The government of the Faroe Islands has restructured its tax model for salmon farming with the aim of providing greater stability and predictability for the industry.
This new framework, effective from 1 January 2025, is part of a long-term agreement extending until 2032.
Key changes the restructuring has introduced include a decrease in the maximum revenue tax rate from 20 percent to 7.5 percent. This tax is also now based on the SISALMONI index as the price reference, replacing the previous FishPool index used for the tax.
While the recently restructured model includes a favorable reduction in the maximum revenue tax rate for producers, it also introduced a new corporate tax of 12 percent, specifically targeting income accrued from the at-sea farming phase of salmon production.
This is in addition to the standard corporate tax rate of 18 percent, bringing the total corporate tax rate for marine-farming activities to 30 percent.
This has caused apprehension among salmon-farming firms, including Hiddenfjord.
“We like the lower revenue tax, of course, but if it was only this tax, it would be a lot better,” Hiddenfjord CEO and Owner Atli Gregersen told SeafoodSource. “This system that we have now could lead sites to go out of business, even though they are viable. This is because these farming systems will make a negative net income after tax.”
Another change is that the average production cost used to determine the applicable revenue tax rate will now be a simple average across the three major salmon-farming companies in the Faroes: Hiddenfjord, Bakkafrost, and Mowi Faroes. For 2025, this average production cost is set at DKK 44.77 (USD 6.15, EUR 6.00) per kilogram.
The new system replaces a monthly revenue tax on harvested fish ranging between 0.5 and 20 percent. The percentage paid by salmon-farming firms depended on the difference between the weighted average production cost for the Faroese industry and the FishPool Index price – a system which was deeply unpopular among producers throughout its short lifespan, according to Gregersen.
“This time last year, we were paying a maximum of 20 percent. This was bad for us, with such a big part going to the state,” Gregersen said. “That system, which was only around for about a year, was not good. Before that, we just had to pay a 5 percent maximum of the sales price and no tax. We preferred that.”
Bakkafrost said that the previous system forced it to reduce the share of volumes sold on long fixed-price contracts and downsize its value-added production and staffing.
Bakkafrost CEO Regin Jacobsen told SeafoodSource he would comment on the new taxation model in the producer’s next quarterly presentation, scheduled to take place on 18 February.
Despite changes to the tax structure and macroeconomic uncertainties, Hiddenfjord is looking forward to the year ahead and building on its “strong market positions” in both the U.S. and Europe.
“Things are looking very good for us at the moment,” he said. “Demand is increasing, and we have strengthened our brand in these markets.”
Hiddenfjord is also now building its presence in Asian markets, with strong interest particularly coming from both China and Korea. For these, it is ramping up its production of vacuum-packed frozen fillets, Gregersen said, as the company has committed to abandoning airfreight in its operations.
Both the Faroe Islands and Norway have recently revised their taxation frameworks for salmon farming, but their approaches to doing so have differed.
Norway's tax structure leads to a higher combined tax rate of 47 percent, comprising a resource rent tax of 25 percent on the value created during the at-sea phase of salmon production and a standard 22 percent corporate tax rate. The resource tax is applicable when a company’s profits exceed NOK 70 million (USD 6.4 million, EUR 5.9 million).
When introduced, salmon-farming firms in the country like SalMar and Mowi vowed to fight the tax, claiming that it would bite into profits and hinder future investments.
“[SalMar] will continue to argue for a review of the tax system and tax level for Norwegian aquaculture through close and fact-based dialogue with [the] authorities and decision-makers,” SalMar CEO Frode Arntsen said in 2023.
Mowi CEO Ivan Vindheim also said in 2023 he hopes to influence Norway’s 2025 elections, which he hopes will result in a “new government with a more business-friendly policy.”
Mowi's attempts to change the tax structure in court failed in 2024.
