# Faroe Islands: taxes, residence and cost of living

Source: https://domicile.wiki/places/faroe-islands/ (domicile.wiki, researched 2026-10-15). Data licence CC BY-SA 4.0. Research, not tax or legal advice.

## At a glance

For an EU-citizen family of five living off a EUR 30M portfolio (the guide's default reader).

- Tax on a €30M portfolio: €370,100 a year
- Wealth tax: none
- Children inherit: low tax
- Living costs, family of five: €194,319 a year
- EU member: no
- Currency: DKK
- Capital: Torshavn

## Tax on investments, inheritance and wealth

The Faroe Islands tax residents' capital income (interest, dividends and gains on shares and other securities) under a separate capital gains tax law at a flat 35% for individuals; ordinary income pays progressive national tax plus 16%-23% municipal tax. Emigrants are deemed to sell securities worth over DKK 100,000. Inheritance is free of income tax, but an inheritance duty (arvaavgjald) of 1%-12% is paid to the probate court; children pay at most 3%. Gifts from parents to children are tax-free. No wealth tax was found.

- **Full tax liability**: Flat 35% tax on capital income and gains; progressive tax on other income; inheritance duty up to 3% for children.

## Inheritance law and trusts

Faroese succession law follows the Danish model, which protects children with a forced share, but the exact rules were not confirmed. The Faroes have no trust law and are outside the Hague Trusts Convention. Foundations exist under Faroese law.

## Daily life (0-100, higher is better)

- Healthcare quality and access: 90
- Infrastructure and connectivity: 98
- Cost of living and housing: 84
- Business opportunities and economy: 92

## Research notes

### Faroe Islands — family-office tax dossier

Last reviewed: 2026-10-15
Tax year: 2026
Reviewer: research agent (Claude), unreviewed by a tax adviser

#### Summary

The Faroe Islands tax residents' capital income (interest, dividends and gains on shares and other securities) under a separate capital gains tax law at a flat 35% for individuals; ordinary income pays progressive national tax plus 16%-23% municipal tax. Emigrants are deemed to sell securities worth over DKK 100,000. Inheritance is free of income tax, but an inheritance duty (arvaavgjald) of 1%-12% is paid to the probate court; children pay at most 3%. Gifts from parents to children are tax-free. No wealth tax was found.

US citizens: No US-Faroes treaty; US citizens remain subject to US federal tax.

#### Residence and eligibility

More than 180 days in a 12-month period, or a registered permanent address (TAKS).

- **Danish and Nordic citizens** (EU, OTHER): Danish and Nordic citizens can settle freely; the Faroes are outside the EU, so other EU citizens need permits.
- **Others** (EU, US, OTHER): Work/residence permits under Faroese immigration rules; no investor route found.

#### Capital gains

##### Standard regime

Løgtingslóg nr. 164/2001 on capital gains covers sales of shares, investment certificates and similar securities, debt claims, and also dividends and interest (§ 1). Individuals and estates pay 35% on the net gain (§ 14(2)). On emigration, securities worth over DKK 100,000 (or below acquisition value) are deemed sold; payment can be deferred against a bank guarantee.

- **Important exceptions, statute references and announced changes:** Exit tax: deemed disposal of securities over DKK 100,000 on moving away (TAKS).
- **Tax year / confidence / verification:** 2026 / medium / verified (checked 2026-10-15)
- **JSON numbers:** headline 35% (0.35); listed domestic 35% (0.35); listed foreign 35% (0.35); private business sale 35% (0.35); local real estate n/a (null); foreign real estate n/a (null).
- **How derived:** § 14(2) Løgtingslóg um skatting av kapitalvinningi: individuals 35% on the computed gain.

Open points for this tax: Gains on real estate are outside this law; treatment of private real estate gains not researched (left null).

