Faroe Islands payroll levy

General reference only. This skill 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

Use this Guide for a business supplying remunerated healthcare, insurance, financial services or the electronic services necessary for the specified financial activity. The charging list includes doctors, dentists, other dental activity, chiropractic, physiotherapy and other actual healthcare; insurance; and banking, savings-bank and financial activity. A business with mixed activities allocates the liable part separately. This is not a general levy on every VAT-exempt business, and the MVG small-sales threshold is not a threshold written into this Act. Act 193/1993 §§1, 5(4)

Section 1(2) excludes the specifically named institutions: Vinnuframagrunnin, Færøernes Realkreditinstitut, Húsalánsgrunnin, Búnaðargrunnin, Fíggjargrunnin frá 1992 and Framtaksgrunnin. Do not extend that closed list to another public body merely because its purpose is similar. Registration and owner/representative liability are governed separately below. Ordinary wage withholding and social contributions use the payroll Guide; MVG uses the VAT Guide. Act §§1–3, 12

Rates, bands and thresholds

Item	2026 rule and conditions	Official source
Healthcare levy	2.5% of the §5(1) healthcare base	Act §4(1)
Insurance levy	10% of the §5(2) paid A-wage base	Act §4(2)
Banking, finance and specified electronic services	12% of the §5(2) paid A-wage base	Act §§1(1)(3), 4(2)
Ordinary provisional period	Calendar quarter; provisional business-income component is 25% of provisionally registered B-income	Act §6(1)–(3)
Small quarterly charge	Below DKK 50, payment can be waived; exactly DKK 50 is not below the threshold	Act §6(7)
Small annual refund	Below DKK 50 is not paid out	Act §7(6)

The base

1. Identify the actual §1 activity before choosing the rate. Retain contracts, service descriptions and accounts proving the classification. For mixed liable and other activity, use a division of the business into activities and allocate wages and profit/loss to the liable activity. Section 5(4) requires that division; it does not supply a universal turnover fraction. Use a supported allocation rather than assuming the whole business is liable or exempt. Act §§1, 5(4)
2. For healthcare, add paid A-wages to the profit of the independently run business, or deduct its loss. Determine that profit/loss under the rules for taxable income, rather than using revenue or cash drawings. For insurance and finance, use paid A-wages in the levy period. Do not add healthcare's business-profit component to those wage-only bases. Act §5(1)–(2)
3. Include remuneration in kind in wages to the extent it gives entitlement to holiday compensation under the Holiday Act. Retain the benefit and holiday-entitlement evidence; the payroll Guide supplies ordinary benefit valuation rules. Do not assume every income-tax benefit enters this levy on identical terms. Act §5(3)
4. Apply the activity's rate to its supported base. Provisional quarterly assessment uses paid A-wages and the applicable one-quarter provisional B-income component. Reconcile provisional business income with the final annual tax-income calculation; the provisional amount is not the final annual profit. Act §§4–7
5. Reconcile all provisional payments and the final tax-year levy. A final shortfall becomes a separate demand; an overpayment follows the refund rules below. Where a loss exceeds the healthcare wage component, do not invent a negative-payment or carryforward mechanism: that specific treatment is not established by the calculation in this Guide. Act §§5, 7

Deadlines and filing

Register the correct obligation. Open TAKS's business-starting page and use “Skrásetingarskjal til vinnuskránna” (V01) and its linked guidance. The official V01 PDF is also available on TAKS's original CDN; the new CDN links on the current forms listing did not yield a readable PDF in this source pass. In section 1 identify the business; in section 2 describe the activity and start date; in section 3 identify the lønarhæddaravgjald obligation and its start date, separately from MVG and wage-payment obligations. The responsible manager or other authorised signatory signs the form. In section 4 select the actual legal form and supply its listed attachments: sole trader business plan; partnership plan and agreement; registered company registry extract, articles, ownership book and incorporation decision. Section 5 requires an actual activity description and principal activity where there is more than one. Supply the owner/manager identity and roles requested by the ownership section. In section 8 identify the actual staff and the Vinnugluggin rights requested; section 9 routes accountant/bookkeeper access through form VG03. Complete date, place and signature, and submit using the PDF's secure-mail instruction to taks@taks.fo or another secure delivery route to TAKS. Do not send identity information through an insecure channel. Retain the submitted form and TAKS's registration notice confirming the obligation. Register no later than eight days before activity starts, and notify registration changes no later than eight days after the change. Act §§2–3; TAKS registration guidance; V01, both pages

