While this overview provides a general understanding of Norway's tax system, it's important to note that tax rates, thresholds, and regulations are subject to change. For the most current and accurate information on tax rates and rules, always consult the official Norwegian Tax Administration website at www.skatteetaten.no.
Corporate Income Tax
Norway imposes a corporate income tax rate of 22% on the net income of resident companies. This rate applies to worldwide income, unless exempted by a tax treaty. Non-resident companies are taxed only on their Norwegian-source income. Partnerships are treated as transparent entities, with taxation occurring at the partner level.
Special tax regimes exist for petroleum resources, shipping income, and hydropower production.
Taxation of Resident Companies
Taxable profit calculation starts with the financial statements, adjusted for differences between accounting and tax rules. Key aspects include:
1. Income Recognition: All income from assets or business activities is generally taxable, including interest, dividends, and capital gains. The participation exemption method often applies to dividend income and gains on shares.
2. Expense Deduction: Costs incurred to acquire, maintain, or safeguard taxable income are generally deductible. However, certain expenses like bribes and dividend payments are non-deductible.
3. Depreciation: Two methods are used - the declining balance method for tangible assets and goodwill (rates vary from 2% to 30%), and the linear method for certain intangibles.
4. Interest Limitation Rule: This rule limits the deductibility of net interest expenses exceeding 25% of EBITDA for companies part of a consolidated group, with a threshold of NOK 25 million for the Norwegian part of the group.
5. Capital Gains and Losses: Capital gains are taxed as ordinary income at 22%. Losses are generally deductible and can be carried forward indefinitely.
6. Participation Exemption Method: This method exempts corporate shareholders from taxation on dividends and gains on shares, with some exceptions and a 3% clawback on dividends for shareholdings less than 90%.
Special Tax Regimes
1. Petroleum Tax: A marginal tax rate of 78% applies (22% corporate tax + 56% special tax), balanced by generous deductions.
2. Tonnage Tax: Shipping companies can opt for a tax based on tonnage rather than profits.
3. Hydroelectric Power Production: Subject to an additional 37% resource rent tax, totaling 59%.
4. Financial Activity Tax: Financial institutions face a 25% corporate tax rate and a 5% tax on total salary costs.
International Aspects
Resident companies (incorporated in Norway or managed from Norway) are taxed on worldwide income. Non-resident companies are taxed on Norwegian-source income, subject to limitations in tax treaties.
Norway follows the OECD Model Convention for most tax treaties. Permanent establishments of foreign companies are taxed on income allocated to the Norwegian business.
Withholding tax of 25% applies to dividends paid to foreign shareholders, often reduced under tax treaties or exempted for EU/EEA corporate shareholders under the participation exemption method.
Exit Taxation
Exit tax applies to individuals on unrealized gains when they cease to be tax residents. Companies face exit taxation on gains when they cease to be Norwegian tax residents or when assets are moved out of Norwegian tax jurisdiction.
Group Taxation
While there's no consolidated group taxation, group contributions allow loss relief within groups. Companies with more than 90% ownership form a tax group, allowing tax-deductible contributions and tax-free asset transfers.
Transfer Pricing
Related-party transactions must follow the arm's-length principle. Extensive documentation requirements apply to companies owning or controlling at least 50% of another entity.
Tax Administration
Companies pay advance tax in February and April following the income year. Tax returns are due by May 31st. Penalties apply for providing misleading or incomplete information.
Anti-avoidance Rules
A general anti-avoidance rule allows transactions to be set aside if the main motive was tax savings and it appears wrong to base taxation on the transaction. A special rule applies to ownership changes aimed at exploiting tax positions.
Individual Taxation
Residents are taxed on worldwide income. Net income is taxed at 22%, with additional rates for employment income (up to 16.2% for high incomes). A social security contribution of 8.2% applies. Wealth tax of 0.85% is levied on net assets exceeding NOK 1,500,000.
Value Added Tax (VAT)
Norway applies a VAT system similar to other OECD countries, with a standard rate of 25% and reduced rates of 15% and 12% for certain goods and services. Key features include:
1. Registration threshold of NOK 50,000 annual turnover.
2. Place of supply rules determine VAT liability for cross-border transactions.
3. Reverse charge mechanism for certain imported services.
4. Bimonthly VAT returns and payments.
5. Capital goods adjustment rules for changes in VAT-liable use over time.
6. Special rules for non-resident enterprises, often requiring VAT representatives.
This comprehensive tax system reflects Norway's approach to balancing revenue generation with economic competitiveness and social welfare objectives.
Conclusion
Norway's tax system is complex and dynamic, with changes often implemented at the start of each calendar year. While this overview provides a general understanding, it's crucial for businesses and individuals to consult www.skatteetaten.noor seek professional advice for the most up-to-date and accurate information relevant to their specific situation.