See the different types of deductions below.
The child tax credit, in Faroese barnafrádráttur, is a fixed amount that can be deducted from your tax if you have children.
To be entitled to the child tax credit, the child must live with you or you must have custody of the child. You must have full tax liability in the Faroe Islands and be a permanent resident here. The child must also live in the Faroes or have maintained full tax liability in the Faroes, if it is studying abroad. The child must be under 18 years of age on 1 January the year the tax credit is given.
Most commonly the child tax credit goes to the mother, if the parents are unmarried, and to the father, if the parents are married.
How much is given in the child tax credit?
The child tax credit is given in both national and local tax. In the national tax, it depends on the age of the child - if the child is under the age of 7, DKK 9,200 is deducted from the tax annually, and if the child is between 7 and 17, the tax deduction is DKK 6,500. In the local tax, it depends on the municipality and varies between DKK 4,500 and 10,000. Under quick links, you will find a link to a table containing the different amounts in the municipalities for 2019. Please note, this link is in Faroese and shows the local tax rate, church rate and child tax credit, barnafrádráttur.
How do I receive the child tax credit?
When you receive wages or salary, the amount of tax that is automatically withheld is less than if you were not entitled to barnafrádráttur. The tax credit is not indicated on your payslip - you simply pay less tax. The total amount of tax credit you receive is stated on your annual tax statement.
If the amount of tax you pay in a year is less than the child tax credit, you will get the difference paid out in connection with the annual tax statement.
How to assign the child tax credit to another person
You may assign the child tax credit to your spouse, or someone who meets the requirements, by sending a Preliminary tax assessment form to TAKS. You must enclose a written agreement with the form, signed by both parties, that lays out the details of the transfer or division. Find the preliminary tax assessment form under Forms.
The sport deduction, in Faroese ítróttafrádráttur, is a tax-free amount that sporting associations can pay assistants that work for them. By assistants is meant managers, coaches, coordinators, referees, umpires, bookkeepers, committee members etc. In other words, everyone, except for the sports performers.
As of 1 January 2020, the tax-free payment can be a maximum amount of DKK 50,000 a year. In previous years, the amount was DKK 30,000. If the payment exceeds this amount, you are required to pay tax on everything. If you receive payments from several sporting associations, the payment must not exceed DKK 50,000 altogether in order to be tax-free.
For the sporting association to pay their assistants this tax-free amount, the association must have a special v-tal for sporting association assistants.
The marriage deduction, in Faroese hjúnafrádráttur, allows a married couple to move the basic deduction, up to DKK 30,000, among themselves, in the case that one of them earns less than this amount. This would allow these couples the same advantage as couples where both can utilise the basic deduction.
When one spouse has no income and the other spouse earns DKK 300,000 in a year, the income of the former will be adjusted from DKK 0 to 30,000 and the income of the latter to DKK 270,000 at year end. Or if one spouse earns DKK 20,000 and the other DKK 300,000, the difference up to the basic deduction is worked out - in this case, the income of the former will be adjusted to DKK 30,000 and of the latter to DKK 290,000.
The 24-hour deduction, in Faroese samdøgursfrádráttur, is a compensation for the additional expenditures that arise as a result of working abroad. This could be, for example, expenses for meals, rent, travel, transport, insurance etc. The deduction is DKK 300 per 24 hours and is deductible from your income.
Those entitled to the 24-hour deduction, are persons working aboard fishing vessels in the Nordic countries, and persons who receive their income through DIS (the Danish International Ship's Register). The conditions are that the work was abroad and lasted at least two consecutive months or 100 days within a 12 month period.
Have you paid tax and then afterwards made a pension contribution, which is also taxed? Then you are entitled to a pension deduction. The pension deduction, in Faroese eftirlønarfrádráttur, is a deduction which you qualify for if you make private contributions to your pension savings which are immediately taxed. Please note, you may not deduct pension contributions which are untaxed.
If you qualify for a pension deduction, yet have not received it, you must contact your pension provider.
The retirement deduction, in Faroese pensjonistafrádráttur, is an annual tax deduction for retirement pensioners. This deduction has been in place since 1 January 2020.
In 2020 the deduction amounts to DKK 3,000 a year. From 2021 onwards, the deduction will amount to DKK 6,000 a year.
If you are a retirement pensioner, fólkapensjonistur, the deduction is automatically applied, you do not have to do anything.
The apprentice deduction, in Faroese lærlingafrádráttur, is an amount of DKK 50,000 that is deducted from the income of an apprentice before the taxes are worked out.
Conditions for getting the apprentice deduction
In order to qualify for the apprentice deduction, you must be an apprentice.
This means that you must work according to one of the following:
You must work according to an apprenticeship contract, which is approved by Yrkisdepilin who administers the Faroese vocational educations. This could be, for example, a master builder apprentice.
Or you must work according to a contract where the education is coordinated and paid according to an agreement between a trade union and an employer on the Faroese labour market. This could be, for example, apprenticeships in insurance companies, banks or pharmacies.
Please note, work experience as part of a degree is not considered an apprenticeship. For example, teachers and nurses do not qualify for the apprentice deduction because they do not have an apprenticeship contract.
If the apprenticeship only covers a part of the year, the deduction decreases accordingly.