Tax Benefits for Real Estate Investors in Papua New Guinea

Published on January 17, 2026 and written by Cyril Jarnias

Investing in real estate in Papua New Guinea may initially seem reserved for large mining groups or hotel developers already established in the Pacific. However, the combination of a system without a broad-based capital gains tax, relatively simple withholding mechanisms, generous depreciation regimes, and, in some cases, sectoral or geographic incentives, creates a tax environment often more favorable than one might imagine for real estate investors, whether individuals or companies.

A General Framework Without a Broad-Based Capital Gains Tax

One of the most unique aspects of Papua New Guinea’s tax system is the absence of a general capital gains tax regime. Currently, the country does not have a capital gains tax (CGT) in the broad sense, although the idea of introducing one – even a draft law effective from 2026 – is on the authorities’ table.

Concretely, profits from the sale of real estate are not taxed as separate capital gains, unless the tax administration can demonstrate that the property was purchased with the intention of resale for profit or as part of a regular trading activity. In that case, the gain is reclassified as ordinary business income and taxed at the usual income tax or corporate tax rates.

At the same time, there is no net wealth tax, inheritance tax, gift tax, or genuine national property tax. Only certain provinces may levy a local land tax, for example at a rate of 1.25% of the land value in the National Capital District.

A Proposed Capital Gains Tax to Monitor

However, the authorities have embarked on a comprehensive overhaul of the system, with a draft new income tax law and a future CGT regime intended to take effect for tax years starting after January 1, 2026. The proposed rate is 15% on certain assets, including real estate located in Papua New Guinea and shares in companies with a “significant real estate component.”

If this regime materializes, it will include important safeguards for investors: exemption for individuals’ primary residence, calculation base set at market value at the start of the new system for older assets, possibility to carry forward capital losses indefinitely, tax deferral mechanisms in case of group restructuring or reinvestment of the asset. In other words, even in a future architecture with CGT, the tax treatment for real estate investors would remain competitive compared to many neighboring countries.

A Rental Income Tax Structure Centered on Withholding at Source

The other pillar of the favorable regime for real estate investors lies in a withholding mechanism on rental income, which, if well utilized, can significantly simplify reporting obligations.

Any rent paid for the use of land or buildings is in principle subject to a 10% tax withholding on the gross amount. It is the tenant who has the legal obligation to withhold and remit this amount to the Internal Revenue Commission (IRC), no later than the 15th of the following month.

– the lessor does not have to file an annual return if their only local resources correspond to this correctly taxed rent,

– their rental income is not reintegrated into the progressive income tax scale.

For a resident taxpayer in the maximum bracket of 42%, the differential is significant: the rent bears a levy of 10% instead of being taxed at a high marginal rate. This gap gives the regime an objectively advantageous character, provided one accepts the simplicity of the flat-rate levy over fine-tuning optimization via a full return.

This architecture is summarized in the following table.

Lessor Profile	Rent Withholding Rate	Nature of Withholding	Reporting Obligation
Resident Individual, rental income only	10% on gross	Final and definitive tax	None, if withholding correctly done
Resident Individual, other income	10% on gross	Final tax on rents, other income reported separately	Return for other income
Resident Company	10% on gross	Creditable prepayment	Corporate tax return mandatory
Non-Resident Company (branch, etc.)	10% on gross	Creditable prepayment for 48% corporate tax	Corporate tax return mandatory

The investor can, in some cases, request to opt out of the withholding mechanism and pay classical provisional tax. But for most individuals, the standard scheme remains very attractive.

Significant Stamp Duties, but Targeted Exemptions

The absence of tax on capital gains and moderate taxation of rents does not mean real estate transactions are exempt from charges. Papua New Guinea indeed applies a stamp duty on property transfers, leases, and certain setups via property-holding companies.

For sales of real estate (land, buildings, apartment titles, mining and petroleum interests, etc.), the duty is calculated on the market value and follows a progressive scale. Beyond 140,000 kina, the rate reaches 5% of the transaction value, plus a modest registration fee of about 0.01% borne by the purchaser.

The applicable scale can be presented as follows.

Value of Property Transferred (PGK)	Stamp Duty Rate on Transfer
Up to 36,000	2%
36,001 to 70,000	3%
70,001 to 140,000	4%
Over 140,000	5%

For leases, the regime is simpler: 1% of the total rental value for leases under 5 years, and 0.40% for those of 5 years or more. Again, the base is the total rental value over the lease term.