Quarterly demand. Section 6 requires TAKS to send a provisional base and levy demand within seven days after quarter end. Match its paid A-wages, applicable provisional B-income and rate to the workpaper; retain the actual demand and corrections. Ordinary payment is due no later than one month and ten days after quarter end: 10 May, 10 August, 10 November and 10 February after Q4, moved to the next working day if the last timely date is a Saturday, Sunday or holiday. The VAT Q2 filing exception is not written into this levy's §6. A specific shortened-period demand under §§9–10 overrides the ordinary timetable. Act §§6, 9–10

Payment setup. TAKS offers the business payment-agreement applications “Gjaldsavtala hjá virkjum við TAKS” and the version “um at gjalda rokningar á Vinnuglugganum” on its payment-agreement page. For home-bank setup, the official levy row is PBS 5108748, debtor group 5, type LA, GS customer number BO + LA + the business's V-tal + 00000. Substitute the actual business V-tal; never reuse the page's sample taxpayer number. Check the resulting agreement and actual demand against the business before payment, then retain the bank receipt and account reconciliation. This Guide does not initiate a payment. TAKS, business payment agreements, LA row

Final reconciliation. After the income year, reconcile provisional levy to the final annual base under §7. A shortfall must be paid within the period worded “leypandi mánað og 10 dagar aftaná, at kravið er útskrivað”: the running month plus ten days after the demand is issued. Use the issue date and timely date on the actual demand, rather than substituting the quarter's ordinary date. Overpaid levy is refunded no later than three weeks from the last timely tax-return submission date, where the return was timely. Inspection prevented by the business's circumstances suspends that period; prior-year returns must have been received; older levy/interest claims are offset even if not yet due; refunds below the table's amount are not paid. Act §7(1)–(6)

Penalties and interest

Late payment bears 0.7% for each commenced month, counting from the due date; the same rule applies to booked interest. Keep the actual demand, payment date and account statement when reconciling accrued interest. A late return increases the levy by 1%, minimum DKK 300, maximum DKK 1,000; TAKS can waive that increase where special circumstances justify it. Act §§6(5), 8

An established incorrect return causing underpayment produces a demand due within 14 days. Inadequate accounts or no return can lead to an estimated base. The statutory reminder-letter fee is DKK 50. The business operator bears liability; a registered foreign representative and the foreign business have joint liability. Intentional or grossly negligent misinformation/control failures can incur a fine; intentional evasion can incur a fine or up to two years' imprisonment. Section 18 states no fixed monetary criminal fine. Act §§11–12, 18–19

Cross-border points

A foreign business without a local branch or equivalent registers through a resident person or a business with a local place of business. The Act's express exception is only to the extent the 31 August 2005 Hoyvík treaty provides otherwise. Do not apply a general EU/EEA representative exemption or income-tax PE conclusion to this distinct registration rule. The foreign business and its registered representative have joint payment liability. Act §§3(3), 12

Two worked examples that recompute

1. Healthcare provisional payments and final profit

Fictional full-year sole medical practice: paid A-wages DKK 800,000; final business profit DKK 400,000 after ordinary tax adjustments; provisionally registered annual B-income DKK 300,000. Assume wages paid equally each quarter, no benefits in kind, no mixed activity or special notice. Each quarter's provisional base is DKK 200,000 wages plus DKK 75,000 provisional B-income, producing DKK 6,875 levy. Four payments total DKK 27,500. The final base is DKK 1,200,000 and levy DKK 30,000, leaving DKK 2,500 to reconcile against the actual final demand. Act §§4(1), 5(1), 6–7

name: Faroese healthcare payroll levy annual reconciliation
inputs:
  annual_a_wages: 800000
  final_business_profit: 400000
  provisional_b_income: 300000
  rate: 0.025
steps:
  quarterly_wages: annual_a_wages / 4
  quarterly_b_income: provisional_b_income * 0.25
  quarterly_provisional_levy: (quarterly_wages + quarterly_b_income) * rate
  total_provisional_levy: quarterly_provisional_levy * 4
  final_base: annual_a_wages + final_business_profit
  final_levy: final_base * rate
  final_shortfall: final_levy - total_provisional_levy
expected:
  quarterly_provisional_levy: 6875
  total_provisional_levy: 27500
  final_base: 1200000
  final_levy: 30000
  final_shortfall: 2500

