Faroe Islands corporate income tax

Who this applies to

This Guide prepares ordinary and separate capital-income tax working papers for Faroese P/F and Sp/F companies. Faroese registration brings companies with limited-liability participants within Tax Act §1(1)(8); §1(2) also covers relevant foreign-registered entities whose effective management is in the Faroes. Treaty residence requires separate analysis. Tax Act

Compute ordinary income and non-business capital gains in separate schedules. Business securities activity belongs in ordinary income under Capital Income Act §3; company interest and negative interest belong there under §10(1). The separate §14 calculation covers the remaining statutory capital items. Do not classify every investment receipt as ordinary income or every company interest receipt as separate capital income. Capital Income Act §§1–4, 10, 14

Petroleum, fishing/resource charges, aquaculture surcharges, tonnage taxation, reorganisations and minimum-tax exposure need separate work. Identify those activities before using the ordinary calculation. An 18% result here is not necessarily the company's complete tax liability.

Period: income year 2026, with the additions below checked on 28 October 2026 against retained current primary provisions and the stated TAKS guidance. Earlier source checks retain their dates. The Tax Act consolidation identifies amendment 53 of 1 June 2026, effective 1 September 2026. Event-specific rules must be matched to the event date.

Rates, bands and thresholds

Item	Amount or condition	Tax year	Official source
Ordinary qualifying company rate	18%	2026	Assessment Act §5(2)
Relevant capital for specified §5(2) entities	At least DKK 50,000; entrepreneur companies separately included	2026	Assessment Act §5(2)
Residual rate, only after testing exceptions	49%	2026	Assessment Act §5(1)–(4)
Petroleum-income exception, outside ordinary calculation	27% for the specified Hydrocarbon Tax Act §4 income	2026	Assessment Act §5(4)
Company separate capital-income rate	18%	2026	Capital Income Act §14(2)
Company distributions to individuals/estates	35% withholding before treaty or specific relief	2026	Capital Income Act §15(1)–(2)
Distributions to entities outside the §9(1) exemption	18% withholding before treaty or specific relief	2026	Capital Income Act §§9, 15
Ordinary equipment pool maximum	30% of adjusted balance	2026	Depreciation Act §2(5)
Small equipment / positive pool write-off	DKK 20,000 or less, subject to the separate conditions	2026	Depreciation Act §§2(5), 3
Specified exclusive-business passenger car cost cap	DKK 150,000; special treatment when cost exceeds this	2026	Depreciation Act §5a
Mixed business/private equipment cap	DKK 150,000 of acquisition cost; depreciate separately and allocate deduction by business use	2026	Depreciation Act §7
Other qualifying business building floor-area test	At least 75% qualifying business use	2026	Depreciation Act §17(1)(c)
Building index multipliers, 1 Jan / 1 Apr / 1 Jul / 1 Oct	21.4589 / 21.4767 / 22.0056 / 22.0829; select dates under the circular, not by year alone	2026	TAKS Circular 10/1992, annex 1

The 18% ordinary rate is the combined national and municipal amount. Assessment Act §5(1) allocates 70% of that tax to the state and 30% to municipalities; these are not additional rates. Section 5(3) supplies separate 18% treatment for its specified entities. Check legal form before applying a rate. Assessment Act §5

The base

Start with a reconciled trial balance and a separate tax-adjustment schedule. Operating expenditure incurred to earn, secure and maintain income is addressed by Tax Act §31. Tax depreciation is governed separately, so an accounting depreciation charge is not its own tax deduction. Business loan interest, specified financing fees and negative interest fall under §33(1)(1). Interest deducted when due but still unpaid at the end of the following income year is brought back into the original due-year income, subject to the provision's bank-credit payment test. Check related-party restrictions under §37b before allowing it. Assets acquired for resale or within the taxpayer's trading business require Tax Act §27 treatment; property held for less than two years carries a rebuttable resale-profit presumption. Ordinary unrealised asset changes are excluded under §29(2), subject to its exceptions. Tax Act

Working-paper sequence:

1. Identify the entity, period and applicable rate provision.
2. Reconcile revenue, costs and accounting profit to signed accounts and ledgers.
3. Separate ordinary income from capital-income items and special regimes; document the legal classification for each material item.
4. Reverse accounting charges that require separate tax treatment; insert only deductions supported by the applicable law and schedules.
5. Establish the allowable loss balance, then apply it against positive ordinary taxable income. Preserve the unused balance by origin year and entity.
6. Multiply the resulting ordinary taxable income by the established rate. Reconcile the assessment and actual payment notices separately.

