The Requirement to Register
All persons (including companies) who are not already registered are required to register as a group employer within seven days of beginning to employ staff from which he is liable to deduct Salary and Wages Tax. A person is to register on the form provided for the purpose by the Commissioner General of Internal Revenue.
Application for Registration
Each employer who is required to register as a group employer, or those businesses who wish to do so, are to apply in writing by lodging an Application for Registration as a Group Employer on within 7 days of making a payment of salary or wages that exceed 277 Kina. These forms are also available from the Internal Revenue Commission by writing to;
The Commissioner General
INTERNAL REVENUE COMMISSION
Attention: Manager Salary and Wages Tax Administration
P.O. Box 777
PORT MORESBY NCD
T: +675 322 6600
F: +675 321 7621
Notification of Registration
Upon receipt of the Application for Registration as a Group Employer the Internal Revenue Commission will register the Business as a Group Employer. After registration the Office will notify the employer in writing that he has been registered and will provide him with a Group Registration Number. This registration will remain in force, regardless of any changes in the number of employees, until cancelled by written notification from the Internal Revenue Commission.
Group Registration Number
When registered, a group employer is assigned a group registration number, commonly called a Group Number. That number must be used by the group employer on all payment advices, statements of earnings and any letters to the Internal Revenue Commission about group tax.
Multiple Group Registrations
Only one group employer registration is to be permitted for an employer, unless the employer is able to satisfy this office that due to the location of his business operations or the limitation of his accounting systems he requires more than one group registration. Requests for more than one group registration are to be made with supporting reasons to;
The Commissioner General
INTERNAL REVENUE COMMISSION
Attention: Manager Salary and Wages Tax Administration
P.O. Box 777
PORT MORESBY NCD
T: +675 322 6600
F: +675 321 7621
Person(s) Allowed To Sign Documents On Behalf Of the Group Employer
The full name(s) and specimen signature(s) of the person(s) allowed to sign documents on behalf of the group employer should be given to the Internal Revenue Commission.
This is initially on the “Application for Registration as a Group Employer” and subsequently to be completed on the annual “Group Employers Reconciliation Statement”
If there is any change in the person(s) allowed to sign documents on behalf of the group employer your must give written notice to the Internal Revenue Commission within 14 days of such a change.
Remittance of Salary or Wages Tax Deductions
A group employer must pay to the Internal Revenue Commission by the seventh day of each month, the amount of the Salary or Wages Tax deducted from the earnings of his employees during the preceding month.
Only one remittance should be sent in each month.
Remittance advices are supplied on registration and at yearly intervals. Further forms may be obtained from the Manager Salary and Wages Tax Administration at the address mentioned earlier.
A remittance advice must be sent to the Internal Revenue Commissioner each month â€“ even if there have been no payments of Salary or Wages.
Each payment of Salary or Wages Tax deductions is to be accompanied by a remittance advice form with all the required details completed. If a receipt is required both parts of the form should be completed and sent in with the payment.
The employer should ensure that the name, address and group number shown are correct. Any necessary changes should be indicated on the form.
The group employer should write the amount of the payment and month and year to which it relates on the remittance advice form.
If Salary or Wages Tax deductions have not been made in any month, the remittance advice form should be endorsed “NIL” and one part only sent to the Internal Revenue Commission.
Penalties for Late Payment or Failure to Remit
If any amount of Salary or Wages Tax deductions made by a group employer is not remitted to the Internal Revenue Commission by the due date, an additional tax for late payment may be imposed.
This penalty is calculated at the rate of 20 per cent flat penalty on the amount due, plus an amount of 20 per cent per annum calculated on the total of amount paid late and the amount of flat penalty.
Provision is also made in law for legal prosecution of an employer who does not meet the above obligation.
On conviction for such an offence a court fine of not less than K500.00 and not exceeding K2, 000.00 or imprisonment term of 6 months or both may be imposed.
Statement of Earning Forms
A summary of an employees’ salary or wages record and Salary or Wages Tax deducted each year is shown on a “Statement of Earning”.
