Faroe Islands
Overall findings
Overall determination on the legal framework: In Place But Needs Improvement
The Faroe Islands’ legal framework implementing the AEOI Standard is in place but needs improvement in order to be fully consistent with the requirements of the AEOI Terms of Reference. While the Faroe Islands’ international legal framework to exchange the information with all of the Faroe Islands’ Interested Appropriate Partners (CR2) is consistent with the requirements, its domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has deficiencies significant to the proper functioning of elements of the AEOI Standard. More specifically, the Faroe Islands’ legislative framework does not include rules requiring Reporting Financial Institutions to keep records in accordance with the requirements.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Conclusions on the legal framework
General context
The Faroe Islands commenced exchanges under the AEOI Standard in 2017.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, the Faroe Islands:
enacted the Faroese Tax Act No. 86 of 1 September 1983 (amended by Act No. 50 of 6 May 2016); and
introduced the Regulation No. 11 of 19 February 2016, as amended in 2017 and in 2019.
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.
Following the initial Global Forum peer review, the Faroe Islands made various amendments to its legislative framework to address issues identified, the last of which will be effective from 1 January 2021.
With respect to the exchange of information under the AEOI Standard, the Faroe Islands:
Detailed findings
The detailed findings for the Faroe Islands are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (www.oecd.org/tax/transparency/documents/aeoi-terms-of-reference.pdf).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Determination: In Place But Needs Improvement
The Faroe Islands’ domestic legislative framework is in place and contains most of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures, but it needs improvement in relation to the framework to enforce the requirements (SR 1.4). More specifically, the Faroe Islands’ legislative framework does not include complete rules requiring Reporting Financial Institutions to keep records in accordance with the requirements.
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
The Faroe Islands has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
The Faroe Islands has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
The Faroe Islands has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
The Faroe Islands has a legislative framework in place to enforce the requirements in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. More specifically, the Faroe Islands’ legislative framework does not include rules requiring Reporting Financial Institutions to keep records in accordance with the requirements. This is a key element of the required enforcement framework and is therefore material to the proper functioning of the AEOI Standard.
The Faroe Islands should amend its domestic legislative framework to require Reporting Financial Institutions to keep records of the steps undertaken and any evidence relied upon for the performance of the due diligence procedures, rather than only of the steps taken.
The Faroe Islands should amend its domestic legislative framework to require Reporting Financial Institutions to maintain records for at least five years from the deadline to report the information, in accordance with the AEOI Standard.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
The Faroe Islands’ international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of the Faroe Islands’ Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from The Faroe Islands and that meet the required standard in relation to confidentiality and data safeguards). (SRs 2.1 – 2.3)
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
The Faroe Islands has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
The Faroe Islands put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
The Faroe Islands’ exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.