Negative interest may be tax deductible

BankNordik claims that negative interest paid by private clients is tax deductible.

Negative deposit interest means that instead of receiving money on deposits in the form of interest, depositors must pay regularly to keep their money with the bank.

BankNordic will introduce negative deposit interest for private clients on 1 March.

 >> SEE ALSO Negative interest rates for private bank clients

The capital gains tax rate in the Faroes is 35 percent. According to the bank, when people lose money, or capital, for instance due to losses from shares, they can deduct 35 percent of the lost amount in their tax returns.

The bank reports its total interest expenditure to tax authority Taks at the end of each calendar year.

 >> SEE ALSO Betri bank introduces negative interest rates

According to Taks, however, it is not clear whether negative interest is tax deductible, and an investigation has been launched to find out whether the law needs to be changed to allow for tax deduction of negative interest.

All Faroese banks introduced negative deposit rates for business clients last year.

BankNordik is so far the only bank to announce negative deposit rates for private clients.

Translated by prosa.fo