Statement of Earnings forms are supplied to employers by the Internal Revenue Commission. If the number of Statement of Earnings supplied is insufficient to meet an employers needs, a request for further forms should be made to the Internal Revenue Commission.
Under no circumstances should Statement of Earnings supplied to one employer be transferred to another employer.
Statement of Earnings forms are in four parts and as from the 1987 year the parts should be used as follows:
Statement of Earnings (marked original) should be issued to each of the employees. Details of the copies use by the employee are printed on the back of the form.
Statement of Earnings (marked duplicate) should also be handed to the employee who retains it for reference purposes.
Statement of Earnings (marked triplicate) to be returned to the Commissioner General together with the Reconciliation Statement after 31 December – but not later than the following 14 February.
Statement of Earnings (marked quadruplicate) should be retained by the employer.
If any Statement of Earnings is lost, stolen or destroyed the Internal Revenue Commission must be advised immediately (see paragraph 0)
Preparation of Statement of Earnings
The Statement of Earnings forms are serially numbered and must be in correct sequence. Four parts (original, duplicate, triplicate and quadruplicate) with the same number must be used for each employee.
The total value shown as tax deducted from the salary or wages of the employees on all the Statement of Earnings issued by an employer in respect of a year must equal the total amount paid to the Internal Revenue Commission in respect of that year.
Statement of Earnings forms:
Must be prepared in ink. (Blue or Black)
Must not be altered during or after preparation.
Must be signed (original only) personally by the employer or by a person the employer has allowed to sign on his behalf (refer paragraph0); and
Must be issued only in respect of the income year printed on the face of the statement.
If there is an error requiring adjustment, a new statement must be prepared and the four copies of the incorrect statement cancelled by writing across the face “Cancelled – See Certificate No….”. All copies of the canceled Statements should be forwarded to the Internal Revenue Commission along with the triplicate of the correctly issued statement.
The Statement of Earnings should show in the relevant spaces provided:-
Full name of employer.
Group Employers group registration number.
Full name and postal address of the employee.
Number of dependants claimed by the employee and subsequently allowed.
Details of the employees’ citizenship.
Column No. 1. Details of the employees’ total gross salary, wages, commissions, fees and other income subject to salary or wage tax.
This excludes the amounts shown in column 2,3,4 and 5 (i.e. value of taxable allowances, taxable benefits, value of non deductible allowances and lump sum payment on termination of employment) derived by the employee during the year ended 31 December each year.
Column No. 2. Value of Taxable Allowances Received. This is the amount of allowances received that are paid or are payable to the employee.
Column No. 3. Value of Taxable Benefits Received. Show here all benefits received including accommodation, motor vehicle and meals. Please provide a reasonable description.
Column No. 4. Value of Non Deductible Allowances. Show here all non deductible allowances received by the employee, these would include Domestic servant, Security, Telephone, Entertainment, Utilities etc.
Column No. 5. Lump Sum Payment on Termination. This column will detail all payments made on termination. The components of termination payments are broken into two parts;
(a)This part is used to show the amount of termination payment accrued prior to 1 January 1993 and has been taxed at 2 percent, also include here any payment in relation to superannuation taxed at 2 percent.
(b)This part is used to show the amount of termination payment accrued after 1 January 1993 and has been taxed in full. Also to be shown here are payments in relation to superannuation that have been taxed in full.
Column No. 6. Amount of Salary or Wages Tax Deducted (in figures). The total amount of Salary or Wages Tax deducted for the employee during the year ended 31 December each year is to be shown in Column 6 in figures.
The total of the amounts of the Salary or Wages Tax deductions shown in Column 6 of each employees’ statement of earning must reconcile with the total of the amount paid each month to the Commissioner General.
Amount of Salary or Wages Tax Deducted (in words). The total amount of Salary or Wages Tax deducted for the employee during the year ended 31 December each year must be show in words.