Ordinary business equipment depreciation

For machinery, furniture and similar equipment used exclusively in the business, maintain a tax pool separately from accounting carrying values. Classify assets first: buildings, leased-premises installations, ships, mixed/private-use assets and passenger cars subject to §5a cannot simply be placed in this ordinary equipment calculation. Foreign-managed joint ownership also has §1 restrictions. Depreciation Act §§1–2, 5a

For an ordinary positive pool, start with the opening tax balance, add qualifying acquisitions and deduct disposal proceeds. The maximum annual deduction is 30% of that adjusted balance. If the balance before depreciation is DKK 20,000 or less, the positive remainder can be deducted in full. The ceiling is not a mandatory deduction. §2(3)–(5)

Separately, an eligible item costing DKK 20,000 or less can be deducted immediately in its acquisition year under §3. Choose either full immediate deduction or inclusion of its entire cost in the pool; do not claim both. Subsequent sale proceeds of an immediately deducted item are fully taxable income, not a second pool reduction. §3(1)–(4)

A proved disposal loss has special treatment: compare proceeds with that asset's cost less prior tax depreciation. Deduct the loss in the disposal year and remove the asset's remaining tax value from the pool. Do not both remove that tax value and deduct the proceeds again from the pool. Keep asset-level records even though ordinary annual depreciation uses a pool. §4(1)

If proceeds create a negative pool, stop the positive-pool calculation. Section 5 allows inclusion in taxable income in the current year and requires settlement by the following income year unless offset through qualifying acquisitions or a permitted extension. Record the negative balance and its deadline; it is not a negative depreciation deduction. The full reinvestment/extension procedure remains outside this Guide. §5

Passenger cars used exclusively for business

Depreciation Act §5a applies to passenger cars used exclusively for business but registered for private passenger transport when acquisition cost exceeds DKK 150,000. Registration class and actual use are separate tests. Do not assume a company-owned car qualifies for ordinary pooling merely because its use is entirely business-related. Exactly DKK 150,000 does not trigger this particular above-threshold exclusion; other classification conditions still apply. §5a(1)

For an affected car, keep a separate DKK 150,000 depreciable balance. Record the excess purchase cost and improvement expenditure as a separate non-depreciable asset item in the accounts accompanying the return. Apply the compatible Chapter 1 rules to the depreciable portion, including the 30% annual ceiling, without adding this car to the ordinary equipment pool. No depreciation is allowed in its disposal year. §5a(2)–(4), (6)

On disposal, compare proceeds with full acquisition cost plus improvements less prior depreciation. A positive gain is taxable. A loss is deductible only to the extent it exceeds the amount that §5a(2) excluded from depreciation. This differs from deducting the full accounting loss. Preserve original cost, improvements, prior tax deductions and the excluded balance separately. §5a(4)

Mixed use, change of use and ships

For equipment used both privately and for business, keep an individual schedule under §7. Compute annual depreciation at an elected whole percentage up to 30% of acquisition cost in year one and unrelieved balance thereafter, subject to the DKK 150,000 acquisition-cost cap. Only the current-year business-use share of that computed depreciation is deductible. Keep both total computed depreciation and actually deducted business depreciation: disposal recapture/loss allocation under §8 uses the ratio of those cumulative amounts, with the statutory excluded-cost restriction. No depreciation is computed in the sale year. Improvements to an asset originally acquired above the cap are also excluded. Depreciation Act §§7–10

