OFFICIAL GUIDE TO SHIP & YACHT REGISTRIES

Faroe Islands

Shipowner Eligibility 

The national ship register in the Faroe Islands consist of around 550 vessels of which 365 are fishing vessels. Vessels registered in the national register must be owned by a Faroese company/person.
Vessels registered in the Faroese International Ship Register must be owned by a Faroese company or person as well as each ship must have an appointed Faroese representative.

To qualify for the Tonnage Tax System, the owner has to be a Faroese company, not a person. However, there are no restrictions regarding the nationality of the ownership of a Faroese company

About the Flag

Situated in the North Atlantic Ocean, the Faroe Islands have a population whose whole way of life revolves around the sea.

The Islands are self-governing, with close political and cultural ties to Scandinavia, and Denmark especially. Yet despite close relations to Denmark, the Faroe Islands have chosen to stay outside the European Union (EU).

The Faroe Islands were populated more than a 1000 years ago by seafaring Norwegians and Irish monks, and love of the sea is still deeply rooted in the Faroese people.

Faroese seafarers today are highly educated and enjoy an excellent reputation for their skills. These skills have been acquired in an outstanding educational environment on the Faroe Islands.

Although the population of the Faroe Islands counts less than 50,000 people, it is safe to say, that Faroese sailors have traveled the globe many times over.

Since the Faroe Islands are a microstate in an advanced part of the world, their maritime authorities can rely on highly educated staff, at both managerial and administrative level.

Furthermore, there are several obvious benefits in terms of sheer concentration of knowledge in a country this size.

Government administration of the national and international ship register is both efficient and multilingual (as is the majority of the population).

Moreover, highly qualified legal advisers are easily accessible, and there are several financial institutes on the Islands with a great deal of experience in the field of international ship financing and brokering.

Company Formation

Vessels in FAS must be owned by a Faroese citizen or a company registered in the Faroe Islands. There are no restrictions regarding the ownership of a Faroese company. One shareholder, foreign or Faroese may own all shares in the company. Furthermore, there are no restrictions on the nationality of the management of a Faroese company. However, there are obvious requirements regarding Faroese address, representative, activities etc.

There are two different types of limited liability companies, both regulated by the same Company Act. The share capital requirement is a minimum DKK 80,000 for a Sp/f or DKK 500,000 for a P/F. In fact, there are limited differences between the two types, but customarily a P/F company structure is regarded as more appropriate for larger companies, while the Sp/f company is regarded as more suitable for smaller companies with less market capitalization.

The corporate tax rate for both types of companies is 18% on net annual income. However, companies under the Faroese Tonnage Tax System, will not be taxed based on its net income, but on its available tonnage, whether owned or bareboat chartered.

The tax on dividends distributed to other companies is 0%, provided that the receiving company is either registered in the Faroe Islands or is registered in a country which has entered into a double taxation treaty with the Faroe Islands. For shareholders in countries without a double taxation treaty with the Faroe Islands, the tax on dividends is 18%.

The Faroe Islands has entered into double taxation treaties with the following countries:
Aruba
Bermuda
British Virgin Islands
Cayman Islands
Denmark
Finland
Great Britain
Greenland
Guernsey
Iceland
India
Isle of Man
Jersey
Northern Ireland
Norway
Switzerland
Sweden

The list of double taxation treaties is continuously expanded, to support the growing number of nationalities, with interest in Faroese companies.

There is no withholding tax on interest income. However there are rules on thin capitalization, preventing deduction of the portion of interest expenses to shareholders or other controlling parties, originating from debt in excess of a debt to equity ratio of 4:1.

Taxation

The taxation of Faroese shipping companies can be divided into:
General Corporate taxes
The Tonnage Tax System
The Wage Refund System

Shipping companies that own vessels that are registered in the Faroe Islands International Ship Register FAS are subject to the same 18% general corporate tax rate as other companies in the Faroe Islands (cf. Company Formation). However, by choosing the Tonnage Tax System (TTS), the taxable income will be calculated based on the shipowner's available tonnage, rather than net income. As a special feature, the profit on sale of a vessel in the Tonnage Tax System is tax free.

In addition, shipowners of commercial vessels are entitled to a Wage Refund corresponding to 35% of the paid gross wages, taxable in the Faroe Islands.

The refund corresponds to the 35% flat tax, charged on wages paid to the crew of commercial vessels either registered in the Faroe Islands International Ship Register or bareboat chartered by a Faroese shipping company.

