Harmful Tax Practices – 2024 Peer Review Reports on the Exchange of Information on Tax Rulings

Faroe Islands

The Faroe Islands has met all aspects of the terms of reference (OECD, 2021[1]) (ToR) for the calendar year 2024 (year in review), and no recommendations are made.

In the prior year report, as well as in the 2019-2022 peer reviews report, the Faroe Islands had received one recommendation. Faroe Islands has resolved this issue and therefore the recommendation is now removed.

The Faroe Islands can legally issue two types of rulings within the scope of the transparency framework.

In practice, The Faroe Islands issued rulings within the scope of the transparency framework as follows:

Type of ruling	Number of rulings
Past rulings	0
Future rulings in the period 1 September 2019 – 31 December 2019	0
Future rulings in the calendar year 2020	1
Future rulings in the calendar year 2021	0
Future rulings in the calendar year 2022	0
Future rulings in the calendar year 2023	3
Future rulings in the year in review	1

No peer input was received in respect of the exchanges of information on rulings received from the Faroe Islands.

Information gathering process (ToR I.A)

1. The Faroe Islands can legally issue the following two types of rulings within the scope of the transparency framework: (i) preferential regimes1 and (ii) permanent establishment rulings.

2. For the Faroe Islands, past rulings are any tax rulings issued prior to 1 September 2019. However, there is no obligation for the Faroe Islands to conduct spontaneous exchange information on past rulings. Future rulings are any tax rulings within scope that are issued on or after 1 September 2019.

3. In the prior year’s peer review report, it was determined that Faroe Islands’ review and supervision mechanism was sufficient to meet the minimum standard. Faroe Islands’ implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

4. The Faroe Islands has met all of the ToR for the information gathering process and no recommendations are made.

Exchange of information (ToR II.B)

5. The Faroe Islands has the necessary domestic legal basis to exchange information spontaneously. The Faroe Islands notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

6. The Faroe Islands has international agreements permitting spontaneous exchange of information, including: (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011[2]) (“the Convention”), (ii) the Nordic Convention on Assistance in Tax Matters, and (iii) bilateral agreements in force with four jurisdictions.2

7. For the year in review, the timeliness of exchanges is as follows:

 

Future rulings within the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	1	0	N/A	N/A

 

Follow-up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	N/A	N/A

Completion and exchange of templates (ToR II.B.3, II.B.4, II.B.5, II.B.6, II.B.7)

8. In the prior years’ peer review reports, it was determined that the Faroe Islands is still developing a process to complete the templates on relevant rulings, to make them available to the Competent Authority for exchange of information, and to exchange them with relevant jurisdictions. Therefore, the Faroe Islands was recommended to develop a process to complete the templates for all relevant rulings and to ensure that the exchanges of information on rulings occur in accordance with the form and timelines under the transparency framework going forward.

9. During the year under review, the Faroe Islands implemented its process for the completion and exchange of templates. The Competent Authority is responsible for completing the Annex C template, based on relevant information provided by the departments responsible for issuing the rulings. The information is then required to be exchanged within three months after it becomes available to the Competent Authority. The Faroe Islands now has a process in place for the completion and exchange of templates and therefore, the prior year’s recommendation is removed.

Conclusion on section B

10. The Faroe Islands has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed all exchanges. Faroe Islands has met all of the ToR for the exchange of information process and no recommendations are made.

Statistics (ToR IV.D)

11. The statistics for the year in review are as follows:

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Ruling related to a preferential regime	De minimis rule applies	N/A
Permanent establishment rulings	0	N/A
De minimis rule	1	N/A
Total	1

Matters related to intellectual property regimes (ToR I.A.1.3)

12. The Faroe Islands does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015[3]) were imposed.

Summary of recommendations on implementation of the transparency framework

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made.

Notes

← 1.  1) Tonnage tax regime; 2) International shipping regime.

← 2.  Participating jurisdictions to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Parties to the Nordic Convention on Assistance in Tax Matters are Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden. The Faroe Islands also has bilateral agreements with Greenland, India, Switzerland and the United Kingdom. The bilateral agreements with Switzerland and India are the Danish tax treaties, which are territorially extended to include the Faroe Islands.