Norway Personal Income Tax

Individuals resident in Norway are subject to tax on their worldwide income. Nonresidents are taxable on Norwegian-source income only. Wages and remuneration may be considered Norwegian-source even if an employer has no permanent estab­lishment in Norway.

Individuals present for a period or periods exceeding in aggre­gate 183 days in any 12-month period or 270 days in any 36-month period are considered to be resident for tax purposes. After emigrating from Norway, an individual continues to be considered a resident for tax purposes if the individual, or some­one closely related to him or her, maintains a home in Norway. After emigrating from Norway, an individual who does not main­tain a home in Norway is considered to be a resident if the indi­vidual stays in Norway for more than 61 days per income year.

Notwithstanding the conditions mentioned above, an individual who has been resident in Norway for more than 10 years is con­sidered to be resident for tax purposes in the three-year period after emigration and for as long as he or she maintains a home in Norway or stays in Norway for more than 61 days during a year.

Special rules may apply to individuals working on the Norwegian Continental Shelf.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Taxable income generally includes salaries and wages, bonuses, directors’ fees, benefits in kind, annuities and pensions, whether the benefit is earned over a period of time, occasionally or on a single occasion. Most allowances and fringe benefits are considered taxable income.

Nonresidents are subject to tax at various rates on income earned from work carried out in Norway and on wages earned on ships registered with the Norwegian common shipping register.

Self-employment and business income. Residents are subject to tax on worldwide self-employment and business income. Non­residents are subject to tax if they engage or participate in busi­ness or other economic activities carried on or administered in Norway. Further more, persons with assets in Norway in the form of real property or tangible assets are subject to tax on income derived from such assets at the ordinary 25% rate described in Rates. Special rules may apply to shipping activities.

The special tax regime for active owners was abolished, effective from 1 January 2006.

Partnerships are subject to so-called net assessment. The partner­ship model applies to general partnerships (ANS), limited part­nerships (KS), silent partnerships (IS) and shipping partnerships (Partsrederier). Effective from 2016, new regulations are intro­duced for distributed income to personal shareholders and par­ticipants in partnerships. As a result of the reduction of the cor­porate tax rate from 27% to 25%, the basis for the calculation of distributed income is increased by an adjustment factor of 1.15.

For 2016, such partnership taxation ensures the same level of taxation on both retained and distributed profits as in limited companies. The maximum marginal tax rate for distributed income is 46.6% for 2016.

The partnership model applies to all partners, regardless of whether the partners are active. However, partners, other than partners who are individuals, are not subject to additional taxa­tion at distribution under the exemption method.

For self-employed individuals, all business profits exceeding a risk-free interest on the capital invested are taxed as personal income.

Taxable personal income serves as the basis for levying both personal income tax (step tax) at a rate of up to 13.7% and the social security contribution at a rate of 11.4%. It also entitles an individual to pension points in the social security system.

Nonresidents are also subject to tax at the same rates that apply to residents on the following amounts:

  • Income from, and capital invested in, activities carried on or man aged either in Norway or on the Norwegian Continental Shelf
  • Income derived from providing employees for principals who are carrying on activities in Norway
  • Income derived from, and capital invested in, real and movable property located in Norway
  • Fees paid to foreign entertainers and artists for performances in Norway

Nonresidents may also be subject to Norwegian taxes if they participate as general partners or limited partners in businesses carried on in Norway. For example, a leasing business with prop­erty in Norway is taxable, even if the activity is not carried out through a fixed place of business in Norway.

Investment income. Interest, rental income and royalties are sub­ject to tax with other ordinary income at a rate of 25%.

For dividends received by shareholders who are individuals, a shareholders’ model has been introduced. Under the shareholders’ model, dividends exceeding a risk-free return on the investment (the cost base of the shares) are taxed as general income when distributed to individual shareholders. The part of the dividend that does not exceed a risk-free return on the investment is not taxed in the hands of the shareholder. If the dividend for one year is less than the calculated risk-free interest, the tax-free surplus amount can be carried forward to be offset against dividends dis­tributed in a subsequent year or any capital gain derived from the alienation of the shares on which the dividend is paid. In addition, an adjustment factor of 1.15 is introduced for dividends in 2016.

