Income taxable to Norway
The aim of Norway’s government is that the tax system shall be competitive in order to attract foreign investment. During the last decades the tax rate has been reduced and the tax base has been widened.
Prior to setting up a business in Norway, it is important to get an assessment of whether or not the business activities will be taxable to Norway. To this extent, if a foreign company’s business is taxable in Norway, the activities will normally be subject to the same tax principles and tax rates as Norwegian companies: corporate income tax, employer’s social security contribution and value added tax.
Companies that are resident abroad are only subject to tax on their economic activities in Norway. All business activities in Norway or managed from Norway are generally subject to Norwegian tax, unless otherwise provided for in an applicable tax treaty.
If the company generates income taxable to Norway, the company is obliged to submit an annual tax return. There is no specific corporate tax registration, but the tax office expects that all registered entities comply with the various reporting obligations and file the corporate tax return.
The international tax team at Magnus Legal hold extensive knowledge of Norwegian taxation for both companies and individuals. We regularly assist foreign companies in establishing a business structure in Norway. We offer an assessment of the tax liability for both the company and its employees. Furthermore, we assist in the proper filing of tax returns and address the unique complexities that may arise.
Tax in Norway - our services:
- Registration of the company in Norway
- Reporting of contract and employee information to the tax authorities
- VAT-registration and handling of VAT-returns
- Assistance with the employee’s ID-check at the tax office
- Assistance with A1-application for employees
- Application for HSE-cards for employees
- Application for exemption from advance tax deductions (if relevant)
- Registration in the Staffing Register for companies hiring out employees
- Application for exemption from joint and several liabilities (if relevant)
- Monthly salary reports (the A-report scheme)
- Annual corporate tax return
- Annual accounts (if relevant)
- Personal tax returns for employees
- Labour law assistance
- Correspondence with tax authorities, business register, Work Inspection Authorities, Labour and Welfare Administration etc.
Permanent establishment
A foreign company with a permanent establishment in Norway should, based on the tax treaties Norway has with approximately 90 countries, be subject to Norwegian corporate tax on business profits attributable to the permanent establishment.
But it is not always obvious when the Norwegian activity of a foreign company constitutes a so-called permanent establishment.
Find out more: Permanent establishment in Norway – 3 grey areas
Corporate tax
According to domestic tax law the threshold for becoming subject to corporate tax in Norway is rather low. The starting point is that any foreign enterprise is subject to Norwegian corporate tax if it conducts business activities within Norway or if it hires out employees to work in Norway.
However, a relevant tax treaty may provide exemption from Norwegian tax liability. Thus, an assessment of tax liability must be made specifically for each foreign enterprise.
The basic rule in the tax treaty is, as mentioned, that a foreign enterprise becomes subject to tax if it has a permanent establishment in Norway.
More about Norwegian tax rates and corporate taxes: Corporate tax in Norway - The basics for non-Norwegian enterprises
Tax reporting
Corporate tax return in Norway
The basic rule is that all Norwegian companies and foreign enterprises conducting business activities in Norway are subject to Norwegian corporate tax and are obliged to file a corporate tax return. Note, that the foreign enterprise is obliged to file a corporate tax return even though it may be tax exempted according to a tax treaty.
Failure to submit an annual tax return, or a tax return providing incomplete and incorrect information, may result in additional tax and compulsory fines.
Find out more: Corporate tax return in Norway
Extract of accounts
The annual corporate tax return must include an extract of accounts related to the company’s Norwegian turnover.
The extract of accounts shows the accounting figures for the company’s activity in Norway. All income related to the Norwegian activity must be included. It is also important to include all costs directly related to the activity in Norway.
Find out more: Remember to file your extract of accounts to the Norwegian tax administration
A-melding
Foreign enterprises with business activities in Norway are obligated to declare employment and income information for personnel working in Norway. This also applies to personnel who are non-taxable to Norway.
If the work is performed in Norway, the employer must deduct and pay tax in advance from the employee’s salary based on information provided in the employee’s tax card. This is a compulsory obligation regardless of where the salary is paid from.
More information: All you need to know about the Norwegian tax report system – a-melding
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Velovay Ltd
Tax audit
The Norwegian tax office frequently conducts tax audits. You should therefore not be surprised if this hits you or your company. The tax authorities may audit any information relevant for the various taxes and duties levied by the state.
This includes corporate income tax, value added tax (VAT) and payroll taxes. The control can be limited to one of these areas or apply to them all.
Our best advice: Business in Norway: Tax audit
Sanctions and penalty charges
As stated above, all companies performing business activities in Norway are obliged to prepare and file a multitude of different forms and reports to the Norwegian authorities. For non-compliance, the Norwegian authorities may levy serious sanctions including penalty taxes and interest charges, late filing penalty charges, deemed discretionary assessments, etc.
It is now quite normal that late filing penalties, of up to around NOK 50,000,- are levied automatically for each report that is not filed within due date.
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