View Full Version : PricewaterhouseCoopers - Management tax now withdrawn

10-11-2002, 06:42 PM
THE management fee withholding tax imposed on Australian, Singaporean and Canadian residents working in Papua New Guinea has been withdrawn following a submission by leading accounting firm PricewaterhouseCoopers.

Taxation partner of PricewaterhouseCoopers David Caradus said yesterday that as a result, recent confusion over the issue had been resolved and “potential international embarrassment prevented”.
“The Internal Revenue Commission has for the last three or four months been suggesting that management fees paid to residents of Australia, Singapore or Canada, where the services are provided outside PNG, were subject to income tax in PNG,” he said.

“PricewaterhouseCoopers believed the IRC was incorrect and that management fees paid to residents of those countries for services rendered outside PNG are not subject to tax in PNG.”

Mr Caradus said PNG had entered into double taxation agreements with those countries and had agreed not to impose tax on residents of those countries, which did not carry on business in PNG through a permanent establishment.

He said a number of clients supported the detailed submission which was lodged in August. The Australia PNG Business Council and the Australian High Commissioner were also made aware of the submission.

“I am pleased that we have been able to work with the IRC to resolve this difficult area of legal interpretation. At the time the issue was first raised, we believed there was the potential for valuable resources of the IRC to be unnecessarily allocated to imposing tax on management fees paid in prior years and in denying PNG companies the right to remit payments of management fees,” Mr Caradus said.

“In addition, a considerable amount of private sector resources may have been spent in dealing with an unnecessary battle with the IRC. The IRC’s response to the technical submission has contributed to avoiding this misallocation of resources and they are to be congratulated for their efforts in responding to concerns raised by taxpayers.”

Mr Caradus said a number of companies had been given tax clearance to remit management fees net of the 17 per cent management fee withholding tax and it was understood the IRC had taken immediate steps to revoke its decision to apply the tax.

This meant it should be possible to obtain taxation clearance to remit the balance due, he said.