DOWNLOAD
Hiring in Faroe islands
Faroe Islands are an archipelago and an autonomous territory of the Kingdom of Denmark. Torshavn is the capital of Faroe Islands. Fishing and fish farming are the primary sectors of Faroe Islands’ economy. Faroe Islands’ main trading partners are the United States, Russia, the United Kingdom, Denmark and France. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Faroe Islands’ legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. The Labor Code stipulates that employees are entitled to 5 weeks of annual leave in addition to public holidays. All individuals who are living in the Faroe Islands must pay tax on all personal income. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Falkland Island’s Labor Code and tax laws.
statutory labor requirements
Probation Period
- There is no general legislation regarding probationary periods.
- However, a probationary period of up to three months may be agreed.
Annual Leave
- In general, the annual holiday entitlement is five weeks, in addition to public holidays.
Public Holidays
- New Year’s Day (1st January)
- Maundy Thursday (9th April)
- Good Friday (10th April)
- Easter Monday (13th April)
- National Flag Day (25th April)
- Prayer Day (8th May)
- Ascension Day (21st May)
- Whit Monday (1st June)
- Danish Constitution Day (5th June)
- St. Olav’s Eve (28th July)
- St. Olav’s Day (29th July)
- Christmas Eve (24th December)
- Christmas Day (25th December)
- Second Day of Christmas (26th December)
- New Year’s Eve (31st December)
Maternity Leave
- All wage-earners who are registered and pay tax in the Faroe Islands have the right to paid leave when having a child.
- Mothers are entitled to 52-weeks´ leave after childbirth.
Paternity Leave
- Fathers get 4 weeks of paternity leave
Sick Leave
- Loss of income due to illness may entitle you to sickness benefit.
- One condition is that you have had employment for at least 5 weeks before the sick leave begins.
- And the maximum period of receiving the benefit is 40 weeks.
- If offered, you have a duty to accept any medical treatment helping you regain the ability to work, in order to keep your entitlement to sickness benefit.
Work Hours
- Normal working hours are around 40 hours per week in the private and public sector.
Overtime
- Work in excess of normal working hours is compensated with an overtime supplement.
Notice Period
- The period of notice correlates to the seniority of the employed person.
- For an hourly employed worker who has been employed for 6 months the period of notice is at least 7 working days.
- While for a worker receiving regular monthly wages (employed under the terms of the agreement of the Faroese General Workers` Union, Føroya Arbeiðarafelag) who has worked for more than 6 months and less than 2 years the period of notice for dismissal is 2 months.
- For salaried employees (e.g. in the Office and Retail Workers` Union, S&K) who have been in work between 6 months and 3 years (excluding temporary or probation period employment) the period of notice is 3 months.
13th / 14th Month Pay
- No
- There is no statutory requirement to pay the 13th or 14th month salary.
- Employees are entitled to 5/6 weeks holidays which they have to take by the 2nd of May.
income tax
- All individuals who are living in the Faroe Islands must pay tax on all personal income.
- Personal income is collected on wages, interest, gifts and inheritance.
- Personal income tax is paid to the government, the municipality and in most cases also to the church.
- The total government and municipal tax paid on regular taxable income cannot exceed 50 %.
- Individuals with full tax liability in the Faroe Islands start to pay taxes on income when they earn more than DKK 30,000 a year.
- National tax is based on a progressive system, meaning that the tax rate rises as the amount subject to taxation rises.
- No tax is paid on the first DKK 65,000 of the taxable income.
- A fixed amount and a tax rate increasing from 15 to 30 per cent is paid on the remaining income.
- A person earning between DKK 330,000 and DKK 800,000 pays DKK 44,500 of the first DKK 330,000 and 25 percent of the remaining income.
- Local tax is paid to the municipality.
- The local tax rate is not progressive.
- Each municipality sets its own tax rate which varies from 16 to 22 per cent (2019).
|
National Tax |
|
|
First DKK 65,000 |
Exempt |
|
First DKK 330,000 (On income between DKK 330,000 and DKK 800,000) |
DKK 44,500 |
|
On remaining income (DKK 333,000 to DKK 880,000) |
25% |
|
Local Tax |
|
16% to 22% |
deductible expenses
- A deduction in the government tax is made for each child under the age of 18.
- The deduction is DKK 9,200 for children under 7 years and DKK 6,500 for older children.
|
Deductible Expenses |
|
|
Deduction for children under 7 |
DKK 9,200 |
|
Deduction for older children |
DKK 6,500 |
immigration
- 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.
- This also applies to EU citizens; since the Faroe Islands are not a member of the European Union, the regulations on free movement for citizens of EU countries do not apply to the Faroes.
- In order to receive permission to work and reside in the Faroes, foreign nationals need to apply with the Danish Immigration Service, which will process the application in consultation with the Faroese Government.
- Furthermore, conditions for obtaining a visa for the Faroe Islands are similar to the conditions for obtaining a visa for Denmark.
- Visa is required for entering the Faroe Islands regardless of the person having a residence permit in Denmark.
- Correspondingly, a visa is required when entering Denmark, even though the person has a residence permit in the Faroe Islands.
- The assessment of your application is normally based on whether your labor and your qualifications are in demand on the Faroe Islands.