The shareholders’ model applies to dividends received by Norwegian individuals and to individuals resident in other European Economic Area (EEA) states who are subject to Norwegian withholding tax.

Effective from 2016, dividends are multiplied by an adjustment factor of 1.15, and the adjusted basis is then taxed as ordinary income at a rate of 25%. As a result, the effective tax rate for dividends is 28.75%.

Nonresidents are subject to a 25% withholding tax on dividends paid by Norwegian companies, unless a lower treaty rate applies. Withholding tax is not imposed on interest and royalties paid to nonresidents.

Directors’ fees. Nonresident and resident directors are taxed on directors’ fees from Norwegian companies. Directors’ fees are taxed in the same manner as employment income.

Taxation of employer-provided stock options. Stock options pro­vided by employers to employees are taxed at the date of exercise as income from employment.

The taxable value at the date of exercise is the fair market value of the shares at the date of exercise, less the exercise price and any other costs incurred by the employee related to the grant of the options or the conversion of the options to shares.

Capital gains and losses. Capital gains derived from disposals of business assets, including real property, are subject to ordinary income tax at a rate of 25%.

Effective from 2016, capital gains from the disposal of shares are multiplied by an adjustment factor of 1.15, and the adjusted basis is then taxed as ordinary income at a rate of 25%. As a result, the effective tax rate for capital gains from the disposal of shares is 28.75%.

Capital losses derived from disposals of shares are deductible against ordinary income (25%). However, the taxable gain may be reduced by any unused tax-free amount with respect to dividends received (see Investment income).

The gain derived from the sale of a personal residence is not subject to tax if the owner lived in the residence for at least 12 months during the 24 months before the sale. Otherwise, the gain derived from the sale of a private residence is subject to ordinary income tax, and losses are deductible from ordinary income.

Nonresidents are taxed on capital gains from capital assets located in Norway only.

Exit tax. Norway imposes an exit tax on unrealized profits on shares or share units in Norwegian or foreign companies includ­ing units in securities funds and stock options. The exit tax applies only to profit exceeding NOK500,000.

Individuals who have been resident in Norway for tax purposes are taxed on profits as if the shares, units, options and similar instruments were realized on the last day the individual was con­sidered a tax resident of Norway for either domestic or tax treaty purposes. The deemed gain after an adjustment of 1.15 is subject to capital gains tax at the normal rate of 25%. As an exception, the deemed gain on employee share options is treated as normal compensation income, which is taxable at the individual’s mar­ginal rate.

For individuals who have resided in Norway for more than 10 years and were born in Norway, the profit is calculated as the spread between the original cost price of the asset and the market value at the time of emigration. However, individuals who have resided in Norway for less than 10 years may choose to use the market price at the time he or she became tax resident in Norway instead of the actual cost basis. However, this rule applies only to shares and share units owned by the individual when he or she took up residence in Norway.

The exit tax ceases to apply if the gain on the assets is not actu­ally realized within five years after the emigration (or in the case of stock options, if the options are not exercised in the five-year period). The taxable profit can also be reduced if the actual sales price was lower than the value of the shares at the date of emigration.

It is possible to defer the payment of the exit tax until actual realization of gain takes place. To achieve this deferral, the tax­payer needs to furnish adequate security for the payment obliga­tion or move to a state within the EEA with which Norway has entered into an agreement for the exchange of information and assistance with recovery of taxes.

Deemed losses on emigration are also calculated using the same rules (that is, on shares sold within five years of emigration), and any loss is offset against gains chargeable at the capital gains rate of 25%. However, the loss may be excluded on emigration out­side the EEA, and no loss is granted as a result of step-up of the historic cost price.

In general, strict documentation requirements apply at the time of emigration and for the following five years. If the deemed profit is less than NOK500,000 and, consequently, no exit tax applies, the taxpayer is still required to report the unrealized profit to the Norwegian tax authorities.

Deductions

Deductible expenses. The following expenses are deductible in calculating the ordinary income tax base if the 10% standard deduction for expatriates on temporary stay in Norway is not claimed:

  • Within certain limits, costs of home leave if the individual is working and temporarily living abroad
  • Premiums paid to pension plans with Norwegian insurance com­panies, within certain limits
  • Alimony
  • Interest on debts, except debts related to real property situated abroad

The 10% standard deduction applies for a maximum of two income years, and only up to a maximum of NOK40,000 each year. In addition, the 10% standard deduction for nonresidents does not apply to directors’ fees received from Norwegian companies.

