Ultimate Guide to Tax in Norway
Norway country profile:
European Union: No
Norway is not a member of the European Union (EU), however, it is a member of the European Economic Area (EEA), the European Free Trade Area (EFTA), and it is also a part of the Schengen Area.
Economy & Forms of business:
Over the years the Norwegian economy has become stronger and stronger and in 2022 it has become the country with the 14th freest economy in the world and ranks number 7 in the world in GDP per capita.
The main trade partners for Norway are the United Kingdom, Germany, the Netherlands, and Sweden, and it ranks 38 for both imports and exports in the world.
Norway’s economy strongly relies on its natural resources – petroleum counts for 50% of Norway’s exports and 21% of its GDP. The main and most important industries in Norway’s economy are oil and gas production, seafood, maritime, renewable energy, and tourism.
Double tax treaties of Norway:
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Tax residency in Norway:
A company that is incorporated under Norwegian company law is considered resident for tax purposes in Norway.
A company that is not incorporated under Norwegian company law can be considered resident for tax purposes if the company’s respective management takes place either in or from Norway, meaning that the management at board level and daily management take place in Norway.
There is an exception in instances where the company is resident in Norway and another state under domestic law, but under DTT is considered to be tax resident only of the other state. In this case, the company is treated as non-resident company also under domestic law.
Key tax in Norway for companies: CIT and VAT:
Corporate income tax:
At starting point a resident company in Norway is subject to CIT on its world-wide income. Generally, the CIT in Norway is set at 22% and for certain companies within the financial sector are assessed at a CIT rate of 25%.
Value added tax:
The general value added tax in Norway is 25% and this rate applies to all goods and services that are not subject to other tax rates or are not exempt from tax.
A reduced VAT of 15% applies to supply of foods and beverages (except alcohol and water from waterworks) and this deduction also does not apply to restaurants and other food establishments.
Withholding tax in Norway (to non-resident companies):
Dividends paid by a Norwegian company to non-resident shareholders are as a starting point subject to a 25% withholding tax.
This tax, however, may be reduced by a tax treaty between Norway and another state that has entered into this tax treaty with Norway. This reduction usually is 15%.
Holding rules in Norway:
In 2020, the Norwegian Ministry of Finance introduced a proposal for 2021 state budget, where 15% WHT would be applied on interest, royalties, and certain lease payments to related entities resident in a low-tax jurisdiction. This WHT may be reduced or exempt if there is a tax treaty in place or in cases where the recipient is a company that is established and carrying on genuine economic activities within the European Economic Area (EEA).
CFC rules in Denmark:
Norwegian residents are directly taxed on the allocable part of the profits from a CFC’s income if the company is resident in a low tax country, and it does not matter whether the profit is distributed to the Norwegian investor. A low-tax country, in this situation, is considered to be a country where the taxation of the company’s profits is less than two-thirds than the taxation that would have been due if the company had been resident in Norway. For this, 50% or more of the company’s shares or capital must be held or controlled by Norwegian taxpayers, either directly or indirectly.
If Norwegian taxpayers control or own more than 60% of the shares or capital by the end of the income year, then this control exists irrespective of the control held at the beginning of the income year. If Norwegian taxpayers control or own less than 50% of the shares both at the beginning and at the end of the income year or less than 40% by the end of the income year, then control ceases to exist.
In cases where tax treaties are in place, CFC rules will only be applicable if the income of the entity is mainly of a passive nature.
CFC taxation can be avoided for EEA companies that fulfil certain substance requirements.
Other taxes in Norway:
Taxes on imports in Norway:
There are no customs duties on other products than agricultural products, clothes, and textile products. The tax on agricultural products must be paid upon importation, however, it may be possible to be exempt from this tax if applied for an exemption from the agricultural authorities in advance.
The tax on clothes and other textile product imports comprised by free trade agreements (such as the EEA with the EU) and the General System of Preferences (for developing countries) are exempt.
Excise Tax in Norway:
Excise taxes are calculated on import and domestic production of the following:
– Petroleum products, including gas
– Lubricating oil
– Alcoholic beverages, including beverage packaging
– Beverage packaging (the excise duty on non-alcoholic beverages has been abolished from 1 July 2021, but there is still excise duty on beverage packaging)
– Ethanol for technical purposes
– Sugar (i.e. granulated sugar, icing sugar, refined, pearl sugar, etc.)
– TRI/PER, including products containing the chemicals TRI/PER
– HFC/PFC, including products containing the propellant gases HFC/PFC
– Wild marine resources (i.e. fish, marine mammals, other marine organisms, and plants)
– Fish production (i.e produced salmon, trout, and rainbow trout from fish farms)
– Onshore wind power.
There are also excise taxes related to the following:
– Registration of vehicles
– Use of vehicles, road tax on fuel
– Emissions of NOx
– Sale of electricity
– Flight passengers (the air passenger tax is abolished throughout 2021 due to COVID-19)
– Waste incineration.
Real estate tax(RET)
In Norway not all municipalities impose property tax on real estate, it is up to each municipality to choose whether they wish to impose property tax on real-estate.
This tax may vary between 0.1% and 0.7%, which is decided by the municipality. The tax base will normally be the estimated market value (with some adjustments). The maximum rate for property tax on private residences and leisure properties is 0.4%.
Production equipment and production installations are exempt from property tax from 2019, with a seven-year transitional period.
Taxation period & general information
The taxable period in Norway is the same as the calendar year from 1 January to 31 December. Companies with a financial year other than the calendar year may use the financial year for tax purposes in certain instances (e.g. if they belong to a foreign group with a deviating accounting year, they may also use the financial year of the group for tax purposes.
To find out more about taxes in Norway do not hesitate to contact our tax specialists in Norway by writing us in email: firstname.lastname@example.org or via telephone: +371 26742086