Faroe Islands Sole Proprietor (Einkarvirki) Tax Calculator
Estimate net business profit, allowable trade deductions, self-employed social contributions (ALS & AMEG), and municipal and national personal tax obligations under TAKS.
Commercial Revenue & Deductions
Total commercial turnover exclusive of 25% MVG.
Materials, vehicle expenses, office rent, software, professional fees.
Proprietor's net take-home earnings after deducting all operating expenses, self-employed social contributions, and TAKS income taxes.
Einkarvirki Fiscal Breakdown All amounts in DKK
| Accounting Category | Statutory Basis | Rate / Note | Amount (DKK) |
|---|---|---|---|
| Gross Trade Turnover | Invoiced commercial sales | — | 650,000 kr. |
| Allowable Operating Expenses | Direct commercial write-offs | — | −140,000 kr. |
| Net Taxable Profit (B-inntoka) | Revenue − Expenses | Profit Basis | 510,000 kr. |
| Self-Employed ALS Unemployment | Logtingslog um ALS | 2.50% | 12,750 kr. |
| AMEG / Samhaldsfasti Pension | Solidarity pension fund | 3.00% | 15,300 kr. |
| Municipal Tax (Kommunuskattur) | 19.75% after allowance | 19.75% | 89,863 kr. |
| National Tax (Landsskattur) | Progressive national tiers | 14%–25% | 76,467 kr. |
| Proprietor's Net Take-Home | Available personal cash flow | 61.89% | 315,620 kr. |
Faroe Islands Sole Trader (Einkarvirki) Regulatory Guide
Flow-Through Taxation (B-inntoka)
An Einkarvirki is legally indistinguishable from its owner. Profits generated by the trade are classified as B-inntoka (income where tax is not withheld at source). The proprietor must estimate their profit, file an annual business return (Sjalvuppgava fyri personar við vinnuvirksemi), and remit provisional quarterly tax installments directly to TAKS.
Double ALS Contribution (2.50%)
Because an independent contractor does not have an arm's-length employer to pay the employer payroll surcharge, sole proprietors are statutorily responsible for remitting the full 2.50% ALS contribution (both the 1.25% employee portion and the 1.25% employer overhead) on their annual net commercial profit.
Einkarvirki vs. Sp/f Incorporation
While an Einkarvirki entails zero minimum share capital and simpler administrative bookkeeping, all profits are exposed to progressive personal tax rates that can reach approximately 50%. Incorporating a private limited company (Sp/f) allows profits to be taxed at a flat 18%, preserving retained capital inside the company for expansion.
Meirvirðisgjald (VAT) Compliance
If commercial turnover exceeds 50,000 DKK in any 12-month period, the sole proprietor must register with TAKS for MVG, add 25% VAT to their domestic sales invoices, and submit periodic MVG settlements.
Frequently Asked Questions (FAQ)
How is a sole proprietorship (Einkarvirki) taxed in the Faroe Islands? ↓
In the Faroe Islands, a sole proprietorship (einkarvirki) is not a separate legal tax entity. Net business profits (gross revenue minus allowable commercial operating expenses) flow directly to the proprietor taxable income (B-inntoka), taxed under municipal and national income tax schedules.
Do self-employed individuals pay ALS and AMEG contributions? ↓
Yes. Sole proprietors are subject to mandatory labor fund contributions on their net business earnings, including 2.50% total ALS unemployment insurance (covering both worker and owner portions) and 3.00% AMEG / Samhaldsfasti pension levy.
What business expenses can an Einkarvirki deduct in the Faroe Islands? ↓
All ordinary operating costs incurred directly to produce and maintain business income are deductible: materials, tools, business software, vehicle operational mileage, office rent, telecommunications, and professional accounting fees.
When does an Einkarvirki have to register for VAT (Meirvirðisgjald)? ↓
A sole trader must register for VAT (MVG) with TAKS taxable sales exceed 50,000 DKK within any consecutive 12-month period.
When should an entrepreneur switch from an Einkarvirki to a Sp/f company? ↓
Entrepreneurs generally convert to a private limited company (Sp/f) when business earnings exceed ~500,000 DKK to benefit from the flat 18% corporate tax rate (felagsskattur) and shelter retained profits from higher progressive personal tax rates (up to ~50%).
📊 TAKS & Faroese Labor Market Funds (Samhaldsfasti) Matrix
| Statutory Component / Legal Deduction Item | Calculated Amount (DKK) |
|---|---|
| Primary Net / Statutory Payable Amount | 0 kr. |