, 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from that person’s personal activities as such exercised in the other Contracting State, may be taxed in that other State.

  • 2. Where income in respect of personal activities exercised by an entertainer or a sportsperson in that person’s capacity as such accrues not to the entertainer or sportsperson but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised.

  • 3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, income derived by entertainers or sportspersons who are residents of a Contracting State from the activities exercised in the other Contracting State under a special programme of cultural exchange agreed upon between the governments of both Contracting States, shall be exempt from tax in that other State.

Article 18Pensions

  • 1. Pensions (including government service pensions) and other similar remuneration for past employment or any life annuity arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State.

  • 2. The term annuity includes a stated sum payable periodically at stated times, during life or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration in money or money's worth.

  • 3. Pensions and other payments made under the social security legislation of a Contracting State to a resident of the other Contracting State shall be taxable only in that other State.

Article 19Government service

1.
  • (a) Salaries, wages and other similar remuneration (other than a pension) paid by a Contracting State or a political subdivision or a local authority to any individual in respect of services rendered to that State or political subdivision or local authority shall be taxable only in that State.

  • (b) However, such salaries, wages or other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the individual is a resident of that other State who:

    • (i) is a national of that other State; or

    • (ii) did not become a resident of that other State solely for the purpose of rendering the services.

2.

The provisions of Articles 15, 16 and 17 shall apply to salaries, wages and other similar remuneration in respect of services rendered in connection with any trade or business carried on by a Contracting State, a political subdivision or a local authority.

Article 20Students and trainees

Payments which a student or business trainee or apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of their education or training receives for the purpose of their maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

Article 21Other income

  • 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State.

  • 2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

  • 3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Agreement and arising in the other Contracting State may also be taxed in that other State.

Chapter IV
Elimination of double taxation

Article 22Elimination of double taxation

  • 1. Subject to the provisions of the laws of Papua New Guinea from time to time in force which relate to the allowance of a credit against Papua New Guinea tax of tax paid in a country outside Papua New Guinea, New Zealand tax payable under the laws of New Zealand and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Papua New Guinea for the purposes of the law of Papua New Guinea relating to Papua New Guinea tax from sources in New Zealand (not including, in the case of a dividend, tax paid in respect of the profits out of which the dividend is paid) shall be allowed as a credit against Papua New Guinea tax payable in respect of that income.

  • 2. Subject to the provisions of the laws of New Zealand which relate to the allowance of a credit against New Zealand tax of tax paid in a country outside New Zealand (which shall not affect the general principle of this Article), Papua New Guinea tax paid under the laws of Papua New Guinea and consistent with this Agreement, in respect of income derived by a resident of New Zealand from sources in Papua New Guinea (excluding, in the case of a dividend, tax paid in respect of the profits out of which the dividend is paid) shall be allowed as a credit against New Zealand tax payable in respect of that income.

  • 3. For the purpose of paragraphs 2, Papua New Guinea tax paid shall include an amount equivalent to the amount of any Papua New Guinea tax forgone.

  • 4. In paragraph 3, the term “Papua New Guinea tax forgone” means an amount which, under the law of Papua New Guinea relating to Papua New Guinea tax and in accordance with this Agreement, would have been payable as Papua New Guinea tax on income but for an exemption from, or a reduction of, Papua New Guinea tax on that income resulting from the operation of those provisions of the laws of Papua New Guinea which the Government of New Zealand and the Government of the Independent State of Papua New Guinea agree from time to time in letters exchanged for this purpose to be provisions to which this paragraph applies. Subject to its terms, such an agreement on applicable provisions shall be valid for as long as those provisions are not modified after the date of that agreement or have been modified only in minor respects so as not to affect their general character.

  • 5. Paragraph 3 and 4 shall apply only in relation to those years of income that may be agreed by the Government of New Zealand and the Government of the Independent State of Papua New Guinea in letters exchanged for this purpose.

