China Desk Newsletter - 在挪威发展业务 - 税务 Doing Business in Norway - Tax

按常规,在挪威常驻的公司将就其在全球的收入向挪威纳税。 As a main rule, corporations domiciled in Norway are subject to Norwegian taxes on their worldwide income.

1. General

As a main rule, corporations domiciled in Norway are subject to Norwegian taxes on their worldwide income.

A Norwegian subsidiary, through which a foreign company has organized their Norwegian activity, is tax liable to Norway as any other Norwegian company. Other foreign companies operating in Norway and on the Norwegian Continental Shelf are liable to Norwegian tax provided they are engaged in a "business activity" in Norway and thereby have created a Norwegian permanent establishment.

Save for tax liability due to permanent establishments, foreign investors will as a general rule not have any income tax liability to Norway. A foreign investor may, however, be liable for withholding tax on dividends derived from an investment in a Norwegian company.

2. Business Profits

2.1 Tax Liability

Norwegian limited liability companies are generally subject to corporate income tax on worldwide income.

Chinese entities carrying out business activity in Norway will be tax liable for profits that are connected to their Norwegian operations provided they are considered to have created a Norwegian permanent establishment. The China/Norway tax treaty defines a permanent establishment as a "fixed place of business through which the business of an enterprise is wholly or partly carried on".  Further to this, a permanent establishment may be created if a Chinese enterprise has employees or depended agents in Norway acting on its behalf, and such persons have and habitually exercises an authority to conclude contracts in the name of the Chinese enterprise.

Note that having ownership to or otherwise control over a Norwegian company, will not in itself constitute a permanent establishment for the foreign shareholder. In such case Norwegian tax on business profits will only be levied on the Norwegian entity.

2.2 Tax Base

The current corporate tax rate is 24 %, levied on net taxable income (the tax rate is expected to be reduced to 23 % effective as from 1 January 2018).

Taxable income includes business profits, capital gains, dividends, interest and royalties. Generally, all costs incurred for income generating purposes are deductible, either directly or through depreciations or amortizations. However, Norway apply certain interest deduction limitation rules, cf. section 2.3 below.

Norway applies a participation exemption method for income derived from (qualifying) share investments, entailing that income on shares to a large extent is exempt from taxation, cf. section 3 below.

The determination of the tax base and timing of income taxation is not based on the financial accounts, but on separate tax accounts. Even though, in the big picture, the financial accounts and tax accounts correspond, differences exists, e.g. with respect to depreciations, interest deductions, representation costs etc.

2.3 Interest Deduction Limitation Rule

Interest expenses (including arrangement fees etc.) are generally tax deductible. However, Norway has interest deduction limitation rules applicable to intra group financing and external financing secured by a related party. In brief, interest expenses exceeding 25 % cent of a company's taxable EBITDA will not be deductible in so far as the interest expenses are paid to a related party or to an unrelated party in favor of which a related party (other than a subsidiary) has provided security. The limitations apply irrespective of the interest rate and other terms for the loan being on market terms.

Note that, for companies that are part of a company group, the Government has proposed that the current rule is amended to include interest expenses in favour of third party lenders (external interest). The new rule is proposed implemented with effect from the income year 2018. Note in this regard that the proposal has at date not been approved by the Parliament.

2.4 Transfer Pricing

Transactions between related parties must comply with the arm’s length principle. The OECD transfer pricing guidelines are in principle applicable in determining market terms and conditions.

Norway applies a thin capitalization rule based on the arm's length principle.

2.5 Group Taxation

Norwegian group companies are taxed individually, not on a consolidated basis. However, companies within a "Tax Group" may set-off taxable income and losses by making group contributions from a profit making company to a company with losses (carried forward). A Tax Group is defined in the Norwegian tax act as companies with common direct or indirect ownership (and voting rights) of more than 90 %. The ultimate parent could be a foreign entity.

Within the Tax Group, the group contribution may be made in any direction, i.e. from a subsidiary to a parent, from a subsidiary to another subsidiary, from a parent to a subsidiary of a subsidiary etc.

Note that group contributions have to be within the conceding company's distributable equity, similar as with distribution of dividends.

2.6 Anti-avoidance

Norway has a general anti-avoidance rule ("GAAR") which has been established through case law. GAAR applies to activities that are formally legal, but that are deemed to be tax motivated and contrary to the object and spirit of Norway's tax regime.

In addition to GAAR, section 14-90 of the Norwegian Tax Act establishes a statutory anti-avoidance rule concerning the transfers of general tax positions (such as tax losses carried forward) through reorganizations or transactions. If a company with a general tax position is subject to a reorganization or transaction, and it is established that the main objective for the reorganization or transaction is to utilize the general tax position, the tax position shall be eliminated.

3. Taxation of Dividends and Capital Gains on Shares

3.1 Norwegian Corporate Shareholders

Dividends on shares in qualifying companies[1] received by corporate shareholders tax resident in Norway are generally comprised by the participation exemption method (Norwegian: Fritaksmetoden). Three percent of the dividends shall however be entered as general income and taxed at the flat rate of 24%, implying that dividends distributed to a Norwegian corporate shareholder are effectively taxed at a rate of 0.72%.

Capital gains from qualifying companies are tax free, and losses are not deductible for tax purposes.

3.2 Foreign corporate shareholders

Foreign corporate shareholders resident and carrying out genuine business activities within the EEA[2] area are not subject to Norwegian withholding tax on dividends from a Norwegian limited liability company, provided that the foreign shareholder is a corporation and the beneficial owner of the dividends.

[1] Qualifying companies is, generally, limited liability companies' resident within the European Economic Area (the "EEA"), and companies resident in high tax jurisdiction outside the EEA provided the Norwegian shareholder continuously for the past two years has owned of at least 10 % of the issued capital and has had at least 10 % of the votes in the company. Note that companies resident in low tax jurisdictions outside the EEA will not be qualifying companies under the participation exemption method. 

[2] European Economic Area – the European Union, Norway, Iceland and Lichtenstein 


Morten Sandli


31. May 2017