As the number of registered vessels in the Faroe Islands International Ship Register (FAS) approaches 100, more shipowners in Scandinavia and elsewhere discover the Faroes as a fiscally attractive flag jurisdiction — here’s why.
The Faroe Islands International Ship Register (FAS) is becoming increasingly recognized as an emerging Nordic registry based on international standards. The number of international merchant vessels registered under the Faroese flag is expected to reach 100 soon and could grow well beyond in the months and years ahead, according to Director General Hans Johannes á Brúgv, of the Faroese Maritime Authority.
“The idea of an open ship registry under the Faroese flag is not very old,” Mr. á Brúgv said.
“It was made law in 1992, originally as a measure to protect domestic shipping interests. Later it was decided to revise the legislation with the aim of turning the FAS into a platform for international shipowners; the changes took effect in 2008 and since then the FAS administration has been strengthened as we continually strive to improve the registry.”
Mr. á Brúgv, who joined the Faroese Maritime Authority in January 2013, believes the FAS has the potential to attract hundreds of international vessels.
“The Faroe Islands has a maritime industry with a proud history especially in commercial fisheries,” he noted. “The country is surrounded by sea and lives and lives off the sea — that’s an important element as far as concerns the background for the Faroes in merchant shipping.
“Furthermore, it’s widely known that Faroese sea officers have been in high demand for many decades, especially among Danish and Norwegian shipowners.”
Some of those captains, navigators and engineers — there are quite many of them, an estimate 2,000 — have been involved with developing the FAS; it’s assumed that some of the expatriates are likely to return home once it becomes clear that a growing Faroese merchant shipping sector needs them.
“Merchant shipping is an up and coming industry in the Faroes with a positive outlook,” Mr. á Brúgv added. “Since the changes to the legal framework of the FAS, the number of registered vessels has increased markedly. At the same time, the position of the Faroes as a reputable flag state has risen. We’re not far from a hundred vessels today and signs are we are going to see many more as the word spreads.”
On the ‘White List’: According to Mr. á Brúgv, the FAS has had a 172-percent increase in the number of entries since 2008, to about 90 vessels — tankers, bulk freighters, workboats, and ferries. Many of the vessels have Scandinavian owners, typically Norwegian, Swedish or Danish. But why the growing interest?
Crews working on FAS-registered vessels pay a 35-percent income tax and are given proof of payment to avoid double taxation in their home countries; meanwhile shipowners are currently refunded 100 percent of the crew income tax. Under this cash-flow friendly refund scheme, shipowners receive their tax refund already within days after payment of monthly wages.
“The FAS offers a number of competitive advantages,” Mr. á Brúgv said. “Part of it has to with the fact the Faroes is a friendly and uncomplicated place to do business with. For example, the public administration is straight forward and helpful and compared to many other places, it’s a breeze to deal with them. Another important aspect to all of this is the FAS is completely international and devoid of national protectionism. Then you have some very tangible financial and operational advantages including, for example, prompt refund of crew wage taxes and, not to forget, a fiscally very attractive tonnage tax system. Many shipowners, from Scandinavia and from other places around the world, find that these are compelling reasons to consider the FAS as a viable option.”
In the FAS tonnage taxation scheme, each ship is taxed at the fixed rate of 18 percent of taxable revenues, with the taxable revenues calculated from the ship’s net tonnage per on-hire day, according to the table below:
The Faroe Islands is an Associate Member of the International Maritime Organization (IMO) and vessels flying the Faroese flag are included in the ‘White List’ of the Paris Memorandum of Understanding on Port State Control (Paris MoU).
“All relevant IMO/ILO conventions are in force in the Faroes.”