A transfer to exclusively private or mixed use is a deemed sale and purchase at market value under §31. A transfer from exclusively private use into business or mixed use is a deemed purchase at that value. The passenger-car transitions in §5a(5) expressly invoke §31, including the above-DKK-150,000 market-value condition for a Chapter 1 car moving into §5a use. Record the transition date, market evidence, old basis and recapture before opening the new schedule. Employee benefit valuation and payroll reporting are separate from the company asset schedule. Use the payroll Guide’s dated 2026 benefit values and reporting; its stated adjustment/exemption limits remain. Depreciation Act §§5a(5), 31

Keep a separate commercial ship pool, including equipment used commercially aboard ships; §11 also expressly addresses the specified commercial fishing licences. Chapter 1 rules apply subject to §12, whose pool deducts relevant scrapping subsidies and disposal proceeds. A negative balance must be settled by the following income year unless qualifying replacement acquisitions or permitted extension apply. For contracted decked-ship construction/reconstruction, advance depreciation starts in the contract year, is capped at 15% per year and 45% in total, and continues only until delivery. On delivery, add cost net of advance depreciation to the ship pool. Contract cancellation recaptures prior advance deductions; sale of contract rights has its own gain/loss computation including prior advance deductions. This does not establish eligibility for tonnage tax or fishing levies. Depreciation Act §§11–16

Business buildings

Classify each building under Depreciation Act §17 before selecting a rate. Category (a) covers exclusive craft/industrial use, including necessary offices/storage; (b) covers exclusive hotel use or rental buildings with at least ten apartments, including necessary offices/storage. Category (c), including other office/storage buildings, requires at least 75% business floor area. Residential use is excluded except within the express §17(1) exceptions. §17

Classification	Acquisition year and next nine income years	Later income years	Tax year / official source
§17(1)(a) or (b)	Up to 7% of eligible acquisition cost annually	Up to 2%	2026; Depreciation Act §20(1)
§17(1)(c)	Up to 4% of eligible acquisition cost annually	Up to 1%	2026; Depreciation Act §20(2)

These are cost-based rates, not the equipment pool method. The acquisition-year definition in §20(1) includes acquisition/completion and use for a qualifying purpose. Keep that date and accumulated deductions in the schedule; do not start a new ten-year period merely because this year's return is the first one being prepared. §20

Exclude land acquisition, site preparation and surrounding-area costs from the depreciable building basis. Where only part qualifies, allocate cost by qualifying floor area under §18; where business uses span the rate classes, apply §20(4)'s area allocation. Test eligibility before allocation: a 74% business-use office building does not meet the 75% test merely by reducing its deduction to 74%. Keep separate schedules for each building and its reconstruction/improvement expenditure. §§18–22, 27

No annual depreciation is allowed in the disposal or demolition year. Section 24 provides a separate demolition deduction for unrelieved amounts less material-sale proceeds only where ownership and qualifying use lasted at least five years before demolition. For disposal, separate gain and recaptured tax depreciation under §25. Index the building/land acquisition cost to the last prescribed index before disposal; Circular 10/1992 computes indexed cost as original cost divided by the acquisition-quarter multiplier, multiplied by the relevant disposal multiplier. Preserve separately dated improvement costs and their own evidence. The four 2026 multipliers appear in the rates table; do not extrapolate a later unpublished index. TAKS's standalone index page and the circular differ for some older entries, so reconcile any conflicting historic acquisition factor before computing that case. Do not use these 2026 factors as acquisition factors for an earlier acquisition. Depreciation Act §25(3); Circular 10/1992 and annexes; TAKS index page

For category (a), §25(1) permits the statutory gain/recapture reinvestment route into Chapter 1 equipment or category (a) buildings by the end of the following income year. Categories (b)/(c) bring gain and recaptured depreciation into disposal-year income under §25(2); do not extend the category (a) route to them. Disposal losses are not deductible. For buildings/land acquired before 1 January 1950, the gain/loss exclusion does not remove the separate recaptured-depreciation rule. Insurance/compensation is treated as disposal proceeds. The published TAKS worksheet below separates recapture from indexed gain; the acquisition-factor conflict still requires resolution in affected cases. §25

