Worldwide transfer pricing reference guide 2014

Papua New Guinea (continued)
Documentation deadlines (continued)
followed and their analysis in determining transfer prices, in their efforts to comply with the arm’s length principle. This should include
some justification of why those transfer prices are considered to be consistent with the arm’s length principle.
The IRC recommends that contemporaneous documentation be prepared for all future transactions that are entered into after the
release of the Circular by a date no later than the date of lodgment of the tax return affected by those transactions.
Statute of limitations on transfer pricing assessments
There is generally no statute of limitations with respect to transfer pricing adjustments.
Return disclosures/related party disclosures
The IRC requires an International Dealings Schedule (IDS) to be filed with each tax return where the international related party dealings
exceeded PGK 100,000 in value excluding the capital value of any related party loans and/or had loans with related parties whose
aggregate capital value exceeded PGK 2 million at any time during the year.
Information disclosed on the IDS includes:
• International related party transaction types and quantum
• Countries with which the taxpayer has international related party transactions
• The percentage of transactions covered by contemporaneous documentation
• Transfer pricing methodologies selected and applied for each international related party type
• Details of branch operations
Transfer pricing–specific returns
As stated above, the IRC requires an International Dealings Schedule (IDS) to be filed with each tax return where the international
related party dealings exceeded PGK 100,000 in value excluding the capital value of any related party loans and/or had loans with
related parties whose aggregate capital value exceeded PGK2 million at any time during the year.
Frequency of tax audit and transfer pricing scrutiny by the tax authority
The Commissioner General allocates resources on transfer pricing cases according to the perceived risk to the revenue of taxpayer,
in case of non-compliance with the arm’s length principle. The more significant and broader the scope of dealings, the more likely that
a taxpayer will be subject to a transfer pricing review. Businesses with significant levels of international dealings, who are constantly
returning losses, are at the greatest risk of a transfer pricing review.
Taxpayers should be aware that the Commissioner General may pay closer attention to a transaction involving an associated entity
resident in a country with lower tax rates than PNG. The perception exists that transactions involving low tax jurisdictions are often
motivated by tax, rather than strictly commercial reasons. This will particularly be the case where the PNG entity has ongoing tax losses
as a result of its dealings with a related party in a lower tax jurisdiction.
APA opportunity
The Commissioner General supports having an APA program operating in PNG and will be issuing guidelines shortly of the type of APA
program proposed for PNG and the circumstances in which taxpayers may be eligible for this arrangement.
Expected reaction to OECD Report on BEPS
Not aware of any reaction.
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