VAT

VAT is a tax added to most goods and services sold in Norway and the VAT standard rate is currently 25%. Some items are exempt or subject to reduced rates. A Norwegian limited company (“AS”) must register for VAT once its taxable sales exceed a certain amount, currently NOK 50 000, within a 12-month period. The company cannot charge VAT on invoices before it is registered. Late registration can trigger interest and surcharges, so it is important to monitor turnover and apply for registration at the appropriate time. In some cases, you may apply for a VAT registration ahead of reaching the necessary turnover, if you are able to provide proof that your turnover will within a reasonable time reach the threshold. Registration and reporting is done electronically in Norway. Once registered in the Norwegian Register of Business Enterprises (“NRBE”) (Nw. “Foretaksregisteret”), the company must add VAT to its sales (output VAT) and can usually deduct VAT paid on business purchases (input VAT).
 
Foreign companies doing business in Norway that are subject to VAT may also need to register for VAT, either directly or through a Norwegian VAT representative. The requirement depends on the company’s country of establishment and the nature of its Norwegian activities.

Corporate income tax

Companies that are tax resident in Norway are subject to corporate income tax on their worldwide income and assets. A company is regarded as resident in Norway when it is incorporated under Norwegian law and registered in the NRBE or its central management and control is carried out in Norway. In the assessment of central management and control, the company’s activities and organisation will also be considered.
 
Any company that is considered “tax resident” in Norway must pay corporate income tax on all their worldwide income and assets. The corporate tax rate is currently at 22%. The standard corporate tax is calculated on the company’s net profit for the year. Normally, companies pay this tax in two instalments during the first half of the year after the income was earned, in addition a third payment is made after the final tax calculation is completed, with the payment being the difference between the tax paid and the tax due. Payment is reported and made electronically in the same way as VAT. Interest is charged on residual tax.
 
Most costs incurred while earning a taxable income are deductible before corporate income tax is calculated. Special rules apply to entertainment, certain donations, and intra-group interest. Long-lived assets costing above a specified threshold must be depreciated over their useful life rather than deducted in full in the year of acquisition.

Dividends

Dividends paid to individual shareholders are subject to dividend tax. Dividends paid to corporate shareholders are largely exempt, cf. section 2-38 of the Norwegian Tax Act (Nw. “Skatteloven”).

Foreign companies and PE

Limited tax liability

Foreign companies doing business in Norway are generally taxed only on the income they earn from these activities. This is called “limited tax liability.” Most foreign companies are also taxed in their home country, but tax treaties help prevent double taxation.

PE

If Norway can tax a foreign company’s profits usually depends on whether the company has a PE in Norway. A PE means the company has a fixed place of business (like an office or factory), is involved in a long-term project, or has an agent in Norway who regularly enters into contracts on behalf of the company. If a foreign company has no PE in Norway, its business profits are generally not taxable here (though certain Norwegian-source income may still be taxed). Norway may tax the profits attributable to a PE at the standard corporate income tax rate, treating the PE as a notionally independent enterprise for income allocation purposes.

Filing for foreign companies

Foreign companies with business activities in Norway must file a corporate tax return. If they can prove their activities do not amount to a PE, they can apply for an exemption from filing. This is an administrative measure and does not affect the underlying taxation rules applicable.
 
Norwegian companies must file an annual corporate tax return electronically, usually by 31 May the year after the income was earned, exceptions until the 30 of June is usually possible by applying. This duty to file applies even if the company had no income or was set up late in the year.

Next steps?

VAT and corporate taxation are complicated legal subjects and will usually require assistance from professionals. Tax errors can be costly, and the Norwegian Tax Authority (“NTA”) (Nw. “Skattemyndighetene“) actively pursues non-compliance. The NTA can reassess a company’s tax position (to its advantage or disadvantage) within five years of the end of the relevant income year. For serious errors or fraud, this extends to ten years. Companies may voluntarily correct previously filed returns, calculated from the end of the relevant calendar year (“voluntary correction”), but only within the last three years. However, a company may request the NTA for a qualified change up to five years prior. The deadlines for NTA changes are calculated from the end of the calendar year to which the income year applies. For example, a return filed for 2021 must be corrected by end of 2026. For a company’s voluntary changes, the deadline is based on the deadline for filing of the tax return, e.g. by 31 of May.
 
At Brækhus, we regularly advise foreign companies on taxation, please contact us today for further details and an informal chat.