Fiscal Regime
The Falklands fiscal system comprises:
- a variable acreage rental
- 9% royalty on production
- 26% corporation tax on adjusted chargeable profits.
There are no signature bonuses, no production sharing contracts, no back-in rights, no local market discounts, etc.
The system is relatively simple, transparent, and aims to encourage exploration and production activity in the region.
The Falkland Islands Government is committed to ensuring that the overall fiscal regime remains attractive and conducive to attracting future investment.
Royalties
A royalty of nine per cent (9%) is payable on the market value of any petroleum won.
Provision has been made in the legislation for the royalty to be reduced at the discretion of the Governor if:
- reduced royalty payments would encourage development of smaller fields which would not otherwise be economic
- needed to extend the life of a producing field
- in any extended period of extraordinarily low petroleum prices a 9% royalty would lead to the abandonment of a field.
Royalties will be payable in respect of six-month periods ending as set out in the Offshore Petroleum (Licensing) Regulations 1995 & 2000.
Corporation tax
Corporation tax is 26% on all profits from exploration and extraction activities. A lower rate of 21% is available, for other (non-oil related) activities, on the first £500,000 of profits (with effect from accounting periods commending on or after 1/1/2017; £1,000,000 before this date).
The jurisdiction extends to the whole of the Falklands Designated Area.
All petroleum extraction activities are taxable, as are capital gains on licence transfers.
Contractors are taxed on activities within the Designated Area, and the production licence holder is liable for taxes payable by contractors in default ("Schedule 6").
A 2-way ring-fence operates around the designated area which restricts relief of expenditures on ring fence trade to ring fence income and relief of expenditures on non ring fence trade to non ring fence income.
Further guidance
Further guidance on Falkland Islands taxation may be obtained from the FIG Taxation Office website:
http://www.fig.gov.fk/treasury/index.php/taxation
Contact details for the Taxation Office can be found at: