A brief summary
1. INTRODUCTION
The taxation system in Norway is based on direct and indirect taxation including
- income taxes (individuals and companies)
- asset taxes (individuals)
- value added tax on goods and some services
- investment tax
- customs and excise duties
- stamp duty on transfer of property
- inheritance and gift tax
- social security taxes
The tax system in Norway is complex and has been subject to frequent changes, especially through a major change of the income tax system in 1992 (Tax Reform 1992).
I will below give av brief presentation of the system as it works in Norway, but will underline that when investing in Norway, one should always bear the tax aspects in mind and seek counsel, when appropriate.
2. TAX ADMINISTRATION
The body having authority to implement taxes, is the Parliament of Norway (Stortinget). This is done partly through general legislation and annual tax resolutions.
The executive body is the King (i.e. Ministry of Finance), and under here the Tax Directorate and the local tax offices.
The Acts of Parliament are normally supplemented by various provisions issued by the Ministry of Finance.
The assessment, collection and control of the various taxes are mainly carried out by the Tax Directorate, the county tax offices (VAT), the local assessment offices, the central office for foreign tax affairs, the county and local tax collectors and the customs authorities.
The tax year corresponds with the calendar year and individuals shall file their tax returns within the end of January and corporations within the end of February. These dates may be extended on application.
3. CORPORATE INCOME TAXATION
Norwegian companies are in principle liable to tax on their total income including capital gains, on a worldwide basis. So called ordinary income, which is net taxable income based on profits shown in the accounts, adjusted for tax purposes, including capital gains and losses, is taxable at a flat rate of 28 %.
Taxes accrued fall due the year after the tax year, normally to be paid on a preliminary basis in installments by 15th of February and 15th of April. The final adjustments to be paid in two installments, 15th of September and 15th of November, or if a surplus amount has been paid, to be returned after the assessment.
In Norway, the reducing balance system of depreciation is practiced, dividing the physical assets and goodwill into various groups with different depreciation rates.
The costs related to depreciation and capital gains taxation of intangible assets may as a general rule be deducted the year the costs are incurred or capitalized. Depreciation of acquired intangible assets with the exception of acquired or purchased goodwill, shall not be written down faster than their actual commercial fall in value. Inventory and bad debts may in principle not be written down, only when actually incurred, with some exceptions.
As a general rule, tax losses may be carried forward for up to ten years, but is stopped if the company ceases to run the activity that has resulted in the loss. The right to carry forward may in some other cases also be lost or reduced.
The tax regulations open for group contributions if the companies giving and receiving the contributions are more than 90 % owned by the same ultimate parent company, whether this is a Norwegian or a foreign company. Such contribution is deductible/taxable for the transferee and the transferor respectively.
Dividends are in principle taxable, with a tax credit for corporate taxes of the distributing company.
Dividends from foreign companies are taxable as ordinary income in this country, normally with a tax credit for foreign withholding taxes.
Profits of a Norwegian branch of a non-resident company are subject to ordinary income tax as resident company, i.e. 28 %.
4. INDIVIDUAL TAXATION
Individuals resident in Norway are in principle taxable for their wold-wide income and assets, unless otherwise is provided for by act or a tax treaty with the respective foreign country. Non-resident individuals are taxable for income from Norwegian sources and certain Norwegian property, including
- income from employment’s
- income from business activity in Norway
- dividends from Norwegian companies
- certain forms of capital gains on property and shares.
The tax system for individuals is based on ordinary income and personal income, as well as tax on assets and is a progressive system.
Ordinary income is based on net taxable income, i.e. gross income minus deduction for deductible expenses and capital losses/costs. The net income is taxed at a flat rate of 28 % of the income exceeding a certain level, appr. NOK 50.000 for married couples and singles with dependents, and NOK 25.000 for singles.
Personal income is income arising from individual efforts and employment, and will be calculated for employees, sole traders and individuals receiving social benefits. This figures form the basis for calculating social security contributions, and a top tax.
The maximum taxation percentage for individuals is at the moment 44,7 % for retired pensioners, 49,2 % for employed individuals and 52,4 % for self-employed individuals.
There are certain provisions for residents residing less than a whole year in this country.
Dividends are in principle taxable as an ordinary income. There is however given a tax credit equaling in principle this tax, giving the result that the tax in reality paid by the company giving dividend.
Capital gains are taxed as ordinary income (28 %) and capital losses are deductible with the same rate. As a general rule, disposal of private residences and holiday homes, as well as personal belongings and furniture, is tax exempt.
Foreign employees staying in Norway up to a maximum of four years may claim a standard deduction of 15 % on their income, instead of itemized deductions.
Share holders resident outside Norway are subject to dividend withholding tax (25 % unless otherwise laid down in a tax treaty), but are not given credit for corporate taxes, resulting in higher taxation than for resident individuals. Interests from Norway are not subject to any withholding tax.
5. TAX TREATIES
At the moment, Norway has entered into tax treaties with approximately 65 other countries, including a multi-lateral treaty between the Nordic (Norway, Denmark, Sweden, Finland and Iceland) countries. The purpose of the treaties is to avoid double taxation.
6. SOCIAL SECURITY CONTRIBUTIONS
All employers have to pay a contribution based on the salary of the employees and the location in Norway. The percentage vary from 0 % - 14,1 %, dependant on the localization of the employers business.
In addition, individuals will have to pay social security contributions at three different rates, varying from 3 % (pensioners) to 7,8% - 10,7 % depending on income and activity.
At the moment, Norway has social security agreements with approximately 15 other countries.
7. VALUE ADDED TAX
Goods with some minor exceptions (books, papers and some other objects) are subject to value added tax, which at the moment is a flat percentage of 23. Some services related to goods are also subject to the same VAT.
There is no VAT on goods or services for export.
8. INVESTMENT TAX
There is an investment tax payable by VAT registered companies, which get deductions of ingoing VAT on capital investments. Instead an investment tax of presently 7 % is payable.
9. INHERITANCE AND GIFT TAX
Inheritance and gift tax is laid down on all inheritance and some gifts. The tax is progressive and in two classes, dependent on the receiver's relationship with the deceased or the giver. The tax varies from 0 - 30 %.
10. TRANSFER/STAMP DUTIES
Most forms of transfer of ownership of real estates are subject to a stamp duty, which at the moment is 2,5 % of the property's real value. This means that if the transfer takes place at a value less than market value, the duty is in principle based on the market value.
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The information contained in this brief is given in good faith, and is believed to be correct. However, no responsibility for errors or omissions shall be attached to this law firm and to Euro-American Lawyers Group. The information is provided for guidance only for use of member firms of Euro-American Lawyers Group and their clients, and shall not be relied upon in substitution for advice from the member firm in the relevant jurisdiction.
