In the Falkland Islands, employers have specific responsibilities regarding employee taxes. One of the key points is the withholding of Payments on Account of Tax (POAT) from employee remuneration. POAT essentially pre-collects income tax throughout the year. The amount withheld depends on the employee's residency status. For Residents and Ordinarily Residents, tax is deducted based on a tax table that considers the employee's personal allowance. For Non-Residents, a flat rate of 21% is deducted from gross wages. However, non-residents can claim a refund by filing a tax return if their actual tax liability is lower.

Additional Responsibilities

Employers with multiple employees have additional responsibilities. If an employee has more than one employer, only the primary or full-time employer can account for the personal allowance when deducting tax. All secondary employers must deduct tax at the flat rate of 21%.

When an employer pays POAT on the employee's behalf, the amount needs to be "grossed up" for tax purposes. This ensures the employee receives the net amount after tax.

It's important to refer to the latest regulations and guidance from the Falkland Islands Government (FIG) for the most up-to-date information on employer tax responsibilities.

In the Falkland Islands, the system of Payments on Account of Tax (POAT) functions similarly to tax deductions in other countries. This system is used to withhold tax from employee salaries.

Tax Residency

Residency for tax purposes is distinct from residency for immigration purposes. An individual is considered a tax resident if they are physically present in the Falkland Islands for 183 days or more during the tax year. Everyone else is considered non-resident. This residency status determines the amount of tax deducted at source and the personal allowances you qualify for. Non-residents receive a reduced personal allowance compared to residents.

POAT Withholding Rates

Employers withhold a flat rate of 21% from a non-resident's salary as POAT. This can be considered the final tax liability, or non-residents can file a tax return to claim any applicable deductions and potentially receive a tax refund. Resident employees, on the other hand, have tax withheld according to monthly/weekly tax tables that consider their personal allowance (PA) deduction. The PA is a tax-free amount deducted from your income before calculating your tax liability.

Tax Brackets

The Falkland Islands have a tiered tax system with two brackets:

• The first £12,000 of your income is taxed at a rate of 21% after taking into account allowable deductions.
• Any income exceeding £12,000 is taxed at a rate of 26%.

The Falkland Islands do not have a Value-Added Tax (VAT) system. This means that businesses are not required to register for VAT, and there is no VAT charged on the supply of goods and services within the Falkland Islands.

Implications for Businesses

If your business is located outside the Falkland Islands and you are providing services to clients there, you generally do not need to charge VAT since the supply is considered outside the scope of Falkland Islands tax.

It is crucial to consider double taxation agreements between the Falkland Islands and other countries. These agreements can affect how VAT or similar taxes are applied in certain situations.

Additional Considerations

While there is no VAT in the Falklands, there is a General Overseas Consumption Tax (GCT) applied to certain imports. This GCT is not the same as VAT and has distinct rules and rates. Businesses may still need to register for Business Licence Fees in the Falklands, even if they are not subject to VAT.

The Falkland Islands offer a range of tax incentives to attract and encourage business investment. While it has a relatively straightforward tax system, here are some key incentives to consider:

No VAT

Businesses are not subject to Value-Added Tax (VAT) in the Falkland Islands. This can result in significant savings for businesses, as VAT can add a considerable amount to the cost of goods and services.

Competitive Corporation Tax

The standard corporation tax rate in the Falklands is 21%, which is relatively competitive compared to many other countries.

Industry-Specific Incentives

The oil and gas industry benefits from particular tax incentives, including:

• 100% depreciation allowances for exploration and appraisal expenditures.
• 100% depreciation allowances for intangible drilling costs.

Double Taxation Relief

The Falkland Islands have a double taxation agreement with the United Kingdom, which can help to reduce tax liabilities for UK-based businesses operating in the Falklands.

Absence of Wealth Taxes and Capital Gains Tax

The Falkland Islands do not impose wealth taxes or capital gains taxes. This can be advantageous for businesses and individuals with substantial assets.