Direct taxation of businesses
Corporate entities incorporated in Norway, and foreign companies with their effective management in Norway, are regarded as tax-resident and liable to corporate tax on their worldwide income, including capital gains (for partnerships, the tax depends on the partner's tax status).
Non-resident companies and Norwegian branches are taxed on Norwegian source income (see Section IV.ii).i Tax on profitsDetermination of taxable profit
As a general rule, taxable profit is a net amount based on accounting profit adjusted for differences between the accounting rules and the tax accounting rules.
Income is taxed on an accruals basis. Income derived under contracts will, with the exception of fixed price production contracts, be considered accrued when the taxpayer is entitled to the consideration from the other party under the contract (when the taxpayer has delivered his or her goods or services under the contract).Income
The taxable corporate income comprises all kinds of income, inter alia, interest, dividends, capital gains on the disposal of assets or ownership interests and foreign-sourced income taxable in Norway (i.e., ordinary business income). For resident limited liability companies or entities, the participation exemption is applicable for dividends and gains on shares and partnership interests (see Section V.i).
For partnerships (transparent for tax purposes), the net result of the partnership is calculated as if the partnership were a company and then allocated to the partners and taxed at the partner level. Income and loss covered by the participation exemption (capital gains and dividends from shares) shall not be included. However, 3 per cent of dividends shall be recognised as taxable income.
A limited partner will not be able to deduct partnership losses against ordinary income from other sources. Such losses may be carried forward for deduction against future partnership income or gains upon the realisation of partnership interests. Dividends and gains on shares received by corporate partners will to a large extent be tax-exempt under the participation exemption (see Section V.i).Expenses
When calculating net taxable income, the general principle is that all expenses incurred to acquire, maintain or safeguard the company's taxable income are deductible.
As a starting point, interest on debts is deductible, whether paid periodically or discounted. The deductibility may, however, be limited under the interest deduction limitation rule (see section VII) or the arm's-length principle.
Expenses unrelated to normal business activities are not deductible (e.g., excessive entertainment expenses, donations and bribes or similar payments).
Dividends distributed and appropriations of profits are not deductible in taxable income for the distributing company.Depreciation and amortisation
The amount of tax-allowable depreciation is determined by the tax legislation and may differ from the accounting rules. There are two alternative methods to determine the deductible amount:
- the declining balance method (which in general applies to tangible assets and goodwill – the rates vary from 2 to 30 per cent); and
- the linear method (which applies to intangibles that are not covered by the declining balance method).
Land and plots are not depreciable.Capital gains and income
Capital gains are considered as ordinary income for tax purposes.
Gains on shares and partnership shares will, however, to a large extent be tax-exempt under the participation exemption (see Section V.i).Losses
Tax-deductible losses may be carried forward indefinitely and set off against future profits. When a company is liquidated, any loss may be carried back for the two preceding years.
The tax position of a loss carried forward will survive a change in ownership unless the predominant motive is to exploit the tax position, for example through a group contribution. In these cases, the tax position of the loss may be lapsed (see Section IX.ii).
Losses on intra-group loans (between companies where the lender has more than 90 per cent ownership) are not deductible.
In general partnerships, a limited partner will not be able to deduct partnership losses against ordinary income from other sources. Such losses may be carried forward for deduction against future partnership income or gains upon the realisation of partnership interests.Rates
The corporate income tax rate is 23 per cent.Administration
As a general rule, the income tax year follows the calendar year. Companies must file tax returns electronically by 31 May in the year following the income tax year. Companies may apply for a deviating 12-month tax year, but a tax year may never include more than 18 months. Companies must pay advanced tax by 15 February and by 15 April in the year following the income tax year.
The Norwegian Tax Authority is responsible for the administration of all direct taxes and VAT for domestic sales. Complaints against decisions made by the tax authorities may be filed with the Norwegian Tax Appeal Board. Decisions by the Tax Appeal Board may be brought before the courts.
As of 2017, the statute of limitation period for reassessment of the tax return is five years (10 if the taxpayer intentionally or through gross negligence has given misleading or incomplete information about his or her income).
