United States-Norway Tax Treaty
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).
Norway Tax Treaty. Convention between the United States of America and the Kingdom of Norway for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and property, signed at Oslo on December 3, 1971
- 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
- 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%
- 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.
- 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.
- Norway does not levy withholding tax on interest payments.
- 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.
- 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.
- 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.
Tax Treaty Network – International Tax Attorneys
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