Published TAKS recapture worksheet: VLS N's §25 example calculates recapture as min(prior tax depreciation, max(proceeds − unindexed tax book value, 0)), then adds positive disposal gain over indexed building/land cost. Applying that separation to hypothetical proceeds DKK 900,000, book value DKK 700,000, prior depreciation DKK 300,000 and verified indexed cost DKK 1,100,000 gives recapture DKK 200,000 and indexed gain zero. The indexed loss does not offset recapture. This is an expressly identified derivation from TAKS's worked example and current §25, not a new statutory formula. Preserve land/building allocations and the existing category/1950 gates; use current indices and current §26 timing, not the older page's historic factors or insurance period. Depreciation Act §25; TAKS VLS N, §25 worked example

For §26 insurance relief, request exemption and notify the use/intended use by the return deadline. All compensation must go into rebuilding/replacement in the gain year or next income year, and the gain is applied as advance depreciation reducing the replacement basis. Do not deduct it again. Failure to meet the period back-assesses the gain year and carries 1% for each commenced month from the original tax-payment times; a special extension requires approval. Unused compensation is brought back subject to the statutory gain cap. §§21, 24–26

Purchased goodwill and other business intangibles

Tax Act §35a(2) permits purchased goodwill and other business-use intangible acquisition cost to be deducted in equal amounts in the purchase year and the next nine years. For a right covering a specified term, use equal deductions over that entire term instead. Keep the contract, business-use evidence, purchase price, term and cumulative deductions separately from the equipment pool. A hypothetical DKK 100,000 goodwill purchase gives DKK 10,000 annually over ten years; a DKK 100,000 right lasting five years gives DKK 20,000 annually. These are derived amounts, not statutory allowances per asset. Tax Act §35a(1)–(2)

Business intangible sale proceeds enter sale-year income under §35a(1); subsection 3 allows the same asset's undeducted acquisition cost against those proceeds, or deduction in the business-cessation year. For an asset still held, follow subsection 3's ten-year route by reference to subsection 2; cessation and continued holding must be distinguished. Gifts/advances on inheritance and changes between business and private use follow subsection 4's deemed acquisition/disposal and ordinary-market-value rules. Do not replace these with accounting impairment or write off purchased goodwill immediately. Tax Act §35a(1), (3)–(4)

Losses

Section 33a allows forward deduction, using available earlier profits before carrying losses to a later year. Company losses are forfeited if its at-least-50% continuity test for capital or voting value is not met, comparing the beginning of the utilisation year with the end of the loss year. Exactly 50% continuing in the same hands meets the stated numerical boundary. The statute preserves an exception where the company carried on significant business activity involving economic risk when ownership changed. Do not treat every share sale as automatic forfeiture. §33a(1)–(2)

Debt cancellation/reduction also reduces losses; debt-to-equity conversion uses the difference between face and market value, with adjustment for debt-release income taxed. Review the transaction before using the old loss balance. §33a(3)

Separate non-business capital-income computation

First test Capital Income Act §3: business-related securities/claim gains and losses enter ordinary taxable income, using realisation and FIFO for equal-right shares unless the taxpayer has made the irrevocable mark-to-market election. Business foreign-exchange gains/losses on claims/debts follow §6(6). Company interest and negative interest are ordinary items under §10(1). Remove those amounts from the separate capital schedule. Capital Income Act §§3, 6, 10

For remaining share/securities disposals, compute realised proceeds less acquisition cost using FIFO for equal-right shares in the same company. Fully Faroese-taxable companies/funds reduce a security's allowable disposal loss by exempt dividends received from that security: only the excess loss qualifies. Allotted bonus shares and subscription rights have zero acquisition cost and follow the parent share's acquisition date. Claims, debt and options have their own realised acquisition/disposal or debt-release computations under §§6–8; the DKK 1,000 claim/debt-gain threshold in §6(4) is for individuals/estates, not companies. Debt cancellation under §7 taxes the statutory reduction below the creditor's claim market value, subject to its exception. §§4, 6–8

