Corporate tax in Norway

Summary

Corporate Income Tax Rate (%) 25
Capital Gains Tax Rate (%) 25
Branch Tax Rate (%) 25
Withholding Tax (%)
Dividends 25 (a)
Interest 0
Royalties from Patents, Know-how, etc. 0
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 0 (b)
Carryforward Unlimited

a) This tax applies to dividends paid to nonresident shareholders. Dividends paid to corporate shareholders that are tax residents and genuinely estab­lished in member states of the European Economic Area (EEA) (including the European Union [EU], Iceland and Liechtenstein) are exempt from with­holding tax.

b) See Section C.

Taxes on corporate income and gains

Corporate income tax. In general, resident companies are subject to corporate income tax on worldwide income. However, profits and losses on upstream petroleum activities in other jurisdictions are exempt from Norwegian taxation. Nonresident companies are subject to corporate income tax on income attributable to Norwe­gian business operations.

A company is tax resident in Norway if it is legally incorporated in Norway or if its central management and control are effectively exercised in Norway.

Rates of corporate tax. For 2016, the corporate tax rate is 25%.

In addition to the general income tax of 25%, a special petroleum tax of 53% applies to income from oil and gas production and from pipeline transportation. A special power production tax of 33% applies on top of the general income tax of 25% for the generation of hydroelectric power.

Qualifying shipping companies may elect a special shipping tax regime instead of the ordinary tax regime. Under the shipping tax regime, profits derived from shipping activities are exempt from income tax. However, companies electing the shipping tax regime must pay an insignificant tonnage excise tax. Financial income is taxed at a rate of 25%.

Capital gains. In general, capital gains derived from the disposal of business assets and shares are subject to normal corporate taxes. However, for corporate shareholders, capital gains derived from the sale of shares in limited liability companies, partnerships and certain other enterprises that are qualifying companies under the tax exemption system are exempt from tax. This tax exemp­tion applies regardless of whether the exempted capital gain is derived from a Norwegian or a qualifying non-Norwegian com­pany. In general, life insurance companies and pension funds are not covered by the tax exemption regime.

For companies resident in another EEA member state (the EEA includes the EU, Iceland, Liechtenstein and Norway), the exemp­tion applies regardless of the ownership participation or holding period. However, if the EEA country is regarded as a low-tax jurisdiction (as defined in the Norwegian tax law regarding con­trolled foreign companies [CFCs]; see Section E), a condition for the exemption is that the EEA resident company be actually estab­lished and carrying out genuine economic activities in its home country.

For non-EEA resident companies, the exemption does not apply to capital gains on the alienation of shares in the following com­panies:

  • Companies resident in low-tax jurisdictions, as defined in the Norwegian tax law regarding CFCs; see Section E)
  • Companies of which the corporate shareholder has not held at least 10% of the capital and the votes in the company for more than two years preceding the alienation

The right of companies to deduct capital losses on shares is basi­cally eliminated to the same extent that a gain would be exempt from tax.

The exit from Norwegian tax jurisdiction of goods, merchandise, intellectual property, business assets and other items triggers capital gains taxation as if such items were sold at the fair market price on the day before the day of exit. The payment of the exit tax on business assets, financial assets (shares) and liabilities may be deferred if the taxpayer remains tax resident within the EEA. However, the deferred tax must be paid in equal installments over a period of seven years, calculated from the year of exit. Interest is calculated on the deferred tax amount. If a genuine risk of non­payment of the deferred tax exists, the taxpayer must furnish security or a guarantee for the outstanding tax payable. No defer­ral of the tax is available for intangible assets and inventory.

Administration. The annual tax return is due 31 March for account­ing years ending in the preceding calendar year. The deadline is extended to 31 May if the tax return is submitted electronically. Assessments are made in the fourth quarter of the year in which the return is submitted (normally October). Tax is paid in three installments. The first two are paid on 15 February and 15 April, respectively, each based on 1/2 of the tax due from the previous assessment. The last installment represents the difference between the tax paid and the tax due, and is payable three weeks after the issuance of the assessment. Interest is charged on residual tax.

Dividends. An exemption regime with respect to dividends on shares is available to companies if the distribution is not deduct­ible for tax purposes at the level of the distributing entity. How­ever, the 100% tax exemption is limited to 97% if the recipient of the dividends does not hold more than 90% of the shares in the distributing company and a corresponding part of the votes that may be given at the general meeting (that is, the companies do not constitute a tax group of companies). In such cases, the remaining 3% of the dividends is subject to 25% taxation, which results in an effective tax rate of 0.75%.