Personal allowances. In calculating ordinary income tax for 2016, individuals are allowed a standard minimum allowance of 43% of gross compensation, with a maximum of NOK91,450 and a minimum of NOK4,000. This allowance is reduced proportion­ately if the individual is taxable in Norway for only part of the fiscal year.

Business deductions. To be deductible for tax purposes, items must be included in the statutory financial statements. In princi­ple, all expenses for earning, securing or maintaining income, with the exception of gifts and entertainment expenses, are de ductible. Valuation and depreciation rules for individuals earn­ing self-employment or business income are the same as those for corporations.

Rates

Personal income tax. Personal income tax (step tax) is levied on income from employment and pensions, and no deductions are allowed. The step tax rates for 2016 are set forth in the following table.

Taxable income (NOK)

Exceeding                    Not exceeding

 

Rate

%

0 159,800 0
159,800 224,900 0.44
224,900 565,400 1.7
565,400 909,500 10.7
909,500 13.7

Ordinary income tax. A 25% ordinary income tax (county munic­ipal tax, municipal tax and state tax) is levied on taxable net income from all sources after taxable income is reduced by NOK51,750 for individuals without dependents, and by NOK76,250 for individuals with dependents.

If an individual is taxable in Norway for part of a fiscal year only, the income brackets and excludable amounts are reduced proportionately.

Relief for losses. In general, losses may be carried forward for 10 years.

Other taxes

Wealth tax. A municipal and national wealth tax is levied at a rate of 0.85% on taxable net assets exceeding NOK1,400,000.

Inheritance and gift taxes. Effective from 1 January 2014, inheri­tance and gift taxes no longer apply in Norway.

Social security

Contributions. Employers and employees, as well as self-employed individuals, must make social security contributions. Contribu tions are payable on all taxable salaries, wages and allow­ances and, for self-employed individuals, on personal income.

For employees, contributions are withheld by employers together with income tax, and the total amount is paid to the tax authori­ties. Employers’ contributions, payable bimonthly, are deductible for income tax purposes. Employees’ and self-employed indi­viduals’ contributions are not deductible. The 2016 contribution rates are 8.2% of salary for employees and 11.4% for self-employed persons. For 2016, the employer’s contribution is 14.1%. In certain municipalities, the rate for employers is lower.

Expatriates and foreign employers of employees working in Nor­way are subject to these contributions if an exemption (or reduc­tion) is not available under a social security convention between Norway and the country where the expatriate or the employer is domiciled.

Totalization agreements. To provide relief from double social security taxes and to assure benefit coverage, Norway has entered into social security agreements with the following countries.

Australia                     France (a)                          Poland (a)

Austria (a)                  Germany (a)                      Portugal (a)

Belgium (a)                Greece (a)                         Romania (a)

Bosnia and                 Hungary (a)                      Serbia and

Herzegovina               Iceland (a)                         Montenegro

Bulgaria (a)                India                                  Slovak

Canada (b)                  Ireland (a)                         Republic (a)

Chile                           Israel                                 Slovenia (a)

Croatia                        Italy (a)                             Spain (a)

Cyprus (a)                  Latvia (a)                           Sweden (a)

Czech                         Liechtenstein (a)                Switzerland

Republic (a)                Lithuania (a)                      Turkey

Denmark (a)               Luxembourg (a)                United

Estonia (a)                  Malta (a)                           Kingdom (a)

Finland (a)                  Netherlands (a)                 United States

a) EEA countries’ agreement. European Union regulation 883/2004 is i­mplemented 1 June 2012 in Norway.

b) Separate agreement with Quebec.

Tax filing and payment procedures

Income tax and wealth tax on net taxable assets are assessed for a fiscal year ending 31 December. For most individuals resident in Norway who do not have trading income, annual tax returns must be submitted by 30 April in the year following the income year. An extension of one month may normally be obtained. For self-employed individuals, annual tax returns filed on paper must

be submitted by 30 April. For self-employed individuals, annual tax returns filed electronically must be submitted by 31 May.

Married persons are taxed separately or jointly, whichever method yields the more favorable result for the taxpayer.

Individuals who are self-employed or who have income from sources other than salaries, wages and similar compensation, re­ceive from the tax authorities an individual estimate of taxes to be paid during the tax year. These estimated taxes are due in four equal installments on 15 March, 15 May, 15 September and 15 November. Assessments have normally been made in the third quarter of the year following the income year. Beginning with 2011, the Norwegian authorities announce the assessments in four different months. An individual may receive an assessment in June, August, September or October. At the time of assess­ment, an individual receives a tax computation showing total as­sessed taxes compared to taxes paid. Any amount of tax overpaid is refunded to the taxpayer, and any tax due is payable in two equal installments.

Taxes are withheld by employers from salaries, wages and other re muneration paid to employees. Non resident employees who do not provide their employers their tax-deduction cards issued by the tax authorities are subject to 50% withholding. Employees who present their tax-deduction cards are eligible for the reduced rate specified in the cards. The withholding taxes are preliminary pay ments and are credited to the taxpayers in their tax assess­ments.

Tax treaties

Norway’s double tax treaties generally follow the Organisation for Economic Co-operation and Development (OECD) model. Norway has entered into double tax treaties with the following countries.

Albania                        Greenland                   Portugal

Argentina                     Hungary                     Qatar

Australia                      Iceland                        Romania

Austria                         India                           Russian Federation

Azerbaijan                    Indonesia                    Senegal

Bangladesh                  Ireland                        Serbia

Barbados                      Israel                           Sierra Leone

Belgium                       Italy                            Singapore

Benin                           Jamaica                       Slovak Republic

Bosnia and                   Japan                          Slovenia

Herzegovina                 Kazakhstan                 South Africa

Brazil                           Kenya                         Spain

Bulgaria                       Korea (South)             Sri Lanka

Canada                         Latvia                          Sweden

Chile                            Lithuania                     Switzerland

China                           Luxembourg               Tanzania

Côte d’Ivoire                Malawi                       Thailand

Croatia                         Malaysia                     Trinidad and

Cyprus                         Malta                          Tobago

Czech Republic            Mexico                       Tunisia

Denmark                      Morocco                     Turkey

Egypt                           Nepal                          Uganda

Estonia                           Netherlands                Ukraine

Faroe Islands                 Netherlands                United Kingdom

Finland                          Antilles                       United States

France                            New Zealand              Venezuela

Gambia                          Pakistan                      Vietnam

Germany                        Philippines                  Zambia

Greece                           Poland                        Zimbabwe

Temporary visas

Norway has a closed-border policy with strict immigration con­trols that are highly regulated. In general, all foreign nationals, except EEA countries, must have visas to enter Norway. En trance for short-term visits—tourist visits, family visits, official assign­ments, business trips, study visits and certain other purposes no longer than three months—is allowed in accordance with the applicable visa. All other basis for stay in the Norwegian regula­tions are called permits rather than visas.

All foreign nationals (except Nordic nationals) who wish to enter Norway must also carry valid passports or other identification officially recognized as valid travel documents.

Norway entered into the Schengen Agreement on 25 March 2001. Under the agreement, no passport controls apply to pass borders within the Schengen area. Passport controls will apply to pass the Schengen area’s outer border, both to enter and depart the area. Non-EEA nationals are subject to extended controls, that is, a search of the Schengen Information System to determine whether the individual is registered with a denial to enter. As a general rule, under the agreement, visas issued by Norwegian authorities are valid to enter the entire Schengen area. Likewise, visas issued by other Schengen countries are valid to enter Norway.

Norway has concluded agreements on visa-free entry for short-term visitors with approximately 60 countries. Citizens of these countries are not required to obtain visas to enter Norway for short-term visits. Other exceptions to the visa requirement may exist. For further details, contact a Norwegian Foreign Service mission or the Directorate of Immigration.

Work visas (and/or permits)

Foreign nationals who intend to stay in Norway longer than three months, or who want to work in Norway, must apply for resi­dence permits before entering Norway.

Residence permits are granted only if a particular reason for living or working in Norway exists, such as a work assignment, a trainee assignment, cultural exchange or family immigration. Any person who applies for a work permit must receive a concrete offer of employment in advance. The applicant must also have adequate income.

Nordic citizens do not need a residence permit to reside or work in Norway.

EEA nationals do not need to apply for residence permits in Norway. They can do an advance registration online and appear in person at the authorities when they arrive in Norway. EEA nationals need to register in Norway only if they intend to work and stay in Norway for more than three months.

Work permit application process. The residence permit application must generally be submitted from abroad before an individual enters Norway. A first-time work permit or residence permit must be granted before an applicant may enter Norway. However, skilled workers may apply for a first-time residence permit after entry provided that they are legally in Norway. If they apply in Norway, they can submit the application either to the police dis­trict where they live or at a service center for foreign workers.

All applications must be registered at the Application Portal. The Foreign Service mission can provide information about docu­ments that must be included with the application.

The Foreign Service mission sends the work or residence per­mit application to the Directorate of Immigration (UDI), which decides whether to grant the permit. After the application is considered, the applicant is informed of the results by the Foreign Service mission in the applicant’s home country. A foreign national who is granted a residence permit is normally asked by the police to submit to medical clearance before the permit is stamped in the passport by the police. A foreign national must take a tuberculosis test within a week after arrival in Norway.

Exempt categories. The following foreign nationals are exempt from the work permit requirement for employment situations lasting up to three months:

  • Commercial travelers, business travelers or both.
  • Research workers, lecturers and others invited to Norway by educational or research institutions for professional or charity reasons.
  • Technical experts, technicians, consultants or instructors. The purpose must be to install, check, repair or maintain machines or technical equipment or to provide information on their use.
  • Employees in private households or foreign nationals who are staying in Norway on visits.
  • Professional athletes attending sports engagements in Norway.
  • Civil servants who are paid by their own countries.
  • Personnel of foreign rail, air, bus or truck services working internationally, and necessary watchmen and maintenance per­sonnel on ships laid up in Norway.
  • Journalists, foreign newspaper staff and radio or television teams on assignment in Norway, who are paid by foreign employers.

Self-employment. Non-EEA nationals who are self-employed and have established a business abroad may be granted a residence permit for a period of up to four years. Also self-employed per­sons who intend to engage in a permanent business activity are entitled to a residence permit if the presence of the self-employed person in Norway and active participation in running the business is necessary for the establishment or continued operation of the business.

Residence visa (and/or permits)

A permanent residence permit entitles the holder to permanently reside and work in Norway. This permit is granted, on applica­tion, to persons who have had permits for a total of three years that form the basis for a permanent residence permit in Norway.

Family and personal considerations

Family members. Family members of a foreign national who has a residence permit in Norway have certain privileges concerning the right to receive their own residence permits.

Close relatives of a person in Norway may receive residence permits in connection with family reunions, which are granted primarily to the spouse and to children younger than 18 years of age. In general, the person who is granted a residence permit for family reunification must be guaranteed sufficient economic support.

In general, an application for family reunification must be sub­mitted from abroad.

EEA nationals employed in Norway may normally be accompa­nied by a spouse, children and parents. If the family member is an EEA national, he or she can also register through the registra­tion scheme for EEA nationals. If not, he or she must apply for a residence permit.

If the conditions for family reunification are met, work permits are granted to persons older than 18 years of age, regardless of whether they have received job offers.

Depending on nationality, different relation documents are required for family immigration. Relation documents, such as marriage contracts, divorce contracts and birth certificates, are officially required to have an apostille. However, this is not always enforced.

Driver’s permits. Foreign nationals may drive in Norway with their home countries’ driver’s licenses under the following cir­cumstances:

  • To drive a car with foreign license plates, the foreign driver’s license must be valid for at least one year.
  • To drive a car with Norwegian license plates, the foreign driv­er’s license must be valid for at least three months.

After the end of the allowed periods, a foreign license must be changed to a Norwegian driver’s license. A theoretical and a practical test may be required. The expatriate must apply for a Norwegian driver’s license at the Biltilsynet office in the county where he or she lives within one year of arriving in Norway. If an application for a driver’s license is made later than this time, it is difficult to obtain a driver’s license. In general, to obtain a driv­er’s license in Norway, an individual must attend an authorized driving school and take both theoretical and practical lessons.

A driver’s permit issued by another EEA country is accepted on an equal basis with a Norwegian driver’s license.