Exemptions and Relief for Citizens’ Primary Residences

The law provides in particular for exemptions and reduced rates for citizens of Papua New Guinea purchasing their primary residence. First-time citizen homebuyers are exempt from stamp duty for the purchase of a property intended to be occupied as a primary residence when the price is below 500,000 kina. Rates lower than the standard scale also exist for subsequent purchases by citizens, as long as the property remains the primary residence.

These benefits do not apply to non-citizens or to citizens acquiring a third or more property, who fall back under the general scale.

Anti-Avoidance Mechanisms on Land-Rich Companies

To prevent the real estate transfer duty from being circumvented via the sale of shares in companies holding land or buildings, the country has implemented so-called “land-rich company” rules. When an investor acquires, directly or indirectly, a controlling interest (50% or more) in a private company holding land assets, a stamp duty equivalent (2 to 5%) is due on the underlying land value.

In other words, buying 100% of the shares of a private Papua New Guinean property company is fiscally equivalent to buying the building directly. The investor therefore cannot rely on a “share deal” structure to reduce stamp duties, except in very specific cases, notably for certain mining titles capped at 10,000 kina per license.

Depreciation and Deductible Expenses: A Major Lever for Investors

While the taxation of capital gains is key for a long-term investor, the ability to depreciate and deduct expenses related to a real estate asset constitutes an equally important lever to optimize the net return on investment, especially for companies and individuals who choose to declare their rental income.

Papua New Guinea applies a general deduction principle: all expenses incurred in producing taxable income or in the normal course of business are in principle deductible, except for expenses of a strictly private or capital nature, or related to exempt income.

Within this framework, investors can:

– depreciate buildings and equipment related to the rental operation,

– deduct loan interest contracted to finance the acquisition or construction of the building (subject to thin capitalization rules),

– deduct repair, maintenance, management costs, insurance, local taxes, advertising, and certain non-income taxes.

Flexible Depreciation Regimes

The depreciation regime is primarily based on the diminishing value method, unless the taxpayer explicitly chooses the prime cost (straight-line) method. The diminishing value rates are generally 150% of the prime cost rates, which accelerates the tax recovery of costs.

Real Estate or Related Asset	Prime Cost (Straight-Line)	Diminishing Value
Residential building (rental)	approx. 2% per year	approx. 3% per year
Steel frame storage building	approx. 4% per year	approx. 6% per year
Building forming an integral part of a plant	up to 7.5% per year	approx. 11.25% per year
Vehicles used for rental management	20% per year (historical cost)	over 20% under DV
Furniture, office equipment, etc.	7.5–11.25% per year	10–15% per year

Several mechanisms further enhance attractiveness for certain types of investors:

– buildings housing industrial equipment that can be written off in one year can, in some cases, themselves be fully expensed in the year of their construction;

– other income-producing buildings can benefit from an accelerated deduction of 20% of their cost in the year of acquisition, in addition to depreciation;

– in sectors like agriculture, commercial fishing, or tourism, certain assets benefit from 100% deductions or particularly high depreciation rates.

Deductible Interest, but Thin Capitalization to Monitor

Interest paid on loans contracted under arm’s length conditions is in principle deductible when it serves to finance an asset generating taxable income. For a real estate investor using debt, this rule allows reducing the taxable base of rents.

However, the country applies so-called thin capitalization rules: for companies outside the extractive sector, the debt-to-equity ratio must not exceed 2:1. Beyond that, a portion of interest on the excess debt is non-deductible. Foreign or heavily parent-financed real estate companies must therefore structure their financing cautiously, lest part of their interest expenses be disallowed.

Modulable Personal Income Taxation, Without Heavy Social Charges

For resident individual investors, income tax follows a progressive scale where the marginal rate reaches 42% beyond 250,000 kina of taxable income. The lower brackets are nevertheless moderate, with an exemption up to 12,500 kina for residents, then rates ranging from 22% to 40%.

The existence of the final 10% withholding regime on rents offers an interesting exit for taxpayers whose sole or main source of income is rental. Those who also carry out a professional activity or have other income can choose between:

Another indirect advantage: there is no social security contributions in the strict sense. Employers with 15 or more employees must indeed contribute to a retirement fund (6% of salary borne by the employee, 8.4% borne by the employer), but the individual investor receiving rental income is not faced with additional social charges on this income.

For non-resident individuals, the scale starts directly at 22% from the first kina, but the absence of a general CGT and the possibility to structure the investment via a company or optimized real estate vehicle keep the market attractive.

A High Base Corporate Tax for Non-Residents, but Modulable

On the corporate investor side, the country applies a two-tier system:

– 30% corporate tax for resident entities,

– 48% for non-resident entities (including branches) on their locally sourced profits.