The tax exemption applies regardless of the ownership participa­tion or holding period if the payer of the dividends is a resident in an EEA member state. However, if the EEA country is regard­ed as a low-tax jurisdiction, conditions for the exemption are that the EEA resident company be actually established and carrying out genuine economic activities in its home country and that Nor­way and the EEA country have a treaty containing exchange-of-information provisions. As of 2016, all of Norway’s treaties with EEA countries have such provisions.

For non-EEA resident companies, the exemption does not apply to dividends paid by the following companies:

  • Companies resident in low-tax jurisdictions as defined in the Norwegian tax law regarding CFCs (see Section E)
  • Other companies of which the recipient of the dividends has not held at least 10% of the capital and the votes of the payer for a period of more than two years that includes the distribution date

Dividends paid to nonresident shareholders are subject to a 25% withholding tax. The withholding tax rate may be reduced by tax treaties. Dividends distributed by Norwegian companies to corpo­rate shareholders resident in EEA member states are exempt from withholding tax. This exemption applies regardless of the owner­ship participation or holding period. However, a condition for the ex emption is that the EEA resident company be actually estab­lished and carrying out genuine economic activities in its home country.

Foreign tax relief. A tax credit is allowed for foreign tax paid by Norwegian companies, but it is limited to the proportion of the Norwegian tax that is levied on foreign-source income. Separate limitations must be calculated according to the Norwegian tax treatment of the following two different categories of foreign-source income:

  • Income derived from low-tax jurisdictions and income taxable under the CFC rules
  • Other foreign-source income

For dividend income taxable in Norway, Norwegian companies holding at least 10% of the share capital and the voting rights of a foreign company for a period of more than two years that includes the distribution date may also claim a tax credit for the underlying foreign corporate tax paid by the foreign company, provided the Norwegian company includes an amount equal to the tax credit in taxable income. In addition, the credit is also available for tax paid by a second-tier subsidiary, provided that the Norwegian parent indirectly holds at least 25% of the second-tier subsidiary and that the second-tier subsidiary is a resident of the same country as the first-tier subsidiary. The regime also applies to dividends paid out of profits that have been retained by the first- or second-tier sub­sidiary for up to four years after the year the profits were earned. The tax credit applies only to tax paid to the country where the first- and second-tier subsidiaries are resident.

Determination of taxable income

General. Although taxable income is based on book income shown in the annual financial statements (which must be prepared in ac­cordance with generally accepted accounting principles), the tim­ing of income taxation is based on the realization principle. Con­sequently, the basic rules are that an income is taxable in the year in which the recipient obtains an unconditional right to receive

the income, and an expense is deductible in the year in which the payer incurs an unconditional obligation to pay the expense. In general, all expenses, except gifts and entertainment expenses, are deductible.

Inventory. Inventory is valued at cost, which must be determined on a first-in, first-out (FIFO) basis.

Depreciation. Depreciation on fixed assets must be calculated us­ing the declining-balance method at any rate up to a given max­imum. Fixed assets (with a cost of more than NOK15,000 and with a useful life of at least 3 years) are allocated to one of the following 10 different groups.

Group Maximum depreciation rates (%)
A Office equipment and similar items 30
B Acquired goodwill 20
C Specified vehicles
Trailers, trucks and buses 22
Commercial vehicles, taxis and vehicles for
the transportation of disabled persons
20
D Cars, tractors, other movable machines,
other machines, equipment, instruments,
furniture, fixtures and similar items
20*
E Ships, vessels, drilling rigs and similar items 14
F Aircraft and helicopters 12
G Installations for transmission and distribution
of electric power, electronic equipment
in power stations and such production
equipment used in other industries
5
H Industrial buildings and industrial installations, hotels, rooming houses, restaurants and certain other structures
Useful life of 20 years or more 4
Useful life of less than 20 years 10
Livestock buildings in the agricultural sector 6
I Office buildings 2
J Technical installations in buildings 10

* The rate is 30% in the acquisition year.

Assets in groups A, B, C and D are depreciated as whole units, while assets in groups E, F, G, H, I and J are depreciated individ­ually.