The shipowner thereby can reduce the wage cost to 65% of nominal wages.

Seamen, residing in countries which have a double tax treaty with the Faroe Islands, can however deduct the taxes paid in the Faroe Islands from the taxes levied in their country of residence. This means, that the seaman in most cases will not have to pay any additional taxes in their country of residence.

Non-Faroese crew members pay no social security taxes in the Faroe Islands. Nordic citizens working on a Faroese ship are also covered by the Nordic Convention on Social Security and have the possibility to preserve their unemployment seniority by voluntarily paying 1.25 % of their wages to the Faroese unemployment scheme, ALS.

In total, to commercial vessel shipowners, the Faroe Islands tax regime is very competitive, compared to other countries.

The Tonnage Tax System
Enacted in 2005, the Faroese Tonnage Tax System (TTS) is unique in Europe.

The Faroese Tonnage Tax System (TTS) is built on the same structure as other similar systems in the Nordic countries and the EU. However, many of the restrictions that are included in the other systems are not included in the Faroese TTS.

The system therefore offers multiple advantages to the international ship owner. Available for vessels over 100 GT, ship owners may include their own ships, as well as charter tonnage, within the system. Operations closely linked to ship-handling may also be included.

The Faroese TTS was designed to be internationally competitive. Tonnage does not need to be registered in the Faroe Islands, nor does a vessel need to fly the Faroese flag. Most importantly, there is no tonnage ratio with regard to the number of Faroese flagged vessels.

Finally, the binding period for switching between the TTS and the general corporate tax system is also short, only 3 years.

One additional, all-important benefit: The TTS does not tax the profit on the sale of a vessel in the system to a company not in the system.

The Faroese Tonnage Tax System has not been amended since it entered into force in 2005.

Registration and Documentation

Registration procedures
Only the formal owner of the vessel is entitled to register in FAS, with exception of the bareboat register in FAS.

Entry into the register takes place after application by the shipowner to the Registrar. The application may be submitted by the appointed Faroese representative.

Required documents
Application must be made on forms provided by the Faroe Islands International Ship Register's office.
Details of the company (board members, persons authorized to sign contracts, etc.)
Details about the ship (type, name, homeport, function, GT, NT, signal letters, etc.)
Builder's Certificate or deed of conveyance.
Discharge Certificate or certificate of declaration from the foreign registry to the effect that the foreign registration has been or will be deleted when the vessel is registered in FAS.
Certificate from the foreign registry confirming that the owner of the vessel was listed in the registry as the owner of the vessel.
Signatures of persons listed on an application for registration of a shipping company must be made personally in the Faroe Islands International Ship Register's office or be verified by witnesses or a notary public.

Documents must be in English or a Scandinavian Language.

Bareboat Charter Registration

The Bareboat Register
A foreign vessel can be registered in the Bareboat Register, if it is bareboat chartered to a company on the Faroe Islands. Bareboat registered vessels do get access to the wage refund system, cf. taxation.
Freedom to opt for your own flag

A bareboat chartered vessel that is chartered to a Faroese company does not need to fly the Faroese flag. In this case, the flag state, where the ship is registered has to accept that the management of the ship is transferred to another country. Furthermore, a charterparty has to exist.

Vessels that are registered in the bareboat register cannot be mortgaged in the Faroe Islands.

The Faroese charterparty, i.e. a Faroese limited company owned by foreigners, has to provide:
A written confirmation from the the flag state, where the ship is registered, confirming that it accepts that the management of the ship is transferred to another country,
A bareboat charter agreement

Vessel and Yacht Eligibility & Survey Requirements

Vessels
All vessels, except fishing vessels and pleasure crafts, of at least 100 gross tonnes may be registered. Cable barges, floating containers and similar equipment cannot be registered.

Age limit
As a main rule, ships 20 years of age and older cannot be registered in FAS. However, the Registry may permit registration of older vessels, when circumstances warrant it.

The Faroese Maritime Authority (FMA) has delegated all technical surveys to recognised organisations (RO) in accordance with the 1974 International Convention for the Safety of Life at Sea (SOLAS). FMA recognises organisations that are full members of the International Association of Classification Societies (IACS). FMA presently has agreements with the following RO's:
Det Norske Veritas (DNV)
Lloyds Register of Shipping (LR)
Bureau Veritas (BV)
American Bureau of Shipping (ABS)
Nippon Kaiji Kyokai (NK)
RINA (IT)

Crewing

There are no requirements of nationality to the captain or any of the crew members, if only their certificates are recognised pursuant to the STCW convention and an agreement is in effect between Denmark / Faroe Islands and the respective Flag State Party.

