Fo Payroll Levy

---
name: fo-payroll-levy
description: "Compute Faroese lønarhæddaravgjald for healthcare, insurance, banking, savings-bank, finance and the specified necessary electronic services in 2026. Distinguishes the healthcare wage-plus-business-profit base from the insurance and finance wage-only bases, mixed activities, benefits in kind, provisional quarterly demands and final annual reconciliation. Gives the TAKS registration field, payment-agreement identifiers, statutory payment deadlines, refunds, interest, correction demands and penalties. Trigger on Faroe Islands payroll levy, wage tax for VAT-exempt businesses, medical practice levy, insurance wage levy, financial-sector payroll tax and lønarhæddaravgjald. This levy is the business's liability, separate from employees' income-tax withholding and social contributions."
license: "AGPL-3.0-or-later (code) / OpenAccountants Guide License v1.0 (content)"
metadata:
  source: openaccountants
  openaccountants_url: "https://www.openaccountants.com/skills/fo-payroll-levy"
  jurisdiction: "FO"
  tax_year: "2026"
  last_updated: "2026-10-31"
---

# Faroe Islands payroll levy v0.1

> **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)][levy]

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](fo-payroll-contributions.md);
MVG uses [the VAT Guide](fo-vat.md). [Act §§1–3, 12][levy]

## Rates, bands and thresholds

| Item | 2026 rule and conditions | Official source |
|---|---|---|
| Healthcare levy | 2.5% of the §5(1) healthcare base | [Act §4(1)](https://logir.fo/Logtingslog/193-fra-10-12-1993-um-lonarhaeddaravgjald-sum-seinast-broytt-vid-logtingslog-nr-166-fra-22) |
| Insurance levy | 10% of the §5(2) paid A-wage base | [Act §4(2)](https://logir.fo/Logtingslog/193-fra-10-12-1993-um-lonarhaeddaravgjald-sum-seinast-broytt-vid-logtingslog-nr-166-fra-22) |
| Banking, finance and specified electronic services | 12% of the §5(2) paid A-wage base | [Act §§1(1)(3), 4(2)](https://logir.fo/Logtingslog/193-fra-10-12-1993-um-lonarhaeddaravgjald-sum-seinast-broytt-vid-logtingslog-nr-166-fra-22) |
| Ordinary provisional period | Calendar quarter; provisional business-income component is 25% of provisionally registered B-income | [Act §6(1)–(3)](https://logir.fo/Logtingslog/193-fra-10-12-1993-um-lonarhaeddaravgjald-sum-seinast-broytt-vid-logtingslog-nr-166-fra-22) |
| Small quarterly charge | Below DKK 50, payment can be waived; exactly DKK 50 is not below the threshold | [Act §6(7)](https://logir.fo/Logtingslog/193-fra-10-12-1993-um-lonarhaeddaravgjald-sum-seinast-broytt-vid-logtingslog-nr-166-fra-22) |
| Small annual refund | Below DKK 50 is not paid out | [Act §7(6)](https://logir.fo/Logtingslog/193-fra-10-12-1993-um-lonarhaeddaravgjald-sum-seinast-broytt-vid-logtingslog-nr-166-fra-22) |

## 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)][levy]
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)][levy]
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)][levy]
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][levy]
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][levy]

## Deadlines and filing

**Register the correct obligation.** Open TAKS's [business-starting page][start]
and use “Skrásetingarskjal til vinnuskránna” (V01) and its linked guidance.
The [official V01 PDF][form] 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][levy]; [TAKS registration guidance][registration]; [V01, both pages][form]

**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][levy]

**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][payment]. 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][payment]

**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)][levy]

## 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][levy]

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][levy]

## 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][levy]

## 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][levy]

```oa-check
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)][levy]

```oa-check
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.

[levy]: https://logir.fo/Logtingslog/193-fra-10-12-1993-um-lonarhaeddaravgjald-sum-seinast-broytt-vid-logtingslog-nr-166-fra-22
[start]: https://www.taks.fo/fo/borgari/bolkar/at-stovna-virki/
[registration]: 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
[payment]: https://www.taks.fo/gjaldsavtala-virkir

[form]: https://taks.cdn.fo/media/1938/v01-skr%C3%A1setingarskjal-til-vinnuskr%C3%A1nna-161220.pdf?s=5Yrnkhknbc6vaTXl_Pu3BDPa7b8

## Today's figures and who stands behind this skill

This file is an AI skill (tax rules your AI follows) from OpenAccountants, copied on 2026-10-31. Rates, thresholds and deadlines change. For the current version of this skill, its official sources and the named accountant (if any) who stands behind it, call `get_skill` with slug `fo-payroll-levy` on the OpenAccountants connector (https://www.openaccountants.com/connect), or read https://www.openaccountants.com/skills/fo-payroll-levy. If neither is available, confirm every figure against the official source pages cited above before relying on it.