PNG's Tax Rules for Foreign Installation Crews Changed on 1 January 2026 — Most Australian Contractors Haven't Caught Up

Papua New Guinea's Income Tax Act 2025 came into force on 1 January 2026, and with it went the tax regime that Australian equipment suppliers and installers have relied on for decades. The old 15% Foreign Contractor Withholding Tax has been repealed outright and replaced with a permanent establishment framework that determines PNG tax exposure differently, assesses it at a different rate, and is triggered by a different set of facts entirely.

For a business sending an Australian crew to install equipment on a PNG mine site, this is not a technical footnote. It changes whether a contract structured perfectly well in 2024 creates an unplanned PNG tax filing obligation in 2026, whether a client's accounts team is entitled to withhold from an invoice, and whether individual employees retain a personal tax exemption they may be assuming still applies unchanged.

The mechanism has changed, not just the rate

Under the repealed regime, a foreign contractor undertaking a prescribed contract — installation, construction, engineering work — was subject to gross withholding unless a treaty-based variation was secured in advance. That entire apparatus, including the variation certificate process, no longer exists.

In its place, PNG now taxes non-residents according to whether their PNG activity rises to the level of a permanent establishment. Where it does, the profit attributable to that PE is taxed at 30% net, plus an additional tax on repatriated profits that can push the combined effective rate above 40%. Where it doesn't, PNG has no corporate income tax claim at all.

That is a materially different question to the one most commercial teams are still asking. The wrong question is whether there is an exemption certificate. The right question is whether the specific facts of a given engagement cross a threshold that most people involved in the deal have never had to measure before.

There is more than one clock running, and they don't share a number

This is where engagements like ex-works equipment sales paired with an on-site installation scope tend to go wrong. PNG's rules now layer at least three separate duration tests over a single project:

• A threshold that determines whether the installation activity itself creates a permanent establishment for the contracting company.

  
  

• A separate treaty-based test with its own duration rule, which is not automatically the same figure, and can offer additional protection only if engaged in writing before exposure crystallises.

  
  

• An entirely different test that governs whether individual employees on site retain their personal exemption from PNG salary and wages tax.

Conflating these is one of the most common and most expensive mistakes we see, including in AI-generated guidance now treating all three as a single rule. Getting the corporate test right and the employee test wrong doesn't halve the problem. It moves it onto the payslips of people who are no longer in the country to fix it.

The new withholding rules are broader than they used to be

The Act broadened what counts as a withholdable technical fee for non-residents without an in-country permanent establishment, folding in categories of service income that weren't previously captured.

Whether a mechanical installation scope, billed separately from an equipment sale, sits inside or outside that broadened definition is a live question, not a settled one.

It is exactly the kind of question a PNG client's finance team will resolve in whatever direction protects them, by default, unless the position has been confirmed and documented before the invoice is raised.

There’s more, the immigration exposure

Every one of the above is a tax question. Separately, and regardless of how the tax analysis lands, every foreign national on a PNG site needs a valid work permit and entry visa, sponsored through PNG's foreign employment framework. A client sponsoring that permit for site-access purposes does not, on its own, resolve who bears the tax cost of the arrangement, and contracts that are silent on that point tend to surface the disagreement only after the crew has already mobilised, which is the most expensive point in the project to discover it.

Critical to resolve before mobilisation, not after

The commercial pattern we see repeatedly is straightforward: the equipment sale and the installation scope get bundled onto one invoice, the contract doesn't clearly anchor the employment relationship against the sponsoring client, no IRC contract notification is filed, and nobody has actually confirmed which of PNG's several duration tests the project timeline is being measured against.

Individually, each of these is a modest piece of diagnostic work. Left unresolved, together they produce exactly the outcome nobody wants: a client withholding tax from a payment they didn't need to withhold, a PNG filing obligation nobody planned for, or an employee who has quietly lost an exemption they assumed was automatic.

Extax Oceania advises Australian companies on PNG cross-border structuring under the current Act, reviewing contract and invoicing structure, confirming which duration tests actually apply to a specific engagement, and where the position needs to be confirmed with the IRC or documented before mobilisation.

Book a call with Extax Oceania, or email png@extax.net, before your crew leaves Australia.

General commentary on Papua New Guinea's Income Tax Act 2025 and related settings as at July 2026. Not advice on your specific facts. Tax and immigration positions depend on the exact contract terms, project duration, and client relationship involved.