- When processing your application, SIRI pays particular attention to the following criteria:
-
- Whether there are available professionals residing on the Faroe Islands who are qualified to carry out the job in question (applies only to certain types of applications), and
- whether the nature of the job in question is specialized enough to warrant a residence and work permit.
- Your salary and terms of employment must correspond to Faroese standards. This means that your salary, holiday entitlements, terms of notice etc. must not be inferior to the standards within the professional field where you are going to work.
- A residence permit for the Faroe Islands can be granted with a validity of up to 1 year from the date a decision is made on your case.
|
Type of Visa/ Permit |
Documentation |
Validity |
Eligibility |
|
Work Permit |
|
1 years |
|
value added tax
- Value added tax (VAT) is a consumption tax on sales and is levied whenever a sale of goods and services occurs throughout the distribution chain.
- VAT is also levied on the import of goods.
- A standard rate of 25 percent is applied on most goods and services.
- Some goods and services are exempt from VAT.
- Among these are certain cultural activities and sports, personal transportation, financial and insurance transactions and literary, compositional and other artistic activities.
|
VAT |
|
|
Standard Rate |
25% |
|
Exempt |
0% |
withholding tax
- A Faroese corporation distributing dividends is obliged to withhold 18% tax on dividends – whether the recipient is resident or non-resident.
- However, the obligation to withhold the tax does not apply for any part of the total dividend that is distributed to a parent corporation situated in the Faroe Islands.
- A 25% withholding tax is levied on royalties paid from the Faroe Islands to a recipient abroad.
- However, in double taxation treaties the Faroe Islands has waived the right to tax royalties from sources within the Faroe Islands.
- The royalty tax applies to commercial royalties and licenses, but not to artistic royalties or lease payments.
- There is no withholding tax on interest.
|
WHT |
|
|
Royalties |
25% |
|
Dividends |
18% |
|
Interest |
0% |
termination
- Circumstances leading to dismissal can arise at any workplace.
- An example of circumstances relating to the employee could be serious breach of the employment contract.
- Examples of circumstances relating to the employer/ enterprise could be a necessary reduction in the size of the workforce or reorganization.
- An employee cannot be dismissed because she is pregnant. If the employer cannot prove that the dismissal is unrelated to the pregnancy, the dismissal is unlawful.
- This is stipulated in the pregnancy law.
- The period of notice correlates to the seniority of the employed person.
- For an hourly employed worker who has been employed for 6 months the period of notice is at least 7 working days.
- While for a worker receiving regular monthly wages (employed under the terms of the agreement of the Faroese General Workers` Union, Føroya Arbeiðarafelag) who has worked for more than 6 months and less than 2 years the period of notice for dismissal is 2 months.
- For salaried employees (e.g. in the Office and Retail Workers` Union, S&K) who have been in work between 6 months and 3 years (excluding temporary or probation period employment) the period of notice is 3 months.
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay.
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Annual Leave |
|
Public Holidays |
|
Maternity Leave |
|
Paternity Leave |
|
Sick Leave |
|
Overtime Pay |
|
Social Security Benefits |
payments and invoicing
- Citizens subject to taxation use the calendar year as the income tax/fiscal year.
- Generally, the income period for companies follows the accounting year, which has to be no longer than 12 months.
- However, the first accounting year can vary from 6 to 18 months.
- All individuals who have a Faroese ID number are automatically registered in the Faroese tax system.
- All remuneration has to be paid out through a financial institution which withholds taxes and duties for social funds.
- Each tax payment is based on the income up to the date of the latest wage payment converted into annual income.
- Wage earners who only receive wages from Faroese employers receive a completed tax sheet after each year from the Tax Administration.
- If the completed tax sheet is incorrect, the tax payer has to file a tax return.
- Self-employed persons are obliged to keep accounts and must submit a Tax Return along with their accounts.
- Taxes deducted from your income may have been over or underestimated.
- In these cases, the tax payer will receive a payment from the Tax Administration or will be required to pay additional taxes.
employee accruals
| Christmas Bonus% |
0% |
| Christmas Bonus Over Vacations % |
0% |
| Severance per Year % |
No evidence |
| Vacations % | In general, the annual holiday entitlement is five weeks (6.86% of annual salary) |
| Notice % |
Employees are entitled to2 months of notice period for one year of service or more (16.66%) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% | 0% |
| Total percentage of Salary (yearly) | The total employment accruals as a percentage of salary per anum are equal to 23.52% |
employer accruals
Additional information (Country Accruals)
| Pension | 3.00% |
| Christmas Bonus | 90days |
| Vacations | 6.85% |
| Descritption: | If an employer contributes towards an employee’s pension, provident or other retirement fund, these contributions will be exempt from employment income tax as long as their total monthly contribution does not exceed 15% of the staff member’s monthly income. |
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | In general, the annual holiday entitlement is five weeks, in addition to public holidays. | This equals 9.6% (5/52 weeks) of annual income |
| Maternity Leave | Mothers are entitled to 52-weeks´ leave after childbirth. | This equals 100% (52/52 weeks) of annual income |
| Paternity Leave | Fathers get 4 weeks of paternity leave | This equals 7.6% (4/52 weeks) of annual income |
| Sick Leave | Loss of income due to illness may entitle you to sickness benefit. One condition is that you have had employment for at least 5 weeks before the sick leave begins. And the maximum period of receiving the benefit is 40 weeks. |
This equals 77% (40/52 weeks) of annual income |