If fixed assets in groups A, B, C and D are sold, the proceeds reduce the balance of the group of assets and consequently the basis for depreciation. If a negative balance results within groups A, C or D, part of the negative balance must be included in income. In general, the amount included in income is determined by multi­plying the negative balance by the depreciation rate for the group. However, if the negative balance is less than NOK15,000, the en – tire negative balance must be included in taxable income.

A negative balance in one of the other groups (B, E, F, G, H, I and J) must be included in a gains and losses account. Twenty percent of a positive balance in this account must be included annually in taxable income.

The depreciation rate for assets in Group D is increased by 10 per­centage points in the acquisition year. As a result, the total depre­ciation rate for assets in Group D in the acquisition year is 30%.

Relief for losses. A company holding more than 90% of the shares in a subsidiary may form a group for tax purposes. Intragroup contributions to set off profits in one company against losses in another may be made if included in the statutory accounts.

Alternatively, losses may be carried forward indefinitely. Losses can only be carried back when a line of business has been termi­nated. Losses may be carried back to offset profits of the preced­ing two years.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax, on any supply of goods
and services, other than an exempt supply,
in Norway
General rate 25
Articles of food 15
Passenger transportation 10
Social security contributions, on all taxable
salaries, wages and allowances, and on
certain fringe benefits; paid by
Employer (general rates; lower in some
municipalities and for employees age
62 and over)
14.1
Employee (expatriates liable unless exempt
under a social security convention)
8.2
Professional income 11.4
Pensioners and persons under 17 years old 5.1

Miscellaneous matters

Anti-avoidance legislation. Based on general anti-avoidance prin­ciples developed by court and administrative practice, substance prevails over form. The tax authorities may disregard transactions or structures if the dominant motive is to save taxes and the tax effects of entering into the transaction or structure are regarded as disloyal to the tax system.

Foreign-exchange controls. Norway does not impose foreign-exchange controls. However, foreign-exchange transactions must be carried out by approved foreign-exchange banks.

Debt-to-equity rules. Norway does not have statutory thin-capital­ization rules. Based on general anti-avoidance principles, the tax authorities may deny an interest deduction on a case-by-case basis if they find that the equity of the company is not sufficient (for example, the Norwegian debtor company is not able to meet its debt obligations). An allocation rule regulates the deductibil­ity of interest expenses for income subject to petroleum tax.

Norway has interest limitation rules. Under these rules, interest expenses paid to related parties that exceed 25% of “tax EBITDA,” which is defined as ordinary taxable income with the add-back of tax depreciation and net interest expenses, are nondeductible.

These rules impose a general restriction on interest deductibility, which applies to corporations and transparent partnerships as well as Norwegian permanent establishments of foreign companies. The restriction applies to interest payments made to related parties in both domestic and cross-border situations. Companies taxed under the tonnage tax regime and under the hydropower tax re­gime are also subject to the interest restrictions. However, entities subject to the Norwegian Petroleum Tax Act are not yet covered by the rules.

Under the rules, a related party is a person, company or entity if, at any point during the fiscal year, any of the following is true:

  • It directly or indirectly controls at least 50% of the debtor.
  • It is a company or entity of which the debtor directly or indi­rectly controls at least 50%.
  • It is a company or entity that is at least 50% owned directly or indirectly by the same company or entity as the debtor.

In general, interest expenses that cannot be deducted during the fiscal year can be carried forward for 10 years. However, the in­terest expenses carried forward cannot exceed 25% of the basis of the calculation to be made in any future year. Any carryforward of non-deducted interest expenses must be deducted before the current year’s interest expenses.

The interest deduction rules apply only if net interest expenses ex­ceed NOK5 million. If the threshold is surpassed, all interest ex­penses become nondeductible, including the first NOK5 million.

Controlled foreign companies. Norwegian shareholders in controll­ed foreign companies (CFCs) resident in low-tax jurisdictions are subject to tax on their allocable shares of the profits of the CFCs, regardless of whether the profits are distributed as dividends. A CFC is a company of which 50% or more of its shares is directly or indirectly owned or controlled by Norwegian residents. A low-tax jurisdiction is a jurisdiction with an effective corporate tax rate for that kind of company that is less than two-thirds of the Norwegian effective tax rate that would have been imposed if the taxpayer had been resident for tax purposes in Norway. The CFC rules do not apply to the following CFCs:

  • A CFC resident in a country with which Norway has entered into a tax treaty if the income of the CFC is not of a predomi­nantly passive nature.
  • A CFC resident in an EEA member country if such CFC is actually established and carries out genuine economic activities in its home country and if Norway and the home country have entered into a treaty containing exchange-of-information provi­sions. As of 2016, all of Norway’s treaties with EEA countries have such provisions.