2. Activity classification changes the wage levy

Fictional company has DKK 1,000,000 paid A-wages in the quarter, all attributable to one liable activity, with no benefits in kind. If the established facts classify it as insurance, levy is DKK 100,000. If instead the established facts classify it as financial activity under §1(1)(3), levy is DKK 120,000. The DKK 20,000 difference is a classification consequence, not an election. An assumed DKK 600,000 accounting profit does not enter either wage-only computation. In a separate mixed-business fixture, direct records attribute only DKK 300,000 of the same total wages to financial activity and DKK 700,000 to activity outside §1; the supported levy is DKK 36,000, not DKK 120,000. The direct allocation is a fictional fact, not a statutory allocation safe harbour. Act §§1, 4(2), 5(2), 5(4)

name: Faroese insurance versus finance classification and mixed wages
inputs:
  total_paid_a_wages: 1000000
  insurance_rate: 0.10
  finance_rate: 0.12
  supported_finance_wages: 300000
steps:
  insurance_levy: total_paid_a_wages * insurance_rate
  finance_levy: total_paid_a_wages * finance_rate
  classification_difference: finance_levy - insurance_levy
  mixed_activity_levy: supported_finance_wages * finance_rate
expected:
  insurance_levy: 100000
  finance_levy: 120000
  classification_difference: 20000
  mixed_activity_levy: 36000

Ask the client first

• What exact paid services does the business provide, and which §1 activity or express named-institution exclusion is claimed?
• What A-wages were actually paid in the quarter and year, including benefits that give holiday-compensation entitlement?
• For healthcare, what are provisional registered B-income and final taxable business profit or loss, with their supporting computations?
• Is there other activity, and what direct records support the allocation of wages and profit/loss between liable and other activities?
• What registration notice, quarterly/final demands, payment receipts and prior-year returns exist, and has TAKS shortened a period or payment date?
• Does a foreign business have a local branch, registered representative or a specifically evidenced Hoyvík treaty exception?

Sources

Official source	URL	Read on
Payroll Levy Act 193/1993, current consolidation through Act 31/2023, §§1–21 and amendment commencement notes	https://logir.fo/Logtingslog/193-fra-10-12-1993-um-lonarhaeddaravgjald-sum-seinast-broytt-vid-logtingslog-nr-166-fra-22	2026-10-31
TAKS, V01 registration form, both pages, activity/levy fields, attachments, rights and secure submission	https://taks.cdn.fo/media/1938/v01-skr%C3%A1setingarskjal-til-vinnuskr%C3%A1nna-161220.pdf?s=5Yrnkhknbc6vaTXl_Pu3BDPa7b8	2026-10-31
TAKS, business registration guidance, sections 1–3 and registration signature	https://taks.cdn.fo/media/2583/veglei%C3%B0ing-til-skr%C3%A1setingarskjali%C3%B0-til-vinnuskr%C3%A1nna-v01-091220.pdf?s=DItd4f8Ry-pMJPvdHTj67_QvgYo	2026-10-31
TAKS, starting a business, links to current registration form and guidance	https://www.taks.fo/fo/borgari/bolkar/at-stovna-virki/	2026-10-31
TAKS, business payment agreements, LA payment row and two applications	https://www.taks.fo/gjaldsavtala-virkir	2026-10-31

Not yet confirmed: treatment of a healthcare loss exceeding the paid-wage component; a universal formula for mixed activity lacking direct allocation evidence; the current screen/field sequence for amending a disputed levy demand and the precise calendar computation of the §7 final-demand phrase beyond its quoted wording; current monetary criminal-fine practice. These questions are not treated as exemptions or zero liability. No professional attestation is claimed.