The Double Taxation Relief (Taxes on Income) (Papua New Guinea) Order 1991

Made: 19th December 1991

At the Court at Buckingham Palace, the 19th day of December 1991 Present, The Queen’s Most Excellent Majesty in Council

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 788 of the said Act, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

1

This Order may be cited as the Double Taxation Relief (Taxes on Income) (Papua New Guinea) Order 1991.

2

It is hereby declared—

• (a) that the arrangements specified in the Convention set out in the Schedule to this Order have been made with the Government of the Independent State of Papua New Guinea with a view to affording relief from double taxation in relation to income tax or corporation tax and taxes of a similar character imposed by the laws of Papua New Guinea;

• (b) that those arrangements include provisions with respect to the exchange of information necessary for carrying out the domestic laws of the United Kingdom and the laws of Papua New Guinea concerning taxes covered by the arrangements including, in particular, provisions about the prevention of fiscal evasion with respect to those taxes; and

• (c) that it is expedient that those arrangements should have effect.

SCHEDULE — CONVENTION

The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Independent State of Papua New Guinea;

Desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income;

Have agreed as follows:

ARTICLE I — Personal scope

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

ARTICLE 2 — Taxes covered

ARTICLE 3 — General definitions

ARTICLE 4 — Fiscal domicile

ARTICLE 5 — Permanent establishment

ARTICLE 6 — Income from real property

ARTICLE 7 — Business profits

ARTICLE 8 — Shipping

ARTICLE 9 — Air transport

ARTICLE 10 — Associated enterprises

ARTICLE 11 — Dividends

ARTICLE 12 — Interest

ARTICLE 13 — Royalties

ARTICLE 14 — Technical fees

ARTICLE 15 — Independent personal services

ARTICLE 16 — Dependent personal services

ARTICLE 17 — Directors' fees

Directors' fees and other similar payments derived by a resident of a Contracting State in his 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 18 — Artistes and athletes

ARTICLE 19 — Pensions and annuities

ARTICLE 20 — Government service

ARTICLE 21 — Students

Payments which a student or business 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 his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

ARTICLE 22 — Income not expressly mentioned

ARTICLE 23 — Elimination of double taxation

ARTICLE 24 — Limitation of relief

Where under any provision of this Convention any income is relieved from tax in a Contracting State and, under the law in force in the other Contracting State a person, in respect of that income, is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, than the relief to be allowed under this Convention in the first-mentioned Contracting State shall apply only to so much of the income as is remitted to or received in the other Contracting State.

ARTICLE 25 — Non-discrimination

ARTICLE 26 — Mutual agreement procedure

ARTICLE 27 — Exchange of information

ARTICLE 28 — Diplomatic agents and consular officials

ARTICLE 29 — Entry in force

Each of the Contracting States shall notify to the other the completion of the procedures required by its law for the bringing into force of this Convention. The Convention shall enter into force on the date of the later of these notifications and shall thereupon have effect:

ARTICLE 30 — Termination

This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Convention by giving notice of termination, through the diplomatic channel, at least six months before the end of the calendar year beginning after the expiration of five years from the date of entry into force of the Convention. In such event, the Convention shall cease to have effect:

In witness whereof the undersigned, duly authorised thereto by their respective Governments, have signed this Convention.

Done in duplicate at London this 17th day of September 1991.

Signed

G.I. de Deney — Clerk of the Privy Council

Explanatory note

(This note is not part of the Order)

The Convention with Papua New Guinea is set out in the Schedule to this Order.

The Convention provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Shipping profits are generally to be taxed only by the residence state of the shipping enterprise (Article 8). Profits from international air transport are to be taxed only by the residence state of the enterprise (Article 9). The Convention includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 10).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country is normally not to exceed 17 per cent of the gross amount of the dividends (Article 11). The rate of tax imposed in the country of source on interest derived by a resident of the other country is not to exceed 10 per cent of the gross amount flowing to the other country. Certain categories of interest (e.g. interest paid to the Government of the other country) will be exempt from tax in the source country (Article 12). The rate of tax imposed in the source country on royalties is limited to 10 per cent where the beneficial owner is a resident of the other country (Article 13).

The rate of tax on technical fees arising in one country and paid to a resident of the other country is not to exceed 10 per cent of the gross amount, but if the recipient so chooses, the tax chargeable on the fees is to be calculated as if he had a permanent establishment in the source country, i.e. net of expenses (Article 14).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 15 and 16). Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in the latter country (Article 17). Income derived from the activities of artistes and athletes may be taxed in the country in which those activites are performed (Article 18). Government service salaries are normally to be taxed by the paying government only (Article 20). Certain payments made to visiting students or business apprentices are, subject to certain conditions, to be exempt from tax in the country visited (Article 2 1). Occupational pensions and annuities are to be taxed only in the country of the taxpayer’s residence (Article 19).

Where income continues to be taxable in both countries credit will be given by the taxpayer’s country of residence for tax imposed by the other country. The credit to be given in the United Kingdom for tax imposed in Papua New Guinea includes credit for tax spared under certain provisions of Papua New Guinea law. In the case of dividends, the United Kingdom will give credit for underlying tax paid in Papua New Guinea where the shareholder is a United Kingdom company which controls at least 10 per cent of the voting power in the dividend paying company (Article 23).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 25) and for consultations (Article 26) and exchange of information (Article 27) between the taxation authorities of the two countries.

The Convention will enter into force when the legislative procedures in both countries have been completed, and will have effect in the United Kingdom from 1st April (in respect of corporation tax) and 6th April (in respect of income tax) in the following calendar year (Article 29). The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.

Footnotes

[^f00001]: 1988 c. 1; section 788 is extended by section 10 of the Capital Gains Tax Act 1979 (c. 14).