What Stamp Duty Is Payable on a Lease?

Leases are dutiable in Papua New Guinea. Item 9 of Schedule 1 to the Stamp Duties Act (Chapter 117) covers leases or agreements for leases of land, and leases of goods and agreements for leases of goods, for definite or indefinite terms.

Duty is payable by the parties, or any one or more of them — so the Collector may look to either landlord or tenant for the whole amount, whatever the lease says between them.

Where the consideration is rent

This is the ordinary case, and the rate turns on the length of the term:

Where the consideration is not rent

Item 9(a) deals with a premium or other non-rent consideration. Where the consideration, or part of it, not being by way of rent, moving to the lessor or another person consists of money, marketable securities or other property, the duty is K1.00 or 1% of the value of the lease, whichever is greater.

Exemptions

Item 9 exempts, among others:

• Mining leases, or agreements for the right to enter on, occupy and use land for mining purposes;
• leases from the State; and
• leases of goods where the Collector is satisfied the goods are for use in or in connection with mining or petroleum operations or exploration under a Special Mining Lease or Prospecting Authority under the Mining Act 1992, or a Pipeline Licence or Petroleum Development Licence.

The operative sections

• Section 50 — duty on a lease or assignment of a lease.
• Section 51 — duty on an agreement for lease. An agreement to grant a lease can be dutiable in its own right.
• Section 52 — leases for an indefinite term or rent, and options. An open-ended arrangement is not outside the Act.
• Section 53 — charges in respect of produce.
• Section 54 — an instrument of lease relating also to other matters.
• Section 57 — separate instruments.
• Section 57A — leases of goods.
• Section 56 — directions as to duty in certain cases.

If the lease ends early

Section 55 provides for a refund of part of the duty on early determination of a lease. Duty is calculated on the rent for the whole lease period, so where the lease is brought to an end early, part of the duty relates to a period that never happened.

Two further provisions deal with resource tenements: section 55A covers rescission or annulment of mining or petroleum leases, and section 55B the rescission or annulment of a transfer of a land use entitlement.

Practical points for landlords and tenants

1. Decide who pays in the lease, and remember it binds only the parties — not the Collector.
2. Calculate duty on the whole term before fixing the term length, especially near the five-year line.
3. Stamp within 60 days of execution under section 18(1A).
4. Keep the stamped original. Under section 19 an unstamped lease cannot be given in evidence in civil proceedings — which is precisely when you would need it.
5. Diarise 12 months from payment as the outer limit for any refund claim.