The EFTA Surveillance Authority (ESA) has issued a letter of formal notice against Norway regarding the compatibility of its exit tax legislation with the EEA Agreement. The legislation imposes immediate exit taxes on unrealised capital gains of companies that transfer their seat or assets and liabilities from Norway to other EEA States, and unrealised capital gains on the shares of those companies. The same is not true for mergers between domestic companies and ESA regards this as a violation of articles 31, 34 and 40 of the EEA Agreement (freedom of establishment and the free movement of capital).

ESA’s actions represents a departure from the ECJ’s approach to this subject which, from Daily Mail in 1988, has held that restrictions which prevent the retention of the status of a company from one member state to another are outside the scope of Art 23 or 48 EC. This approach was confirmed most recently last year in the case of Cartesio.

The Norwegian government has the option of submitting observations after which ESA may issue a reasoned opinion and bring infringement proceedings before the EFTA Court. We will continue to monitor progress.