The period of employment. The period for which the employee was employed must be shown in this space.
Signature of authorised person. The person authorised to sign on behalf of the group employer must sign each Statement of Earnings (see paragraph0).
Issue of Statement of Earnings
A Statement of Earnings must be issued to each employee,-
Not later than 14 January in each year, to all employees other than those in b. and c. mentioned below.
For any employee who ceases to be employed by the employer, within seven days after the termination of employment.
In no case any amount, for which a Statement of Earnings has previously issued, be included in a further Statement of Earnings issued to an employee.
A Statement of Earnings once issued must not be replaced by another Statement of Earnings in any circumstances.
If an employee inadvertently damages, destroys or loses a Statement of Earnings, the employer should give the employee a photocopy of the group employer’s copy of the Statement of Earnings or a letter setting out the serial number and full details of the lost Statement of Earnings.
The photocopy or letter should be lodged with the employees’ tax return in place of the Statement of Earnings that was lost.
Where an employer discovers than an error has been made in a Statement of Earnings which has been issued or, that the Statement of Earnings was not issued to an employee, he should report the facts in writing to the Internal Revenue Commission. The Internal Revenue Commission will advise how to correct the problem.
Statement of Earnings Incorrectly Issued
Where a tax return for an employee has been processed by the Internal Revenue Commission and the amount shown on the Statement of Earnings was more than the actual amount of Salary or Wages Tax deducted by the group employer, the group employer is liable to pay the difference to the Internal Revenue Commission.
The group employer may sue and recover from the employee any such amount that was paid by the employer to the Internal Revenue Commission.
Statements of Earnings Lost/Destroyed/Never Received
If a group employer loses, inadvertently destroys or never receives their Statement of Earnings, they should contact the Internal Revenue Commission for issue of a new set of group stationary. The group employer should complete a Statutory Declaration, signed by a Commissioner for Oaths, outlining the details surrounding the loss, destruction or failure to receive the Statement of Earnings and submit this to the Manager, Salary or Wages Tax Administration, P.O. Box 777, Port Moresby. This is a free service.
Payments to Be Accounted For In Correct Financial Year
All salary or wages, allowances and taxable benefits from which Salary or Wages Tax deductions are liable to be made are, by law, taxable in the year in which payment is actually made.
For salary or wages Tax purposes, payments relating to employment before and after 31 December in any year must be accounted for solely by reference to the date on which they are made.
Payments in these circumstances should not be split between financial years. As an example, payments made in January for work done in December must be considered as income received in January and then subject to Salary or Wages Tax deducted in January.
Usually a group employer will deliver a Statement of Earnings (original) and the employees’ copy (duplicate) to an employee by hand. Where this is not possible, the documents should be posted to the employees’ last known address.
If the statements are returned unclaimed through the post, the group employer must then send them to the Internal Revenue Commission with an explanatory letter not earlier than 31 December but not later than 28 February.
Where the statement is returned unclaimed after 28 February, it should be sent to the Internal Revenue Commission within seven days of the date it is received by the employer with an explanatory letter.
Unused Statement of Earnings
All copies of unused Statement of Earnings must be returned to the Internal Revenue Commission with the completed Taxation copies (Triplicates) and the reconciliation statement no later than 14th February each year.
A group employer must not transfer spare Statement of Earnings forms to another employer. In this regard, a company having separate registration is not a related or associated company.
If additional Statement of Earnings are required by an employer they should be obtained from the Internal Revenue Commission.
Triplicate copies of issued Statement of Earnings (Internal Revenue Commission Copy) (Note 1986 and prior years duplicate copy). Unless an extension of time to lodge is provided by the Internal Revenue Commission, copies of the Statement of Earnings used by the group employer should be forwarded to the Internal Revenue Commission after 31 December, but not later than 14th February. A penalty of to K 2,000.00 may be imposed if this is not done.
The total amount of Salary or Wages Tax deductions shown on the copies should be the same as the amount remitted to the Internal Revenue Commission in respect of the Salary or Wages Tax deductions made during the year.