Dividends received by fully Faroese-taxable companies/funds holding share or contributed capital in the distributing company are exempt under §9(1). The text sets no minimum participation percentage or holding period; do not import one. A distribution is broadly defined by §1(2); a final-liquidation-year distribution follows disposal treatment, and capital-reduction distributions need TAKS permission for that treatment. A sale back to the issuer is ordinarily a dividend under §5 unless permission or its specific exceptions apply. Do not grant ordinary capital-loss relief to a gross distribution without checking that classification. §§1, 5, 9

Aggregate the separate §14 categories after their own adjustments. Track eligible carried capital losses separately and use them against capital net gains at the first available opportunity. A capital loss cannot reduce ordinary trading profit. Capital Income Act §14(2) allows ordinary-income losses, including eligible carried ordinary losses, to shelter separate capital gain only up to that ordinary loss; record the ordinary loss used once. Apply 18% to the remaining company capital gain. Capital losses have their own §14(4) 50% ownership-continuity/significant-business exception. Do not assume a surviving ordinary-loss balance proves the separate capital-loss balance survives. §14; TAKS

This produces two reconciled bases, two loss ledgers and the resulting tax, not one undifferentiated accounting-profit calculation. Group ordering requires the next section.

Group taxation

Regulation 148/2015 requires eligible Faroese-registered entities, matching financial years and full subsidiary ownership throughout the subsidiary's income year. Application is written, ordinarily by 1 July following the first relevant year, with returns/accounts submitted before consideration. Companies in liquidation cannot obtain permission; liquidation ends their participation from that income year. Section 4(4) prohibits renewed permission after departure. Treat approval as evidence, not an assumption. Regulation §§1–5

Each company computes its own ordinary result under §6(1). Apply the following order before pooling; distinguish pre-group losses, losses arising during grouping, and capital losses by entity and origin year. Regulation §6

1. Use pre-group ordinary losses against that company's own ordinary surplus (§6(3)). Remaining pre-group losses then shelter its own capital income, after older capital losses (§6(4)); preserve any remainder for that company's later years (§6(5)).
2. Use its own earlier group-period ordinary losses against its own ordinary surplus (§6(6)). Its remaining current/group-period ordinary losses then shelter its own current capital income, after older capital losses and pre-group ordinary losses (§6(7)).
3. Only then allocate the remaining current/group-period ordinary loss, up to the remaining combined ordinary surpluses, proportionally among the surplus companies (§6(8)). For each surplus company, allocation is usable group loss × its remaining ordinary surplus / total remaining ordinary surpluses. Preserve unused current/group-period losses for later use under the same ordering (§6(9)). A loss never becomes a transferable pre-group loss merely because a company was acquired.
4. Report the combined ordinary result on the parent's return using the special TAKS group schedule (§6(2)). A departing company retains its own unused pre-group and group-period losses (§7); the parent receives assessments/refunds under §8. Subsection 6(10) confines the stated debt-compromise loss reduction to the debtor company's own loss before the remaining group-period loss is used; obtain its debt/restructuring evidence before applying it.

Ordinary group control: assume approved full-year grouping, no ownership-loss forfeiture or debt compromise, no separate capital-group permission, and C as parent. A has ordinary profit DKK 200,000, pre-group loss DKK 40,000 and own old group-period loss DKK 30,000, leaving DKK 130,000. C has DKK 70,000 ordinary profit. B has current ordinary loss DKK 100,000 and capital gain DKK 25,000 less old capital loss DKK 5,000. B first uses DKK 20,000 ordinary loss against its own net capital income; only DKK 80,000 remains for ordinary group allocation. A receives 80,000 × 130,000 / 200,000 = 52,000; C receives DKK 28,000. Their final ordinary bases are DKK 78,000 and DKK 42,000: total DKK 120,000 and tax DKK 21,600 at the established 18% rate. B has no taxable capital remainder and no unused current ordinary loss in this fixture. Regulation §6(3)–(9); Capital Income Act §14; Assessment Act §5(2)