Penalty tax will be imposed where the company gives misleading or incomplete information about its income and this result in – or could have resulted in – an underassessment. The penalty tax will normally be 20 per cent, but is raised to 40 per cent if misleading or incomplete information was filed intentionally or by gross negligence.Tax grouping
If a resident company (the parent company) holds more than 90 per cent of the capital and votes of other resident companies, the companies will constitute a tax group. Each company within a tax group is, as a general rule, treated as a separate entity, and assets, dividends, interest, income and deductions cannot be moved between companies. However, in a tax group, the participating companies may make tax-deductible group contributions and intra-group transfers of assets without immediate realisation of latent gains (i.e., the taxation is deferred).
A company resident in the EEA may be the parent company in a Norwegian tax group, and a permanent establishment (PE) of a company resident in either the EEA or in a state with which Norway has a tax treaty may also qualify for the tax grouping benefits.ii Other relevant taxesValue added tax
VAT of 25 per cent is imposed on the sale of goods and services (certain goods and services are subject to reduced rates). Norway applies VAT as a net consumption tax calculated according to the indirect subtraction method, which means that suppliers of goods and services are entitled to deduct from the amount of VAT due on their goods and services (output VAT) the amount of VAT incurred on their purchases (input VAT).
Taxpayers must remit the net amount of VAT (balance of output and input VAT for the tax period) to the tax authorities on a bimonthly basis (or shorter periods if applied for). If input VAT exceeds output VAT for the tax period, taxpayers are entitled to reclaim the balance. All companies with annual turnovers that exceed a certain threshold (at present, 50,000 kroner) must register with the Norwegian VAT Register.
Since taxation (including indirect taxation) is not explicitly covered by the EEA Agreement, Norway is not required to harmonise its VAT law with EU VAT law. Movements of goods are treated as traditional exports and imports with the required customs formalities and paperwork.Stamp tax
The registration of transactions involving immovable property in the Land Registry is subject to a stamp duty of 2.5 per cent of the accepted value of the property at the time of the registration.
There are no other stamp duties in Norway.Customs duties
Imported goods may be subject to customs duties depending on the country of origin and the type of goods concerned.Real estate tax
Individuals and companies that own immovable property may be subject to municipal real estate tax regulated by an immovable property tax law.The financial activity tax
A financial activity tax was introduced from 2017 for the financial sector.
For enterprises defined as financial institutions the corporate tax rate will remain at 25 per cent even if the ordinary corporate tax rate is 23 per cent. Financial institutions also have a 5 per cent tax imposed on their total salary costs.The petroleum tax system
All petroleum-related income on the Norwegian continental shelf is governed by the Petroleum Tax Act; however, the general tax legislation will also apply.
The petroleum tax regime is characterised by a very high marginal income tax rate (78 per cent), which to some extent is offset by relatively generous tax deductions, such as the immediate expense of all exploration costs, fast tax depreciation, an uplift allowance for special tax purposes and a tax deduction for financial costs related to upstream business activity.
Income tax from 2018 comprises the ordinary 23 per cent corporate tax rate and the 55 per cent special tax rate.
There are no field operation ring-fencing arrangements on the Norwegian continental shelf, and all exploration costs may be deducted. Companies may, however, no longer deduct exploration costs abroad from the Norwegian income. Companies in a loss position may choose between a cash refund of the tax value (i.e., 78 per cent) of the exploration costs or to carry the cost forward with interest. When winding up the business on the Norwegian continental shelf, a company will receive the tax value (78 per cent of exploration cost and 23 per cent of all other cost) of any unused losses the company may have.
A norm price, set by a separate norm price board, replaces the actual sales price when calculating the taxable gross income from the sale of crude oil (regardless of the actual sales price being higher or lower).
There is no dividend withholding tax on distribution from profits subject to the 55 per cent special tax.Hydroelectric power production companies
In addition to the ordinary income tax rate of 23 per cent, hydroelectric power production companies are subject to a 35.7 per cent natural resource rent tax, so that the total tax rate amounts to 58.7 per cent. An amount equal to the normal rate of return on the investment is shielded against the additional tax. Further, the hydroelectric power production companies are subject to a municipal resource extraction tax of 0.013 kroner per produced kwh.Tonnage tax system
For shipping companies, the tax on corporate profits may be replaced by a tax based on the tonnage operated by a company.
Elaborate ring-fencing arrangements limit the benefit of tonnage tax on the operation of ships, and companies within the regime may not carry on any other business.Employers' social security contribution
The rates range from zero to 14.1 per cent depending on the tax municipality of the employer.
An employer resident abroad is required to pay social security contributions in respect of employees working in Norway, but is subject to a possible exemption under the EEA or other social security treaties.