  • 6. Notwithstanding paragraph 3, 4 and 5, a New Zealand resident deriving income from Papua New Guinea, being income referred to in those paragraphs, shall not be deemed to have paid Papua New Guinea tax in respect of such income where:

    • (a) the New Zealand resident is a financial institution or is associated with a financial institution;

    • (b) the competent authority of New Zealand considers, after consultation with the competent authority of Papua New Guinea, that it is inappropriate to do so having regard to:

      • (i) whether any prearrangements have been entered into by any person for the purpose of taking advantage of paragraph 3 for the benefit of that person or any other person;

      • (ii) whether any benefit accrues or may accrue to a person who is neither a New Zealand resident nor a Papua New Guinea resident;

      • (iii) the prevention of fraud or the avoidance of the taxes to which this Agreement applies;

      • (iv) any other matter which either competent authority considers relevant in the particular circumstances of the case, including any submissions from the New Zealand resident concerned.

  • 7. The provision of paragraphs 3, 4, 5 and 6 shall only apply for a period of 10 years commencing on the date of which the Agreement enters into force.

Chapter V
Special provisions

Article 23Mutual agreement procedure

  • 1. Where a person considers that the actions of one or both of the Contracting States result or will result for that person in taxation not in accordance with the provisions of this Agreement, that person may, irrespective of the remedies provided by the domestic law of those States, present a case to the competent authority of the Contracting State of which the person is a resident. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement.

  • 2. The competent authority shall endeavour, if the claim appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

  • 3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement.

  • 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

Article 24Exchange of information

  • 1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Articles 1 and 2.

  • 2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

  • 3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:

    • (a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

    • (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

    • (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public).

  • 4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information.

  • 5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.

Article 25Members of diplomatic missions and consular posts

Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.

Chapter VI
Final provisions

Article 26Entry into force

Each of the Contracting States shall notify the other through diplomatic channels of the completion of the procedures required by its law for the bringing into force of this Agreement. The Agreement shall enter into force on the date of the later of these notifications and its provisions shall have effect:

  • (a) in New Zealand:

    • (i) in respect of withholding tax on income, profits or gains derived by a non-resident, for amounts paid or credited on or after the first day of the second month next following the date on which the Agreement enters into force;

    • (ii) in respect of other New Zealand tax, for any income year beginning on or after 1 April next following the date on which the Agreement enters into force;

  • (b) in Papua New Guinea:

    • (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after the first day of the second month next following the date on which the later of these notifications is given;

    • (ii) in respect of any other Papua New Guinea tax, in relation to income of any year of income beginning on or after 1 January in the calendar year next following that in which the later of these notifications is given.

Article 27Termination

This Agreement shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Agreement, through diplomatic channels, by giving notice of termination on or before 30 June in any calendar year beginning after the expiration of 5 years from the date of its entry into force. In such event, the Agreement shall cease to have effect:

  • (a) in New Zealand:

    • (i) in respect of withholding tax on income, profits or gains derived by a non-resident, for amounts paid or credited on or after the first day of the second month next following that in which the notice of termination is given;

    • (ii) in respect of other New Zealand tax, for any income year beginning on or after 1 April in the calendar year next following that in which the notice of termination is given;

  • (b) in Papua New Guinea:

    • (i) in respect of withholding tax on income that is derived by a non-resident, in relation to income derived on or after the first day of the second month next following the date on which the notification is given;

    • (ii) in respect of any other Papua New Guinea tax, in relation to income of any year of income beginning on or after 1 January in the calendar year next following that in which the notification is given.

IN WITNESS WHEREOF the undersigned, duly authorised by their respective Governments, have signed this Agreement.

DONE IN duplicate at Pt. Moresby this 29 day of October, 2012 in the English language.

Murray McCully Rimbink Pato
FOR THE GOVERNMENT OF NEW ZEALAND  FOR THE GOVERNMENT OF THE INDEPENDENT STATE OF PAPUA NEW GUINEA

Rebecca Kitteridge,
Clerk of the Executive Council.


Explanatory note

This note is not part of the order, but is intended to indicate its general effect.

This order, which comes into force on 18 July 2013, gives effect to the Agreement between the Government of New Zealand and the Government of the Independent State of Papua New Guinea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the agreement).

The agreement comes into force when the parties have notified each other that domestic procedures for bringing the agreement into force have been completed. The date on which the agreement comes into force will be publicised on http://taxpolicy.ird.govt.nz/tax-treaties

Once it enters into force, the agreement has effect despite anything to the contrary in the Income Tax Act 2007, any other Inland Revenue Act, the Official Information Act 1982, or the Privacy Act 1993.


Issued under the authority of the Acts and Regulations Publication Act 1989.

Date of notification in Gazette: 20 June 2013.

This order is administered by the Inland Revenue Department.