#### Dividends

##### Standard regime

Dividends are capital income taxed at 35% (Løgtingslóg nr. 164/2001 § 1(5) and § 14); Faroese companies withhold 35%. Foreign tax paid on foreign income can be deducted from the Faroese tax up to the tax on that income (TAKS Uttanlandsinntøka).

- **Tax year / confidence / verification:** 2026 / medium / partially_verified (checked 2026-10-15)
- **JSON numbers:** headline 35% (0.35); domestic 35% (0.35); foreign gross 35% (0.35); foreign tax relief: credit.
- **How derived:** Flat 35% capital-income rate for individuals; 35% withholding on Faroese dividends.
- **Outbound withholding:** 35% on dividends (refund to treaty rate: UK 5%/15%, Nordic 0%/15%, Switzerland 0%/15%, India 15%/25%).
- **Treaty network:** Nordic convention, UK, Switzerland, India and a few others.

#### Inheritance and gifts to children

##### Standard regime

Inheritances are free of income tax, but arvaavgjald (inheritance duty) of 1%-12% is paid to the probate court depending on the heir and the size of the share (TAKS). The 1908 Danish inheritance duty act, in force in the Faroes by Anordning 468/1921, sets for spouse and children: 1% on shares up to DKK 1,000, rising in steps to 3% on shares over DKK 100,000 (§ 2 A), the band rate applying to the whole share. Advance inheritance (forskotsarvur) is subject to the duty; ordinary gifts from parents to children are tax-free.

- **Important exceptions, statute references and announced changes:** No duty while the surviving spouse keeps the estate undivided (óskift búgv). Spouse and children under 18 have an exemption under conditions (§ 3).
- **Tax year / confidence / verification:** 2026 / medium / partially_verified (checked 2026-10-15)
- **JSON numbers:** basis `beneficiary`, children `taxed_low`, exemption 0 DKK, brackets (whole_amount): from 0 DKK: 1% (0.01); from 1,000 DKK: 1.25% (0.0125); from 2,000 DKK: 1.5% (0.015); from 3,000 DKK: 1.75% (0.0175); from 5,000 DKK: 2% (0.02); from 10,000 DKK: 2.25% (0.0225); from 20,000 DKK: 2.5% (0.025); from 50,000 DKK: 2.75% (0.0275); from 100,000 DKK: 3% (0.03); other transfer costs 0% (0.0).
- **Gifts:** Gifts from parents to children are tax-free (TAKS, Skattalógin § 29); advance inheritance pays arvaavgjald. (same as inheritance: False; tax-free after years: None)
- **Residence/domicile rules:** Estates administered by the Faroese probate court (skiftirættur).
- **Business relief covers listed shares:** False

Open points for this tax: Later amendments to Anordning 468/1921 not checked; the TAKS summary (1%-12%) matches the original table. | Scope for foreign assets of a Faroese-domiciled deceased and whether a spouse in undivided estate (óskift búgv) defers the duty for children not analysed.
- Surviving spouse: pays the same 1%-3% duty as children (1908 act § 2 A); no tax while the estate is kept undivided, but tax falls due when it is divided.

#### Wealth tax

##### Standard regime

No wealth tax found: TAKS lists taxes on income, interest, gifts and inheritance, pension tax and capital gains tax, with no tax on wealth.

- **Tax year / confidence / verification:** 2026 / medium / partially_verified (checked 2026-10-15)
- **JSON type:** `none`
- **Property tax (not a wealth tax):** Municipal property tax not researched.

#### Special regimes

None modelled; see Residence and eligibility.

#### Company taxation (kept separate from personal tax)

Headline CIT rate: 18% (0.18). Companies and funds pay 18% on capital gains under Løgtingslóg 164/2001 § 14(2); the general corporate rate is believed to be 18% as well (not verified at source).

#### Cost of living notes

City: Tórshavn (incl. Hoyvík and Argir).