The losses of a CFC may not offset the non-CFC income of an owner of the CFC, but they may be carried forward to offset future profits of the CFC.

Transfer pricing. Norwegian law allows the tax authorities to im – pute arm’s-length prices if transactions between related parties are not considered to be at arm’s length.

As an attachment to the annual tax return, Norwegian companies and Norwegian permanent establishments must report summary information about transactions with affiliated companies.

Norwegian companies and Norwegian permanent establishments must prepare and maintain written documentation describing certain transactions with related parties. To avoid a deemed tax assessment, such documentation must be pre sented to the tax authorities no later than 45 days after it has been requested. The statutory limitation for providing such documentation is 10 years.

Companies belonging to a group of companies with less than 250 employees may be exempted from the documentation require­ment if the group has sales revenue of less than NOK400 million or a balance sheet total of less than NOK350 million. The ex – emption does not apply if the Norwegian entity has transactions with related parties located in countries from which Norwegian tax authorities cannot claim exchange of information under a treaty. The ex emption also does not apply to companies subject to tax under the Norwegian Petroleum Tax Act.

Treaty withholding tax rates

Interest and royalties paid to foreign recipients are not subject to withholding tax under Norwegian domestic law. Consequently, the following table provides treaty withholding tax rates for divi­dends only.

Dividends (a)
Normal rate (%) Reduced rate (%)
Albania 15 5 (c)
Argentina 15 10 (c)
Australia 15 0/5 (d)(o)
Austria (a) 15 0 (p)
Azerbaijan 15 10 (k)
Bangladesh 15 10 (d)
Barbados 15 5 (d)
Belgium (a)(b) 15 5 (c)
Benin 20
Bosnia and Herzegovina (f) 15
Brazil (l) 25
Bulgaria 15 5 (d)

 

     
 
Canada 15 5 (d)
Chile 15 5 (c)
China (n) 15
Côte d’Ivoire 15
Croatia (f) 15
Cyprus (a) 5 0 (d)
Czech Republic (a) 15 0 (d)
Denmark (a)    
(Nordic Treaty) 15 0 (d)
Egypt (b) 15
Estonia (a) 15 5 (c)
Faroe Islands    
(Nordic Treaty) 15 0 (d)
Finland (a)    
(Nordic Treaty) 15 0 (d)
France (a) 15 0/5 (i)
Gambia 15 5 (c)
Georgia 10 5 (d)
Germany (a) 15 0 (c)
Greece (a) 20
Greenland 15 5 (d)
Hungary (a) 10
Iceland (a)    
(Nordic Treaty) 15 0 (d)
India 10
Indonesia 15
Ireland (a) 15 5 (d)
Israel (b) 15 5 (g)
Italy (a)(b) 15
Jamaica 15
Japan 15 5 (c)
Kazakhstan 15 5 (d)
Kenya 25 15 (c)
Korea (South) 15
Latvia (a)(b) 15 5 (c)
Lithuania (a) 15 5 (c)
Luxembourg (a) 15 5 (c)
Macedonia 15 10 (c)
Malawi 15 5 (d)
Malaysia (b) 0
Malta (a) 15 – (s)
Mexico 15 0 (c)
Montenegro (f) 15
Morocco 15
Nepal 15 5/10 (h)
Netherlands (a) 15 0 (c)
Netherlands Antilles 15 5 (c)
New Zealand (b) 15
Pakistan 15
Philippines 25 15 (d)
Poland (a) 15 0 (d)
Portugal (a) 15 5 (t)
Qatar 15 5 (d)
Romania (b) 10

 

Russian Federation 10
Senegal 16
     
Serbia 15 5 (c)
Sierra Leone 5 0 (g)
Singapore (b) 15 5 (c)
Slovak Republic (b) 15 5 (c)
Slovenia 15 0 (r)
South Africa 15 5 (c)
Spain (a) 15 10 (c)
Sri Lanka 15
Sweden (a)    
(Nordic Treaty) 15 0 (d)
Switzerland (b) 15 0 (m)
Tanzania 20
Thailand 15 0 (d)
Trinidad and Tobago 20 10 (c)
Tunisia 20
Turkey 15 5 (q)
Uganda 15 10 (c)
Ukraine 15 5 (c)
United Kingdom (a) 15 0 (u)
United States (b) 15
Venezuela 10 5 (d)
Vietnam 15 5/10 (j)
Zambia (b) 15
Zimbabwe 20 15 (c)
Non-treaty countries 25

a) Dividends paid to corporate residents of EEA member states are exempt from withholding tax if the EEA resident company is really established in its home country.