According to law, wage agreements between the Faroese Shipowners Association and the Faroese seafarers labour unions, do not apply to foreign citizens onboard vessels registered in the Faroese International Ship Register.
Furthermore by law, collective wage agreements between Faroese shipowners or shipowners associations and foreign seafarers unions concerning wages- and working conditions, are only allowed to include persons who are members of the union in question and are citizens of the same country as the labour union.
The crew requirements for ships registered in FAS shall be in accordance with SOLAS, Chapter 5, Regulation 14. The requirements for qualifications of the crews are set in accordance with the convention on Standards of Training, Certification and Watchkeeping (STCW).

When you apply for a Minimum Safe Manning Certificate you fill out a form that can be found on Faroese Maritime Authority's (FMA's) website and return it to FMA.
It is mandatory for senior officers to take a course in Faroese maritime law.

Faroe Maritime Services Ltd. and the Centre of Maritime Studies and Engineering have developed an e-learning course, compliant with the Faroese laws, covering relevant study material such as Safety at Sea, CSR files, Special Identification Numbers, Bunker Certificate and Prevention of Marine Pollution. The course and exam is available on http://vh.fo/default.asp?page=693.

Mortgages

It is possible to register three types of mortgages on a vessel.

Under the ordinary ship mortgage ("Pantebrev i skib", form B3), the security interest in the vessel is directly connected to the debt of the loan secured by the mortgage.

The ship mortgage ("Skadesløsbrev i skib", form B4) provides security up to a specified maximum amount and is issued to the mortgagee as security for an underlying obligation.

The owner's mortgage ("Ejerpantebrev i skib", form B5) is the owner's security interest registered on the vessel and can be pledged by the owner to a third party as security for the owner's obligations.

To effect any of the types of mortgages, the original, executed mortgage forms are required. The signatures must be confirmed by two witnesses, a notary public, or a lawyer. If the owner is represented by a legal entity, documentation in respect of the authority to sign must be submitted as well as an original power of attorney. The mortgage will be entered into the journal of the register on the day when the mortgage is received by the Registrar. Mortgages received on the same day have equal ranking provided that the mortgages have no mutual respect clause.

Mortgages received subsequent by the Registrar are allowed and will have lower priority unless the final mortgage includes a respect clause. However, it is possible to register a clause by which subsequent mortgages can only be registered with the acceptance of the registered mortgagee's acceptance. It should be noted that there are no differences between mortgages registered in the faroese national register and the FAS.

The standard forms, B3, B4 and B5, are available from FAS at the cost of 2 DKK.
The mortgage registration fee is DKK 5,000, irrespective of the mortgage type and amount.

Fees

The fee structure for registration in FAS, as per January 2012, is as follows:
Registration fee
- Vessels below 1000 GT: DKK 50,000
- Vessels 1000 - 2999 GT: DKK 75,000
- Vessels 3000 - 9999 GT: DKK 100,000
- Vessels 10000 GT and above: DKK 125,000
Certificate of Nationality
- Vessels below 1000 GT: DKK 3,000
- Vessels 1000 - 2999 GT: DKK 5,000
- Vessels 3000 - 9999 GT: DKK 10,000
- Vessels 10000 GT and above: DKK 20,000

Tonnage Certificate
The Faroese Maritime Authority shall issue all tonnage certificates on Faroese flagged vessels.
The tonnage measurements shall be performed by one of the recognized organisations that are recognized by the Faroese Maritime Authority. The recognized organisations include the classification societies and other professionals.

Based on the measurements, the recognized organisation then makes an application to the Faroese Maritime Authority for the tonnage certificate. The Faroese Maritime Authority will consider the case and issue the tonnage certificate if the measurements are performed in a satisfactory manner.
The fee for the tonnage certificate is DKK. 2.00 per gross ton (GT).

