2. Personal income tax is a tax on an individual
resident’s worldwide income. Income tax is a
direct tax and the tax payer ‘bears the
burden’ of tax.
Income tax paid by individual is normally
‘progressive’ in nature.
Personal Income Tax
3. The income of an individual subject to
personal income tax includes salary or wages,
employment related benefits, gifts and
commissions related to work, and income
from a business or investment
Personal Income Tax
4. The personal income of resident taxpayers is
taxed according to the personal income tax
rates for residents. The rates are progressive
and commence at 22% for income over
K10,000. The top marginal rate is 42% for
income over K250,000
Personal Income Tax Rates
5. Individual Tax
Personal Income Tax Rate for Residents
Taxable Income Tax thereon Tax rate (%)
10,000 Nil 22
18,000 2,420 30
33,000 6,920 35
70,000 19,870 40
250,000 91,870 42
Exceeds 250,000/- - 42
6. Example:
1. Taxable income 9,000
Tax payable Nil
2. Taxable income 11,000
Tax payable: = (11,000 – 10,000 ) x 22/100
= 1,000 x 22/100
= 220
7. Example:
3. Taxable income 80,000
Tax payable: = (80,000 – 70,000) x 40/100
= 10,000 x 40/100
= 4,000
Plus 70,000 (Tax thereon) 19,870
= 23,870
8. Example:
4. Taxable income 260,000
Tax payable: (260,000 – 250,000) x 42/100
= 10,000 x 42/100
= 4,200
Plus 250,000 (Tax thereon) 91,870
= 96,070
9. Residents and non-residents are taxed in a
different manner. Normally a person is a
resident if they have been in the country for
at least six months.
Papua New Guinea Resident
and Non- Resident.
10. A dependent rebate is deductions from a
taxpayer’s gross tax payable amount for
maintaining certain dependents.
Tax payers are allowed a tax rebate for up to
three dependents. Only certain persons
qualify as dependents for tax purposes.
Dependent or Concessional
Rebates
11. Only certain persons qualify as dependents;
a spouse of the taxpayer
an unmarried child of the taxpayer of less than 16 years of
age
a student receiving full-time education who is over 16, but
less than 25, years of age
a Papua New Guinea resident parent of the taxpayer or
the taxpayer’s spouse.
an invalid relative who is permanently incapacitated from
work and has been medically certified as such. He or she
must be more than 16 years of age.
Dependent or Concessional
Rebates
12. Rebate Rate
First Dependent: 15% of gross tax payable but not
more than K450 or less than K45
Second, and third
dependents:
10% of gross tax payable but not
more than K300 or less than K30.
Tax payers are allowed a tax rebate for up to
three dependents.
13. Example:
1. Taxable income 11,500
Dependent 1
Gross tax payable: = (11,500 – 10,000 ) x 22/100
= 1,500 x 22/100
= 330
Less: dependent rebate 49.50 (15% x 330)
Net tax payable = 280.50
14. Example:
2. Taxable income 17,000
Dependent 2
Gross tax payable: = (17,000 – 10,000 ) x 22/100
= 7,000 x 22/100
= 1,540
Less: dependent rebate
1,540 x 15% = 231
1,540 x 10% = 154 385
Net tax payable = 1,155
15. Example:
3. Taxable income 30,000
Dependent 3
Gross tax payable: = (30,000 – 18,000 ) x 30/100
= 3,600
Plus 18,000 (Tax thereon) 2,420
= 6,020
Less: dependent rebate
1st dependent 450
2nd and 3rd dependent
300 x 2
600 1,050
Net tax payable = 4,970
16. End of Topic 2
loq55ar
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