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Labor Laws in Faroe Islands

  • Annual Leave: 6 weeks
  • Maternity Leave: 52 weeks
  • Public Holidays: 15
  • Workweek: 40 hours per week.

Income Tax in Faroe Islands

The Faroe Islands have a progressive personal income tax rate of 0% to 30%.

Value Added Tax (VAT) in Faroe Islands

The standard VAT rate in the Faroe Islands is 25%.

Social Security in Faroe Islands

Employer Contributions

  • Employers are required to contribute to their employees' social security, which provides benefits such as pensions and unemployment insurance.
  • Employers must pay a percentage of employees' salaries towards the Employers' Social Contribution (ALS), typically amounting to 4% of the employee's gross salary.
  • In some industries, employers may also need to contribute to a supplementary pension scheme called the Labor Market Supplementary Pension Fund (ATP). The contribution rates vary and are typically a fixed sum per employee.

Employee Contributions

Employees in the Faroe Islands contribute to the following social security funds:

  • Kringvarpsgjald (broadcast receiver license): DKK 150/month for ages 24-66, DKK 50/month for ages 67+
  • Heilsutrygd (national health insurance): DKK 175/month + 0.6% of income.
  • Barsilsgjald (parental benefit fund): 0.86% of income.
  • ALS-gjald (unemployment insurance): 0.8% of income.
  • AM-gjald (labor market supplemental pension): 3% of income

Pension Contributions

  • All individuals up to age 67 with full tax liability in the Faroe Islands are required to contribute to a mandatory work-related pension scheme.
  • The current combined contribution rate is 15%, split between employers and employees (increasing by 1% each year until 2029).
  • Employees with a fixed-term contract may apply for an exemption from compulsory pension contributions for up to 60 months.

Unemployment Insurance

  • Residents aged 16-66 working in the Faroe Islands are liable to contribute 1.25% of their income to the Unemployment Scheme (ALS).

Parental Leave Fund

  • Residents aged 16-66 working in the Faroe Islands contribute 0.71% of their taxable income to the Parental Leave Fund (BAS.)

Work Visas in the Faroe Islands

Nordic citizens from Denmark, Iceland, Norway, Sweden, and Finland are free to move to the Faroes to work, study and live.

Citizens from all other countries need a Work and Residence Permit before they can take up residence or employment in the Faroes.

To receive permission to work and reside in the Faroe Islands, foreign nationals need to apply with the Danish Immigration Service, which will process the application in consultation with the Faroese Government.

Foreigners from countries outside the EU who have been offered employment in the Faroe Islands can apply for a residence and work permit through the Danish Agency for International Recruitment and Integration (SIRI). The normal processing time for work permit applications is 3 months, with no processing fee required.

Work permit applications are assessed based on the demand for the applicant's labor and qualifications in the Faroe Islands.

Applicants must meet Faroese standards for salary, holiday entitlements, and terms of employment. Jobs requiring specialized skills may warrant a residence and work permit.

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