The Norwegian Petroleum Tax system has been stable for many years, and this is a situation that is continued into 2019.
Except for some expected tax rate changes, the 2019 budget does not have any income tax changes for income from exploration, development and production of petroleum on the Norwegian Continental Shelf (E&P activities).
Relevant budget proposals for E&P activities: As the corporate tax rate is proposed to be reduced from 23% to 22% effective from Jan. 1, 2019, the special tax is increased from 55% to 56%, i.e. the marginal tax rate of 78% is kept unchanged.
In order to keep the tax value of uplift at the same level, the uplift is suggested to be reduced from the current 21,2% (5,3% per year for 4 years) to 20,8% (5,2% for 4 years). The changes will have effect for investments and realizations taking place in 2019. Thus, uplift coming from prior year investments will not be effected, and will continue to use the uplift for the year when the investment took place. Further, some projects may still have uplift under the grandfather rule from 2013.
The Government suggests to introduce more restrictions with respect to interest deduction for ordinary companies, and the current interest limitation rule is suggested expanded to also cover external debt.
However, the interest limitation rules will still not apply for E&P companies operating on the Norwegian Continental Shelf. Nevertheless, the Ministry of Finance maintain their principal view that also the E&P companies should be covered by interest limitation rules with respect to interests deductible for the ordinary corporate tax. The Ministry states that this is an issue still subject to evaluation.
Further, the Ministry of Finance indicates that they are working on withholding tax for interest and royalties, which may be proposed during 2019, but no further details are given.
With respect to environmental taxes such as tax on CO2 emissions and NOX emissions there are an ordinary adjustments just in order to adjust for inflation. The CO2 tax is increased from 1,06 to 1,08 NOK/Sm3 emission (from 7,30 NOK to 7,41 NOK for emission on natural gas to air), and the NOX rate is increased from 21,94 NOK to 22,27 NOK/kg emission. However, with respect to NOX the companies may instead elect to pay to the NOX fund, which gives a significant reduction in the cost for NOX emission. Environmental taxes are regarded as an ordinary opex with a 78% tax deduction.
There are currently an issue with ESA regarding whether the Norwegian exploration refund may be considered as an illegal state aid, but this issue is not mentioned in the budget's tax proposals (LS no. 1 for 2018- 1019).