Under §9 the parent pays B DKK 14,400 compensation for the DKK 80,000 loss used; A pays the parent DKK 9,360 loss compensation and DKK 14,040 for the tax the parent pays for A. C's own loss benefit is DKK 5,040 and its own tax DKK 7,560. The parent's net cash outflow is 21,600 + 14,400 − 9,360 − 14,040 = 12,600, matching 70,000 × 18%. These internal payments have no tax consequences and must be paid or booked by 1 October following the income year. Compensation follows the losses actually used, not every available loss balance. Regulation §9

The ordinary permission does not itself cover capital-income grouping. Capital Income Act §14a provides a separate TAKS permission for Faroese-resident parent/subsidiary companies with the same accounting year and full qualifying ownership. Pre-group losses remain restricted to that company's own surplus. Parent responsibility and participating companies' joint liability follow §14a(3). Obtain the actual capital-group permission and applicable implementing conditions; they remain incomplete here. TAKS's ordinary-group summary must not be read as repealing this distinct statutory route. Capital Income Act §14a; TAKS

Deadlines and filing

Company returns are ordinarily due 1 July following the income year under §100(3). For a calendar-year 2026 company, that means 1 July 2027. A permitted extension cannot exceed 15 August under §105. Tax Act

TAKS requires company accounts with the return, including exempt companies; accounts must be submitted on Borgaragluggin. Retrieve the current return and accounting template and retain submission receipts. TAKS returns

Ordinary company tax falls due in three payments on 1 October, 1 November and 1 December, with payment permitted through the 20th of each month. Use the assessed year and issued amounts; do not substitute the return deadline for the payment calendar. Tax Act §81; TAKS

For a new resident company, §21 taxes the whole first accounting period, with the return by 1 July and the statutory October–December payment dates. The first period cannot exceed 18 months, begin before 1 January of the incorporation year, or span more than two calendar years. A cessation or move into exempt activity requires the liquidator/board to notify TAKS and provide the intervening-income statement within four weeks; it does not erase the company's final-year liability. An existing business transferred to a company uses market values unless the separately legislated conversion regime applies. Tax Act §21

Report separate capital income digitally or on TAKS's form by the ordinary return deadline. No additional capital form is needed if the issued capital statement is correct and complete. Separate capital assessment tax is due on the first of the month after the statement is issued, payable through the 20th. Additional capital tax of DKK 500 or less is not collected; refunds below DKK 50 are not paid. These are settlement thresholds, not exemptions for gains. Capital Income Act §18(1)–(3), (6)

A company declaring dividends pays withheld tax and supplies the recipient/calculation statement within 14 days after the distribution decision. Withhold 35% for individuals/estates and 18% for entities outside the §9(1) exemption, before a verified treaty or specific relief. Retain the decision, recipient identity/status, exemption or relief authority and remittance receipt. Do not substitute a payment-date deadline for the statutory decision-date trigger. Capital Income Act §§9, 15

Penalties and interest

Section 104 provides estimated assessment for a missing timely complete return, a DKK 1,000–5,000 fine, and income-tax increases of 2% when less than seven days late or 5% when seven or more days late. Relief requires a supported application under subsection 3. Tax Act

Section 81(2) states ordinary late-payment interest of 0.7% per commenced month, subject to §146(1). That latter provision requires payment of underpaid tax in the specified offence cases and 12% annual interest for its specified companies from the end of the relevant tax year. Section 146(2) also addresses under-assessment without a punishable offence; do not describe 12% as applying only to deliberate evasion. Do not stack or substitute these mechanically. TAKS's short guidance describes the ordinary calculation from the timely-payment date, whereas §81 says the due date; obtain the assessment's calculation if the start-date distinction affects the charge. Tax Act; TAKS