Other registration fees
Mortgage registration: DKK 5,000
Transport registration: DKK 5,000
Copies of documents: DKK 250
Deletion of ship from Registry: DKK 500

Annual Fees
The annual registration fee is DKK 15,000 + a small additional fee based on size and age of ship. As an example, the additional fee is:
Age
Gross Tonnage 4 years 10 years 20 years 50 years
100 GT DKK 0 13 26 130
1 GT DKK 0 130 260 1,300
10 GT DKK 0 700 1,400 7,000
50 GT DKK 0 1,500 3,000 15,000
100 GT DKK 0 3,000 6,000 30,000

Contact

Faroe Islands National and International Ship Register (FAS)
Faroese Maritime Authority
Sjóvinnustýrið
Bókbindaragøta 8
Tórshavn
FO-100
Faroes, Denmark

Phone
+298 35 56 00

Email
fma@fma.fo

Web
https://www.fma.fo

Stockholm Agreement 96
IMO Convention 48
* IMO amendments 91 
* IMO amendments 93
SOLAS Convention 74
SOLAS Protocol 78
SOLAS Protocol 88
LOAD LINES Convention 66
LOAD LINES Protocol 88
TONNAGE Convention 69
COLREG  Convention 72
CSC Convention 72
CSC amendments 93
SFV Protocol 93
STCW  Convention 78
STCW-F Convention 95
SAR  Convention 79
STP Agreement 71
STP Protocol 73
IMSO Convention 76
INMARSAT OA 76
INMARSAT amendments 94
INMARSAT amendments 98
IMSO amendments 2006
IMSO amendments 2008
FACILITATION Convention 65
MARPOL 73/78 (Annex I/II)
MARPOL 73/78 (Annex IV)
MARPOL 73/78 (Annex V)
MARPOL Protocol 97 (Annex VI)
London Convention 72
London Convention Protocol 96
INTERVENTION Convention 69
INTERVENTION Protocol 73
CLC Convention 69
CLC Protocol 76
CLC Protocol 92
FUND Convention 71
FUND Protocol 92
FUND Protocol 2003
NUCLEAR Convention 71
MARPOL 73/78 (Annex III)
PAL Protocol 76
PAL Protocol 90
PAL Protocol 02
LLMC Convention 76
LLMC Protocol 96
SUA Convention 2005
SUA Protocol 2005
SALVAGE Convention 89
OPRC  Convention 90
HNS Convention 96
OPRC/HNS 2000
BUNKERS CONVENTION 01
ANTI FOULING 01
BALLASTWATER 2004
NAIROBI WRC 2007
HONG KONG CONVENTION
HNS PROT 2010
Cape Town Agreement 2012
SUA Convention 88
SUA Protocol 88

IMO Conventions

Status of Conventions Falkland Islands

IMO Convention 48 x
SOLAS Convention 74 x
SOLAS Protocol 78 x
SOLAS Protocol 88 x
SOLAS Agreement 96 x
LOAD LINES Convention 66 x
LOAD LINES Protocol 88 x
TONNAGE Convention 69 x
COLREG Convention 72 x
CSC Convention 72 x
CSC amendments 93
SFV Protocol 93 x
Cape Town Agreement 2012 x
STCW Convention 78 x
STCW-F Convention 95 x
SAR Convention 79 x
STP Agreement 71
Space STP Protocol 73
IMSO Convention 76 x
INMARSAT OA 76 x
IMSO amendments 2006
IMSO amendments 2008 x
FACILITATION Convention 65 x
MARPOL 73/78 (Annex I/II) x
MARPOL 73/78 (Annex III) x
MARPOL 73/78 (Annex IV) x
MARPOL 73/78 (Annex V) x
MARPOL Protocol 97 (Annex VI) x
London Convention 72 x
London Convention Protocol 96 x
INTERVENTION Convention 69 x
INTERVENTION Protocol 73 x
CLC Convention 69 d
CLC Protocol 76 x
CLC Protocol 92 x
FUND Protocol 76 x
FUND Protocol 92 x
FUND Protocol 2003 x
NUCLEAR Convention 71 x
PAL Convention 74
PAL Protocol 76
PAL Protocol 90
PAL Protocol 02 x
LLMC Convention 76 d
LLMC Protocol 96 x
SUA Convention 88 x
SUA Protocol 88 x
SUA Convention 2005 x
SUA Protocol 2005 x
SALVAGE Convention 89 x
OPRC Convention 90 x
HNS Convention 96
HNS PROT 2010 x
OPRC/HNS 2000 x
BUNKERS CONVENTION 01 x
ANTI FOULING 2001 x
BALLASTWATER 2004 x
NAIROBI WRC 2007 x
HONG KONG CONVENTION x

x: Accession/ratification
d: Denunciation

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