Norway Corporate Taxation

Taxation in Norway is imposed by the central government, the county municipality (fylkeskommune) and the municipality(kommune). The important taxes are VAT, income tax in the petroleum sector, employers’ social security contributions. Most direct taxes are collected by the Norwegian Tax Administration (Skatteetaten) whereas most of the Indirect Taxes are collected by the Norwegian Customs and Excise Authorities (Toll- og avgiftsetaten). The Corporate taxable profit is at 23% of the rate. The tax base is the total of operating profit/loss, financial revenues and net capital gains minus tax depreciation. The profit is taxed on the owner on the basis of capital gain taxation. 

Contents:

  • Tax rate
  • Capital Gains Taxation
  • Taxable Period
  • Tax returns
  • Payment of the Tax
  • Tax Audit
  • Statute of Limitations
  • Use of Treaty Country Entities by a Non-Treaty Country Resident
  • India-Norway Treaty

Tax Rate

The corporate tax rate is 22%. Certain companies within the financial sector are assessed at a CIT rate of 25%.There are reduced rates for shipping, which is taxed under a tonnage tax regime, and increased rates for some financial services (25%, in addition to increased payroll tax), for upstream activities on the Norwegian Continental shelf (78%) and for the production of hydroelectric power (59% – this does not include wind-generated power).

Dividends from limited companies and distributions from partnerships to an individual are multiplied by a factor of 1.44, and then taxed, resulting in an effective tax rate of 31.68%. This gives a total taxation of 46.7% for the company and owner in total. [1]

Capital Gains Taxation

There is a huge exemption for the company and partnerships taxes on the Capital gains from the equity investments. If the ownership share is less than 90%, 3% of received dividends are taxed at a rate of 22%. The participation exemption does not apply to investments in companies that are resident in low-tax jurisdictions outside the EU/EEA area, and it only applies to holdings above 10%, held for more than two years, if resident in normal tax jurisdictions outside the EU/EEA area. 

Taxable period

A normal income tax year runs from January 1 to December 31. Companies are liable for both advance payments and final settlements in the calendar year of assessment. 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 use the financial year of the group for tax purposes).

Tax Returns

Companies are required to file their tax return by May ( end of their financial year). Upon filing that, an extension until the end of the June to file their tax return can be granted. The tax returns and the basic attachments are necessary for all corporate taxpayers. 

Payment of the Tax

Companies are required to make advance payments of tax on 15 February and 15 April in the year following the income year. The two payments should together cover all of the expected CIT to be assessed, but could be complemented by an additional payment within 31 May to avoid interest on any remaining tax balance. If the remaining tax balance is not paid by 31 May, the company will receive an invoice from the tax authorities which is due for payment three weeks after the assessment has been made public (i.e. in October of the year following the relevant accounting year).

The above applies to all corporate taxpayers, except for taxpayers under the petroleum tax regime, where tax shall be paid in six instalments. [2]

Tax Audit

The Norway tax system is based on the tax return. The Norwegian tax office conducts tax audits based on various selection criterions. The reason for a Tax Audit can be review of the tax return, random selection of companies or business sectors, information obtained from other parties, etc.

Statute of limitations

Norway introduced new statutes of limitations for reassessing tax assessment as of 2017. The general reassessment period is of five years (from the year after the income year in question). A ten-year limit applies in cases where the taxpayer has represented gross negligence. The reassessment period will apply to the income year 2015 going forward. For the years 2012 to 2014, the old reassessment period will, in general, apply to the advantage of the taxpayer.

After the old statutes of limitations, the tax office has out a ten-year limit for reassessing tax assessment (from the year after the income year in question). However, a two-year limit applies for negative adjustments and a three-year limit for positive adjustments if the taxpayer has produced sufficient and correct information in the tax return.

The taxpayer may file an appeal on the resolutions made by the tax authorities within six weeks after they were sent to the taxpayer. The time limit for appealing other decisions is normally three weeks after the tax office’s decision. This is for both under the new and previous rule set.

Use of Treaty Country Entities by Non-treaty Country Residents

There is quite a lot of attention in Norway regarding the use and misuse of tax treaties, although there have not been many cases. Norwegian authorities are anxious to see results from the BEPS initiative, including the LOB (Limitation of benefits) and PPT (principal purpose test) introduced to many treaties as a result of BEPS. Norway has ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the MLI), which entered into force for Norway on 1 November 2019. The MLI will be effective for withholding taxes from 2020 and for other treaty regulations (eg, permanent establishments) from 2021. [3]

Norway-India Treaty

India and Norway today signed a revised tax treaty for exchange of information between the two countries to prevent flows of black money and check tax evasion. The agreement will replace the existing convention signed between the two countries on the same subject on December 31, 1986. The new DTAA provides for the exchange of information, especially the sharing of banking data, between India and Norway. A DTAA is essentially a bilateral agreement between the two countries to avoid the taxation of income earned in one country by both of them. The new agreement will provide for a lower rate of taxation of dividend and interest in the source country. It provides for 10 per cent rate, as against 15 per cent or 25 per cent in the existing Double Taxation Avoidance Convention (DTAC), among other things.

Reference:

  1. https://www.oecd.org/tax/tax-policy/revenue-statistics-highlights-brochure.pdf
  2. https://www.regjeringen.no/en/id4/ 
  3. https://www.oecd.org/general/governmentofnorwayusefullinks.htm

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