The Bank of Papua New Guinea, the Central Bank, is the exchange control authority. Exchange control is administered through the Foreign Exchange Regulations and comprises the following:
The Central Bank’s approval is required for all foreign investment proposals. Such proposals include the issue of equity capital to a non-resident, the borrowing of funds from a non-resident investor or financial intermediary and the supply of goods and services on extended terms by a non-resident.
The main concern is that the terms of the investment funds are reasonable in the context of prevailing commercial conditions and that full subscription of loan funds are promptly brought to Papua New Guinea. A debt/equity ratio of 5:1 is generally imposed with respect to overseas borrowings and a ratio of 3:1 in respect of local borrowings.
Registration of foreign capital
The Central Bank’s approval is required for companies incorporated in Papua New Guinea to register shares in the name of non-residents and to dispatch the share script from Papua New Guinea.
Exchange control permission is required by residents of Papua New Guinea to retain foreign currency and for an authorised dealer to maintain foreign currency accounts in the name of residents. Permission is also required for permanent residents to maintain foreign currency accounts overseas.
As a general rule the holding of foreign currency accounts within Papua New Guinea is not encourages, and, for example, exporters are usually required to convert any export proceeds into Kina.
Repatriation of capital and earnings
· Remittance allowances:
All remittances overseas in excess of K50,000 per annum requires a tax clearance certificate issued by the Internal Revenue Services. In addition, approval of the Central Bank is required for annual remittances overseas in excess of K500,000. Remittances relating to the payment of trade-related goods are not taken into account.
· Repatriation of capital:
There are no specific restrictions on the repatriation of capital owned by or due to non-residents. The Central Bank’s principal objectives in assessing applications for capital repayments are to ensure that the funds are due and payable to a non-resident and that Papua New Guinea assets are not sold at an artificial value.
· Current payments:
No formalities are involved in the payment for goods imported into Papua New Guinea where the importer can produce documentary evidence including customs entry forms, to its bankers that the goods have actually been received in or are actually in transit to Papua New Guinea.
Application for other current payments such as interest, rentals, services, insurance premiums and charterage should be supported by documentation showing that the payment is due to the overseas payee for the purpose stated.
Applications for dividend payments to overseas shareholders should be supported by a copy of the company’s dividend declaration, the latest available accounts and a tax clearance certificate. Similar supporting documentation is required where profits are to be remitted by branches, partnerships etc.
· Taxation surveillance:
When seeking approval for the transactions listed below, a tax clearance certificate must be supplied:
- Transfer of funds that have the nature of capital in the hands of the person from whom they are transferred.
- Transfer of funds as a result of the borrowing or lending of money or the assignment of a debt.
- Transfer of funds as a result of sale, purchase, acquisition or disposition of securities, land or other property.
- Transfer of funds being a royalty, license fee, management fee, charter fee or similar payments.
- Transfer of funds into a trust fund created or established in a place outside Papua New Guinea.
- Transfer of funds arising from the declaration of any dividend to a person or group of persons in or resident in a place outside Papua New Guinea.
- Transfer of funds under a court order to a person who is in or is a resident of a place outside Papua New Guinea.
- Transfer of funds in respect of interest on borrowings to a person who is in or is a resident of a place outside Papua New Guinea.
- Transfer of any funds to certain specified countries, mostly tax-haven countries.