At first glance, the 48% rate may deter a purely non-resident structure. But several mechanisms soften this reality:

The table below summarizes the basic structure.

Type of Entity	Taxable Base	Standard Rate
Resident Company	Worldwide income	30%
Non-resident Company / Branch	Locally sourced income	48%
Authorized Retirement Fund	Income from specific investments	25%

For a real estate investor structuring a significant portfolio (offices, shopping centers, hotels, logistics parks), the most effective solution in practice is to establish a resident entity under local control or to set up a mixed vehicle within a project in a special economic zone or priority rural area, where reduced rates or temporary exemptions may apply.

Special Economic Zones: Attractive Tax Treatment for Integrated Real Estate Projects

Special Economic Zones (SEZs), created by the 2019 law, are a key instrument of the economic diversification strategy. They offer a combination of administrative facilities and tax benefits presented as “world-class.”

Several flagship projects include a strong real estate component: the Paga Hill SEZ waterfront, with luxury hotels, cultural center, and commercial spaces; the Portside Business Park near Motukea port, developed on 38 hectares; other zones focused on logistics, fishing, heavy industry, or international trade.

The incentives generally announced in these zones include:

– tax holidays ranging from 3 to 10 years depending on the nature and scale of the project,

– corporate tax rates reduced compared to the standard 30% / 48% rates,

– customs duty exemptions on imported machinery, equipment, and sometimes materials necessary for construction or operation,

– exemptions or reductions of taxes on certain exports from the zone,

– enhanced deductions and tax credits related to capital investments.

For the real estate investor, the interest is twofold:

– the development phase bears a reduced tax burden thanks to tax holidays and customs exemptions on equipment and materials;

– the operation phase benefits from reduced profit tax, even preferential treatment on certain income.

Sectoral and Geographic Incentives: Tourism, Rural Areas, Agriculture

Beyond SEZs, Papua New Guinea has implemented several incentive regimes targeting specific sectors or disadvantaged regions, some of which directly interest real estate investors.

In the tourism sector, certain large-capacity accommodation projects may benefit from a reduced corporate tax rate of 20% for about fifteen years, under conditions (construction period, size and type of activity). The concerned real estate assets – hotels, resorts, tourist complexes – are also often eligible for accelerated depreciation, even full deductions for certain equipment.

Agriculture, fishing, and agri-food processing benefit, for their part, from 100% deductions on most productive investments and, for certain agricultural extension or training programs, from 150% deductions or infrastructure tax credits. Even if the effect is indirect, the associated real estate (warehouses, worker housing, packaging centers) fits into a very incentive-based tax ecosystem for investors combining land and production activities.

Tax Treaties: Protection Against Double Taxation and Capping of Withholdings

Foreign investors can also rely on Papua New Guinea’s tax treaty network, which notably covers Australia, Canada, China, Fiji, Indonesia, South Korea, Malaysia, New Zealand, Singapore, and the United Kingdom.

These treaties do not eliminate local tax on Papua New Guinea-sourced real estate income – generally, rents and capital gains related to property located in the territory remain taxable where the building is situated. But they offer several concrete advantages:

For a real estate investor structuring their portfolio via a Papua New Guinean company, then repatriating dividends to a parent company in a treaty-linked country, the effective rate of source withholdings is thus capped, improving the predictability of net return.

An Environment Without Wealth Tax, Inheritance Tax, or CFC Rules

Another aspect often underestimated by investors concerns the absence of certain taxes that many countries apply:

This context allows wealth investors who reside or settle in Papua New Guinea to structure their local and international real estate wealth with great flexibility, subject obviously to respecting general anti-abuse rules, transfer pricing rules, and international tax transparency obligations of their home countries.

Risks Not to Neglect: Possible Instability of Incentives and Rise of International Standards

The benefits described above are part of a changing tax landscape. The work of the tax reform committee, new tax laws, the country’s adherence to international instruments like the BEPS Multilateral Convention, and the ongoing reflection on a global minimum tax for large groups clearly show that Papua New Guinea wants to modernize and secure its revenue.

For the real estate investor, this means several things:

It is therefore essential for any investor to reason based on the current framework, but also to incorporate a margin of prudence and closely monitor legislative developments. One of the announced axes of the reform is to simplify and rationalize incentives, while making the system more readable and less fragmented.

How to Take Advantage of Tax Benefits in Practice?

In summary, several key trends emerge for structuring a real estate investment in Papua New Guinea in a tax-efficient manner:

In an environment that remains, in some aspects, less advantageous for strictly non-resident companies, but particularly welcoming for long-term wealth holdings and well-designed resident structures, Papua New Guinea offers real estate investors a range of tax opportunities rare in the region.