United States-Norway Tax Treaty
Norway International Tax Compliance Rules
Quick Summary. Norway is a constitutional monarchy with a parliamentary, democratic form of government consisting of three branches: a legislature, the Storting; an executive, the Council of State; and a judiciary.
In 2016, the Government of Norway (GON) initiated tax reforms, gradually reducing the individual income and corporate tax rates.
Norwegian companies are subject to tax on worldwide income. Non-residence companies are subject to tax on certain Norwegian-source income or when engaged in business managed in, or conducted in, Norway.
Resident individuals are subject to tax on their worldwide income. Non-resident taxpayers are taxed on specified categories of Norwegian-source income. Norway introduced a PAYE system in 2019 that applies to certain non-resident workers. The PAYE system applies a 25% flat tax rate.
Norway bases individual tax resident status on a days-of-presence test, which is satisfied where an individual is present more than 183 days during a 12-month period or, alternatively, 270 day during a 36-month period.
U.S.-Norway Tax Treaty
Norway is a member of the North Atlantic Treaty Organization (NATO). While not a member of the European Union, Norway is a member of the European Economic Area (EEA).
Currency.
- Norwegian Krone (NOK)
Common Legal Entities.
- Public and Private Limited Company (ASA/AS)
- Limited Partnership (KS)
- General Partnership (ANS)
- Branch of a Foreign Company (NUF)
- Sole Proprietorship
Tax Authorities.
Tax Treaties.
- Norway has concluded 89 treaties. Norway signed the OECD MLI on 7 June 2017.
Corporate Income Tax Rate.
- Standard Rate – 22%
- Rate for enterprises engaged in financial activities – 25%
Individual Tax Rate.
- Net Income Tax Rate – 22%
- Rate for Income/Loss due to ownership in companies and partnerships 31.68% (1.44 multiplier before taxation)
- Personal Income Tax Bracket (thresholds)
- NOK 174,500 – 1.9%
- NOK 245,650 – 4.2%
- NOK 617,500 – 13.2%
- NOK 964,800 – 16.2%
Corporate Capital Gains Tax Rate.
- Capital gains generally are taxable, subject to an exemption for gains on shares. Capital gains are taxed at a rate of 22%.
- Capital gains derived by a Norwegian limited company on the disposal of shares in another Norwegian (or EEA resident) limited company are exempt from taxation.
- For gains realized on the disposal of shares in a company in a low-tax jurisdiction within the EEA, the exemption applies only if real business activities are conducted in that jurisdiction.
- Capital gains realized by a Norwegian limited company on shares in a company resident in a non-EEA country are exempt from taxation if at least 10% of the shares have been held for at least two years and the foreign company is not resident in a lowtax jurisdiction.
- Exit taxation applies when a company migrates out of Norway’s taxing jurisdiction, subject to certain exemptions when migration is to another EEA jurisdiction. If a company migrates to a low-tax jurisdiction within the EEA, the exemption is conditional on the company conducting real business activities in the new jurisdiction.
- When assets are migrated out of Norway, a built-in gain exceeding certain thresholds is taxable.
Individual Capital Gains Tax Rate.
- Capital gains tax rate for fiscal year 2019 – 22%
Residence.
- Corporations – Limited companies incorporated in Norway and foreign companies with their effective management and control in Norway are treated as resident in Norway.
- Individuals – An individual becomes a permanent resident in Norway if he/she is present in Norway for a period exceeding 183 days during any 12-month period, or 270 days during any 36-month period. Individuals do not become resident during the first calendar year if the time spent in Norway in that year is less than 183 days.
Withholding Tax.
Dividends.
- No withholding tax is imposed on dividends paid by a Norwegian limited company to an EEA resident corporate shareholder, provided the shareholder conducts a real business activity and has an “actual establishment” in the relevant jurisdiction. Otherwise, the applicable tax treaty rate will apply.
- 25% withholding tax applied to distributions to shareholders resident outside the EEA unless reduced under a tax treaty.
Interest.
- Norway does not levy withholding tax on interest payments.
Royalties.
- Norway does not levy withholding tax on interest payments.
- In principle, intercompany transactions are acceptable for tax purposes if they are based on the arm’s length principle. Still subject to documentation requirements.
CFC Rules.
- When at least 50% of shares in a foreign company reside outside the EEA, are held directly or indirectly by Norwegian resident taxpayers, and the foreign company is effectively subject to less than two-thirds of the Norwegian tax on the same income, then the company is considered a CFC.
- Unless a relevant tax treaty applies and the income is not of a mainly passive nature.
Hybrid Treatment.
- Norway has not implemented anti-hybrid rules other than an exception to the participation exemption regime for dividends paid to a Norwegian tax resident if the foreign distributing company has been granted an income tax deduction for the dividend distribution in its country of residence.
- When a capital instrument has both debt and equity features, the tax authorities adopt a substance-over-form approach.
- Common practice to make an overall assessment of the instrument’s main features to determine whether it should be treated as debt or equity.
Inheritance/estate tax.
- None.
Tax Treaty Network – International Tax Attorneys
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