- **Prime rent (monthly):** DKK 14,750 (2026). Median of the 4 listings of at least 140 m² in Tórshavn municipality on Kitt.fo (the Faroese rental portal) on 2026-10-15: 204 m² 5-room house in Hoyvík DKK 14,500 (6-month let); 192 m² 3-bedroom-plus-office flat in Argir DKK 16,900 (over 3 years); 150 m² house DKK 15,000 and 145 m² house DKK 13,000 in central Tórshavn (under 1 year). 48 listings in all; no other had 4+ bedrooms. Some rents include utilities. Very thin sample: many Faroese lets are arranged privately or via Facebook groups. Source: [Kitt — Leiguportalurin](https://www.kitt.fo/search/)
- **School (annual, per child):** DKK 0 (2026). No international school exists in the Faroe Islands and no private upper-secondary school was found. The leading option is the public Glasir – Tórshavn College (about 1,500 students); education is free at all levels. Teaching is in Faroese, so a newly arrived child would need language support. Sources: [faroeislands.fo — Education](https://www.faroeislands.fo/people-society/education-research/education), [Trap Faroe Islands — Education and research](https://trap.fo/en/society-and-business/uddannelse-og-forskning-pa-faeroerne/)

#### Open questions

- Not in World Bank/WGI data; no authoritative overrides added.
- Real estate gains and municipal property tax not researched.

#### Sources

- Logtingslog nr. 164 fra 21.12.2001 um skatting av kapitalvinningi (as amended) (Logir.fo, legislation): https://logir.fo/Logtingslog/164-fra-21-12-2001-um-skatting-av-kapitalvinningi-sum-seinast-broytt-vid-logtingslog-nr-173
- TAKS: Kapitalvinningsskattur (TAKS (Faroese tax authority), tax_authority): https://www.taks.fo/fo/borgari/skattur/kapitalvinningsskattur
- TAKS: Dividend tax refund (TAKS (Faroese tax authority), tax_authority): https://www.taks.fo/en/individuals/tax/dividend-tax-refund
- TAKS: Uttanlandsinntoka (TAKS (Faroese tax authority), tax_authority): https://www.taks.fo/fo/borgari/skattur/uttanlandsinntoeka
- TAKS: Taxation in the Faroe Islands (TAKS (Faroese tax authority), tax_authority): https://www.taks.fo/en/individuals/tax/taxation-in-the-faroe-islands
- TAKS: Skattur og arvur (TAKS (Faroese tax authority), tax_authority): https://www.taks.fo/fo/borgari/skattur/skattur-og-arvur
- Anordning nr. 468 af 08.11.1921 hvorved lov om arveafgift af 27.05.1908 saettes i kraft paa Faeroerne (Logir.fo, legislation): https://logir.fo/Anordning/468-af-08-11-1921-hvorved-lov-om-arveafgift-af-27051908-saettes-i-kraft-pa
- TAKS: Skattur og gavur (TAKS (Faroese tax authority), tax_authority): https://www.taks.fo/fo/borgari/skattur/skattur-og-gavur
- Kitt — Leiguportalurin: search (Kitt.fo, other): https://www.kitt.fo/search/
- Education — Free education for all (Government of the Faroe Islands, government): https://www.faroeislands.fo/people-society/education-research/education
- Education and research on the Faroe Islands (Trap Faroe Islands, other): https://trap.fo/en/society-and-business/uddannelse-og-forskning-pa-faeroerne/

#### Change log

- 2026-10-15: initial research.
- 2026-10-15 (household cost pass): added Tórshavn prime rent DKK 14,750/month (median of 4 Kitt.fo listings of 140 m²+, thin sample) and a school fee of DKK 0 (no international school; public Glasir upper secondary is free, taught in Faroese).
- 2026-10-15: family rent re-checked against the upper-middle-class standard: kept.
- 2026-10-16: added surviving-spouse treatment.


## Residence and succession sources

- [HCCH status table: Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition](https://www.hcch.net/en/instruments/conventions/status-table/?cid=59) — Hague Conference on Private International Law
- [Faroese legislation portal](https://logir.fo/) — Government of the Faroe Islands