Fringe benefits
Fringe benefits, in Faroese fríir ágóðar, are additional compensations that companies can give their employees. Fringe benefits are usually taxable and count towards one's total taxable income; however, there are some exceptions. Read more in the sections below.
In line with section 25 of the Tax Act, everything of monetary value counts towards your total taxable income and must be evident on your tax return. This includes fringe benefits, such as free use of real and personal property.
Typically, fringe benefits are additional benefits that employers award employees. But fringe benefits received from someone other than your employer counts in the same way and must be included in the tax return. However, presents from your spouse, parents or grandparents do not count towards your total taxable income.
The values of fringe benefits are determined annually by Toll og Skattaráð Føroya. See the values in the sections below.
If you are awarded housing benefits, or free electricity and heating, from your employer, you must enter the value of the benefits on your tax return.
Housing benefits are taxed according to a predetermined square metre value.
The following table shows the current and some past values of housing benefits and free electricity/heating.
| Fringe benefits (including VAT) | 2020 DKK | 2019 DKK | 2018 DKK | 2017 DKK | 2016 | ||
Housing benefits: Free electricity Free heating (electricity/ground heating) (1) | 976 10,300 25,500 14,850 | 917 10,000 25,100 14,850 | 871 9,700 21,700 13,760 | 775 9,700 | 754 | ||
(1) Introduced in 2018.
If you are awarded free meals from your employer, you must enter the appropriate value on your tax return.
The following table shows the current and some past values of free meals.
| Fringe benefits (including VAT) | 2020 DKK | 2019 DKK | 2018 DKK | 2017 DKK | 2016 | ||
Free meals (per day): 2 meals 1 meal | 63 47 36 | 62 47 36 | 62 47 36 | 61 46 | 61 | ||
If you are awarded a company car, that you may use for work and in private, it counts towards your total taxable income, and you must enter its value on your tax return. When you have a company car, you will be taxed according to an amount equivalent to driving 10,000 kilometres a year. If you drive less than this, and you can prove it with supporting documents, the taxable value will decline accordingly. In addition, the weight of the car also determines it's taxable value.
The following table shows the current and some past values of company car benefits.
| Fringe benefits (including VAT) | 2020 DKK | 2019 DKK | 2018 DKK | 2017 DKK | 2016 | ||
Company car: 1101-1300 kilograms 1501 kilograms or more | 56,800 65,800 79,00 88,700 | 56,400 65,300 78,300 87,900 | 55,800 64,700 77,700 87,300 | 55,100 64,000 76,900 86,500 | 55,500 77,300 86,900 | ||
Vans (with the same shape | 60% of the fixed value | 60% of the fixed value | 60% of the fixed value | 60% of the fixed value | 60% of the fixed value | ||
All other cars | 60% of the fixed value | 60% of the fixed value | 60% of the fixed value | 60% of the fixed value | 60% of the fixed value | ||
Busses (which seat up to 10 people, and operate as taxi-cabs) | 19,300 | 18,900 | 18,800 | 18,600 | 18,700 | ||
In general, the cost you may save by doing certain work yourself, that you otherwise would have paid someone else to do, does not count towards your taxable income.
However, there are some exceptions in the building industry:
Skilled artisan:
When a skilled artisan or master builder suspends their regular work in order to produce something of lasting value, that is within their line of work, for themselves or someone else, they must be taxed according to lost income. This includes when two artisans carry out mutual services.
Others:
When someone uses their education or training to perform private work that is not done entirely in their off-duty hours, they will be taxed according to what corresponds to standard hours.
Work for others:
When someone does work for someone else without getting paid for it, the work is not taxable. However, the receiver must usually pay tax on the present.
There are three kinds of fringe benefits that do not count towards your total taxable income.
These are:
- the private use of computers and pieces of equipment given to employees in connection with their work,
- the private use of telecommunication equipment given to employees in connection with their work,
- the value of free travel and free housing of someone who does not reside in the Faroes and is in temporary employment in the Faroes. By temporary is meant less than 180 days within a 12-month period.