b) A revision of this treaty is currently being negotiated. The revised treaties with Belgium, Romania and Zambia have been signed, but they have not yet entered into force. Also, see the first paragraph after the footnotes.

c) The treaty withholding rate is increased if the recipient is not a company owning at least 25% of the distributing company.

d) The treaty withholding rate is increased if the recipient is not a company owning at least 10% of the distributing company.

e) Norway honors the Czechoslovakia treaty with respect to the Slovak Republic. Norway has entered into a tax treaty with the Czech Republic. The withhold­ing tax rates under the Czech Republic treaty are shown in the above table.

f) Norway honors the suspended Yugoslavia treaty with respect to Bosnia and Herzegovina, Croatia and Montenegro.

g) The treaty withholding rate is increased if the recipient is not a company holding at least 50% of the voting power of the distributing corporation.

h) The 5% rate applies if the recipient is a company owning at least 25% of the distributing company. The rate is increased to 10% if the recipient is a com­pany owning at least 10%, but less than 25%, of the distributing company. For other dividends, the rate is 15%.

i) The treaty withholding rate is increased to 15% if the recipient is not a cor­poration owning at least 25% of the distributing company. However, the rate is 5% if the recipient is a French corporation owning at least 10%, but less than 25%, of the distributing company.

j) The 5% rate applies if the recipient of the dividends owns at least 70% of the capital of the Norwegian payer. The rate is increased to 10% if the recipient owns at least 25%, but less than 70%, of the Norwegian payer. For other dividends, the rate is 15%.

k) The treaty withholding rate is increased to 15% if the recipient is not a com­pany that satisfies both of the following conditions:

  • It owns at least 30% of the capital of the distributing company.
  • It has invested more than USD100,000 in the payer.

l) Norway has signed a protocol to its tax treaty with Brazil, but the protocol has not yet entered into force.

m) The 0% rate applies if the recipient is a company that owns at least 20% of the distributing company.

n) The Hong Kong and Macau Special Administrative Regions (SARs) are not covered by the China treaty.

o) The rate is 0% if the corporate recipient of the dividends owns at least 80% of the voting power in the distributing company and if certain other criteria are met.

p) The 0% rate applies if the recipient is a company.

q) The treaty withholding rate is increased if the recipient is not a company owning at least 20% of the distributing company.

r) The treaty withholding rate is increased if the recipient is not a company owning at least 15% of the distributing company.

s) The treaty withholding rate is increased if the recipient does not directly own at least 10% of the distributing company for a minimum of 24 months, includ­ing the time of the dividend distribution.

t) The treaty withholding tax rate is increased if the recipient is not a company directly owning at least 10% of the distributing company for the last 12 months. If the distributing company has existed for less than 12 months, the recipient must satisfy the 10% condition since the date on which the distributing com­pany was established.

u) The treaty withholding tax rate is increased if the recipient is not a company owning, directly or indirectly, at least 10% of the distributing company or is a pension scheme.

In addition to the countries mentioned in footnotes (b) and (l) above, Norway is currently negotiating or renegotiating tax trea­ties with Egypt, Israel, Italy, Latvia (protocol), Liechtenstein, Malaysia, New Zealand, Singapore, the Slovak Republic, Switzer­land (protocol) and the United States.

Norway has entered into exchange-of-information tax treaties with Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Belize, Bermuda, British Virgin Islands, Brunei Darus-salam, Cayman Islands, Cook Islands, Costa Rica, Dominica, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Liberia, Lich­tenstein, Macau, Marshall Islands, Mauritius, Monaco, Montserrat, Niue, Panama, St. Lucia, Samoa, Seychelles, St. Kitts and Nevis, St. Vincent and the Grenadines, San Marino, the Turks and Caicos Islands, the United States and Uruguay.

In addition, Norway is currently negotiating exchange-of-information tax treaties with Botswana, Guatemala, the Hong Kong SAR, the United Arab Emirates and Vanuatu.