The Internal Revenue Commission copies should be kept in number order; they should not be sorted in name order. The parcel in which they are sent to the
Internal Revenue Commission should be marked clearly – ATTENTION: SALARY & WAGES TAX ADMINISTRATION SECTION – and endorsed with the employer’s group number. Cheques or cash should not be included in the parcel.
A reconciliation statement form is provided by the Internal Revenue Commission and must be completed and enclosed with the Internal Revenue Commission copies of the statement of earnings when they are returned to Internal Revenue Commission. The following information should be shown on the statement:
The total amount remitted by the group employer in respect of Salary or Wages Tax deductions made during the year;
The total amount of Salary or Wages Tax deductions shown on the statements of earnings issued by the group employer during the year;
A certificate signed by the group employer that the amounts stated under (a) and (b) and the details under (c) are correct; and
The name (s) and signature(s) of persons allowed to sign documents on behalf of the group employer.
Should the amounts on (a) and (b) above not be the same, a full explanation for the difference must be given.
Cancellation of a Group Registration
If a business ceased operation or a complete change of ownership occurs, cancellation of registration as a group employer must be requested in writing within 7 days, advising the date that the salary or wages were last paid.
Before a notice of cancellation is issued by the Internal Revenue Commission, all matters relating to the group must be finalised, including the issue of statements of earnings to all employees and return to the Internal Revenue Commission of the following: Internal Revenue Commission copies of all statement of earnings issued up to the date of cancellation of the group employer;
All unused group stationery, and
A reconciliation statement filled out in accordance with paragraph 10.
This part of the booklet deals with the procedures to be taken by Group Employers in relation to the correct deduction of Salary and Wage Tax from employees. The Salary or Wages Tax deductions required to be made by Group Employers from the salary or wages of employees each fortnight under the INCOME TAX ACT are referred to in this instruction as “Salary or Wages Tax”.
Under the pay-as-you-earn system the calculation of Salary or Wages Tax is made at the end of each fortnight. The tax is calculated on the gross salary or wages earned or derived during that fortnight.
This calculation is deemed to be an assessment under the Income Tax Act and finalises the employees’ Salary or Wages Tax liability for that fortnight. In effect this means that an employee will not need to lodge an Income Tax Return each year unless he receives income from which Salary or Wages Tax has not been deducted or is in receipt of other income.
In calculating the Salary or Wages Tax to be deducted the “Schedule of Rates of Fortnightly Salary or Wages Tax Deduction from Salary or Wages” is most important.
The explanatory notes at the beginning of the schedule explain how the schedule should be used. Failure to make the correct Salary or Wages Tax deduction from a payment of salary or wages income is an offense. On conviction for such an offense a fine may be imposed of not less than K 200.00 and not exceeding K 2,000.00.
The Schedule must not be departed from without written authority being obtained from the Internal Revenue Commission. Unless the employee lodges a “Salary or Wages Tax Declaration” form with his employer, the employer must deduct the amount shown in Column 3 of the Salary or Wages Tax Deduction Schedule – i.e. the column headed “Where no Declaration is lodged”.
Salary or Wage Tax Declaration Form
A Salary or Wages Declaration may be lodged with only one employer at a time. If an employee has more than one employer at any time he should lodge a Declaration with his main employer.
The Salary or Wages Tax Declaration form must be completed in full by the employee and signed by him before being accepted by the employer.
Claims for dependants must only be taken into account when all the details concerning that dependant have been filled out.
In making deductions from salary or wages paid, the employer should not give effect to a Declaration before the end of the first pay period commencing after the furnishing of that Declaration.
Under no circumstances can a new Declaration be used to recalculate tax for fortnights that have already passed.
Where the Declaration is furnished by the employee on the first day of employment with the employer, the employer must give effect to that Declaration on the date of the first payment of salary of wages to the employee.
A new Salary or Wages Tax Declaration must be furnished by an employee to his principal employer when: