FK Transfer Pricing

General reference only. This Guide is general tax/accounting reference material for AI-assisted workflows. It has not been reviewed for any specific person's facts, documents, elections, deadlines, residency, filing status, or local procedures. Do not rely on it to file, pay, amend, or take a tax position without review by a qualified professional in the relevant jurisdiction.

Who this applies to

Section 156 gives effect to Schedule 2A. It is an applicable tax domain in the Falkland Islands. A transaction or series may include informal understandings, arrangements and mutual practices. Common control and attributed rights matter as well as direct ownership. The operative tests are participation, difference from independent dealings, and potential tax advantage, with statutory exceptions. §156; Sch 2A ¶¶1-5.

Quick reference: there is no universal prescribed markup in the text read. Price the actual functions and risks using evidence, then apply the legal tests. Do not import the UK's SME exemption or treat current OECD guidance as automatically incorporated: ¶2 defines the recognised guidelines and permits later designation by order.

Rates, bands and thresholds

Test or deadline	Rule and condition	Official source
General pricing obligation	Arm's-length profits/losses replace actual provision when ¶1 and the advantage test are met; no monetary entry threshold is stated in ¶1	Sch 2A ¶1
Joint major participation	Each of two persons controlling the enterprise together must meet the 40% rights-and-powers test, including attributed rights	Sch 2A ¶4(7)-(10)
Compensating claim	Two years from the advantaged person's qualifying return or relevant notice; consistent computation and other ¶6 conditions required	Sch 2A ¶6(3)-(6)

A percentage of ownership alone does not answer all control questions; ¶4 and §209 contain attribution and control tests. This table supplies legal tests, not automatic safe harbours.

The base

Start with the actual provision: identify counterparties, actual conduct, property, services, funding, consideration, timing and connected arrangements. Map control under ¶4, ¶12 and §209. Include indirect and future rights and relevant connected-person rights, and examine any linked series under ¶3. Schedule 2A.

Compare what independent enterprises would agree for those functions, assets and risks. Keep contracts, benefit evidence, invoices, allocation keys, financing terms and reliable comparable evidence. These are evidence steps, not a claim that the statute prescribes a particular master-file template. Reconcile any adjustment to the tax computation and prevent double deduction. A service charged at cost is not automatically acceptable or unacceptable.

Under ¶5(1), smaller taxable profits or larger tax losses are a potential advantage. Under ¶5(2)-(4), the advantage is excluded only where both affected persons meet both conditions: each is taxable on the relevant activities without an exemption, an individual is resident for those periods, and neither has an actual or potential foreign-tax-credit entitlement for the relevant profits. Do not reduce this to “domestic parties are exempt.” Ring-fence rules can disapply this exception. ¶¶5, 10.

Boundary	Treatment
Unconnected independent transaction	¶1 participation condition must still be established; do not adjust merely because the price seems unusual
Actual arrangement that independents would not make	¶1(3) expressly includes this case
Both fully taxable domestic parties with no relevant foreign-credit entitlement	Test every ¶5(3)-(4) condition before applying the exclusion
Oil valued under §151	¶9 excludes that transaction from Schedule 2A; statutory petroleum valuation applies
Ring-fence and non-ring-fence activities	¶10 can remove the domestic exclusion or deem separate persons; capital allowances remain protected by ¶11

Sch 2A ¶¶1, 5, 9-11.

Deadlines and filing

Make the arm's-length computation in the ordinary income-tax or corporation-tax return. For company filing and payment use fk-corporate-income-tax; Schedule 2A does not replace those obligations. Retain the pricing reconciliation with the supporting computation. Do not assume that a foreign parent's master file satisfies the local return or evidence request.

Where ¶6 applies, obtain the advantaged person's return computation or relevant assessment notice, confirm the disadvantaged person's eligibility, make a consistent written claim, and record the two-year claim clock. ¶7 adjusts the disadvantaged person's double-tax credit as necessary. A foreign corresponding adjustment requires the other jurisdiction's law or treaty procedure; a local claim does not bind it. Sch 2A ¶¶6-7.

Penalties and interest

An adjustment changes the ordinary tax base; tax and interest follow the underlying tax. §§11 and 33 prescribe interest at three percentage points above the statutory base lending rate for overdue individual and company tax respectively. Ordinary late-filing and inaccurate-return sanctions may also apply. No separate transfer-pricing documentation fine or mandatory CbCR deadline is established by the provisions read, so none is invented here. §§11, 33, Part IX.

Cross-border points

There need not be a foreign counterparty for Schedule 2A to require an examination. For overseas transactions also test withholding, income source and foreign credit separately in fk-cross-border-tax. UK treaty associated-enterprise and mutual-agreement provisions may assist eligible residents, but do not provide an automatic refund. Petroleum disposals and finance-charge restrictions need their specific provisions as well as general pricing analysis. Sch 2A; Part VIII.

Two worked examples that recompute

Overpriced service. Assumed evidence supports GBP 100,000, while a controlled foreign supplier charged GBP 140,000. The Falkland buyer's book profit is GBP 50,000. Assume ¶1 participation and advantage, no exception, and a fully deductible arm's-length service. Add back GBP 40,000, producing taxable profit GBP 90,000 before other adjustments. This is a hypothetical benchmark, not a statutory markup.

name: Service pricing adjustment
inputs:
  charged: 140000
  independent: 100000
  book_profit: 50000
steps:
  addback: charged - independent
  revised_profit: book_profit + addback
expected:
  addback: 40000
  revised_profit: 90000

Decision at the domestic boundary. Assume the same GBP 20,000 overcharge. If both ordinary domestic parties satisfy every ¶5(3)-(4) condition and ¶10 does not apply, ¶5(2) excludes potential advantage and the pricing adjustment under this Schedule is zero. If one party instead has an exemption on the relevant activity, that exclusion fails; assuming all other ¶1 conditions, the payer adds GBP 20,000. Ordinary deductibility still needs checking in either case.

name: Domestic exclusion versus exempt recipient
inputs:
  charged: 70000
  independent: 50000
steps:
  price_difference: charged - independent
  excluded_adjustment: price_difference * 0
  exception_failed_adjustment: price_difference
expected:
  excluded_adjustment: 0
  exception_failed_adjustment: 20000

Ask the client first

• Full ownership, voting, management and future-rights map, including connected people.
• All linked contracts, actual conduct and transaction dates.
• Counterparty residence, exemptions and relevant actual or possible foreign tax credits.
• Functions, assets, risks and reliable independent comparable evidence.
• Ring-fence activity, oil transactions and capital-asset implications.
• Existing returns, assessments, pricing adjustments and compensating claims.

Sources

Source and text actually read	URL	Read on
Taxes Ordinance 1997, §156 and complete Schedule 2A ¶¶1-12, including domestic and petroleum exceptions. ¶1: “computed for tax purposes as if the arm's length provision had been made”; ¶4: “at least 40 per cent”; ¶6: “period of two years”	https://legislation.gov.fk/download/pdf/05a29220-06c3-4560-867c-99d6c5200d0d/15f327cc-37ae-4304-a080-e3d54a80bd43/fiord-1997-14_2026-06-12.pdf	2026-11-11
FIGTO corporation guide, §8 and adjoining deduction tests, confirming local connected-person treatment. “transactions made between connected persons”	https://www.gov.fk/taxation/wp-content/uploads/sites/25/2026/02/CT-guide0.pdf	2026-11-11

Not yet confirmed: any later order designating additional OECD documents, any separate local master-file/local-file or CbCR filing regime, and current administrative APA practice. No absence of those obligations is asserted.