Late separate capital returns attract estimated assessment, a DKK 1,000–5,000 fine and the same less-than-seven-day 2% / at-least-seven-day 5% tax increase under Capital Income Act §18(7), subject to the supported relief application. Late capital-assessment or dividend-withholding payment carries 0.7% for each commenced month from the statutory due date, including booked interest as specified; interest is not an ordinary income-tax deduction. Capital Income Act §§15(4), 18(1), (4), (7)

Tax Act §139 penalises false/misleading tax information given with evasion intent by fine, detention or imprisonment up to two years; gross negligence has the separate subsection 2 treatment. Section 139b addresses evasion-motivated failure to file, while §140 addresses false/misleading control information. No fixed monetary fine is supplied by those provisions. Keep offence assessment separate from the mechanical late-return increases. Tax Act §§139–140

Cross-border points

Foreign incorporation does not settle residence where effective management is Faroese. Foreign businesses require a separate domestic-source/PE and treaty analysis under §§1–2. Controlled transactions and thin capitalisation require their own schedules; see the transfer-pricing Guide. Foreign-source capital income from a country without a double-tax treaty can receive credit under Capital Income Act §19 for tax actually paid/withheld there, capped at Faroese tax attributable to that same income. Tax Act §154 separately supplies credit for eligible ordinary income from a country without a treaty. Use the ordinary foreign-tax credit method and its precise limits, including the source-expense and same-income caps; §19 must not be treated as its statutory substitute. Treaty eligibility, nonpositive credit bases, later adjustments, PE profit attribution and refund procedures remain separate. Cross-border dividends require the domestic §15 starting position above and a recipient-specific treaty/relief review. Tax Act §§1–2, 37a–37b; Capital Income Act §§15, 19

Two worked examples that recompute

1. Ordinary profit with equipment depreciation

Assume a qualifying 18% company with accounting profit DKK 600,000 after DKK 80,000 accounting depreciation. Its exclusively business-used ordinary equipment pool opens at DKK 200,000; eligible pooled additions are DKK 100,000, with no disposals. Elect the 30% maximum: pool depreciation is DKK 90,000 and the closing pool DKK 210,000. A separate eligible DKK 20,000 item, capitalised and not expensed in that accounting profit, is immediately deducted. Total tax depreciation/deduction is DKK 110,000, ordinary taxable income DKK 570,000 and tax DKK 102,600. Assume no capital items, loss relief, car cap or other adjustments. Depreciation Act §§2–3; Assessment Act §5(2)

name: Faroese company ordinary profit and equipment deductions
inputs:
  profit: 600000
  accounting_depreciation: 80000
  opening_pool: 200000
  additions: 100000
  separate_small_item: 20000
  depreciation_rate: 0.30
  tax_rate: 0.18
steps:
  pool: opening_pool + additions
  pool_depreciation: pool * depreciation_rate
  closing_pool: pool - pool_depreciation
  tax_deductions: pool_depreciation + separate_small_item
  taxable: profit + accounting_depreciation - tax_deductions
  tax: taxable * tax_rate
expected:
  pool_depreciation: 90000
  closing_pool: 210000
  tax_deductions: 110000
  taxable: 570000
  tax: 102600

2. Capital losses, exempt dividends and an ordinary loss

Assume a standalone fully taxable company with verified ordinary trading loss DKK 150,000 before DKK 30,000 company interest income. Its ordinary loss is therefore DKK 120,000. Separate realised non-business share gains are DKK 240,000. Another security is sold at a DKK 100,000 loss but has paid DKK 60,000 total exempt dividends; §4(3) allows only DKK 40,000 of that loss. The dividends themselves are excluded under §9. The current capital net gain is DKK 200,000, reduced by DKK 50,000 eligible carried capital losses to DKK 150,000. Using the DKK 120,000 ordinary loss once leaves DKK 30,000 taxable capital gain and DKK 5,400 tax. Neither loss balance remains. Assume all classification, FIFO and continuity conditions are satisfied, no group permission, foreign credit or withholding credit, and that none of the securities activity is business activity under §3. Capital Income Act §§3–4, 9–10, 14

