A company that registers a vessel on the Faroe Islands can choose to either enter the Tonnage Tax Scheme or the company tax scheme. In the Faroe Islands the company tax rate is 18%.
A company covered by the Tonnage Tax System (TTS) will not be taxed based on its net income. Taxation is based on its available tonnage.
The taxable income is calculated as follows:
Net Tonnes (NT)
|0 – 1,000:
||6 DKK per day per 100 NT|
|1,000 – 10,000:
||4 DKK per day per 100 NT|
|10,000 – 25,000:
||3 DKK per day per 100 NT|
||1 DKK per day per 100 NT|
In order to enter the TTS scheme, a vessel must fly the Faroese flag and a Faroese limited company must be established. Non-Faroese may have full ownership of the company. However, if no Faroese nationals are in the board of directors or in the management, a local processing agent must be appointed.
Activities closely linked to ship operations may also be included in the TTS.
Enrolment in the TTS is binding for three years.