Grow Your Workforce in Faroe Islands

Income Tax in Faroe Islands

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

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.)