name: Faroese separate capital result and one-way ordinary loss relief
inputs:
  trading_loss: 150000
  company_interest: 30000
  share_gains: 240000
  security_loss: 100000
  exempt_dividends_on_security: 60000
  carried_capital_loss: 50000
  rate: 0.18
steps:
  ordinary_loss: max(0, trading_loss - company_interest)
  allowed_security_loss: max(0, security_loss - exempt_dividends_on_security)
  current_capital_gain: share_gains - allowed_security_loss
  capital_loss_used: min(current_capital_gain, carried_capital_loss)
  capital_after_own_losses: current_capital_gain - capital_loss_used
  ordinary_loss_used: min(capital_after_own_losses, ordinary_loss)
  taxable_capital: capital_after_own_losses - ordinary_loss_used
  capital_tax: taxable_capital * rate
  capital_loss_remaining: carried_capital_loss - capital_loss_used
  ordinary_loss_remaining: ordinary_loss - ordinary_loss_used
expected:
  ordinary_loss: 120000
  allowed_security_loss: 40000
  current_capital_gain: 200000
  capital_after_own_losses: 150000
  ordinary_loss_used: 120000
  taxable_capital: 30000
  capital_tax: 5400
  capital_loss_remaining: 0
  ordinary_loss_remaining: 0

Ask the client first

• What are the legal form, relevant capital, registration and actual management location?
• What are the financial year and incorporation/closure dates?
• Which items involve capital income, special industries or foreign operations?
• What are the loss-year balances, ownership histories and debt restructurings?
• Is group taxation approved, and were all ownership and period conditions met?
• What returns, assessments, extension decisions and payment notices have been received?

Sources

Source	Provisions or purpose	Read on
Consolidated Tax Act	§§1–2, 21, 25, 27, 29, 31, 33, 33a, 81, 100, 104–105, 139–140, 146; controlled-transaction detail belongs to the separate TP Guide	2026-10-25
Assessment Act	§5, ordinary/residual/specified rates	2026-10-25
Capital Income Act	§§1–10, 14–15, 18–19; separate ordinary/capital classification, losses, dividends and settlement	2026-10-25
Group taxation regulation 148/2015	§§1–9, ordinary group scope, ordered loss/capital allocation and compensation	2026-10-28
Current Depreciation Act	§§1–16, 17–27, 29–31; equipment, cars, mixed use, ships, buildings and transitions	2026-10-25
TAKS company tax	Ordinary loss direction, company/group/payment guidance	2026-10-25
TAKS returns	Company return/accounts submission and extension process	2026-10-25
TAKS Circular 10/1992, current annexes	Acquisition/disposal index method and quarterly multipliers	2026-10-25
TAKS building/land index page	Cross-check current factors; some historical entries differ from circular	2026-10-25
Tax Act §35a	Full purchased-intangible acquisition, term, disposal, cessation and deemed-transfer provisions	2026-10-28
TAKS VLS N	§25 worked example: separate recapture capped at deductions and indexed gain; current Depreciation Act §25 cross-check; older §26 timing not adopted	2026-10-28

The whole-Guide figure/rule ledger and old-topic destination table records source quotes, read scopes and derived-example inputs. Supplementary controls there preserve exactly the two main examples in this Guide.

Not yet confirmed: conflicting historic acquisition-index entries; capital-group implementing conditions and case-specific group schedule/filing fields; employee-benefit adjustments and full exemption implementation; foreign-credit nonpositive bases, changes/refunds, unused-credit treatment and filing fields, and treaty procedures; current monetary fine practice; other common deductions not resolved above. The supplied ordinary group allocation and purchased-intangible methods are distinct from these reservations. Special industry levies, tonnage tax, reorganisations and minimum-tax scope require separate applicability work. Independent whole-pack AI review accepted this material for partial tier-2 draft publication on 25 October 2026; professional attestation remains outstanding; this Guide does not establish complete corporate coverage. The 28 October additions require fresh independent review and do not extend the earlier review to this version.