Today, UK is treated as if it were still a member of the EEA for cross border trade in goods. The same customs duties and customs procedures apply in trade with Norway as if the UK was an EEA state. This arrangement can also be extended, although no such extension has been announced yet.
If the UK leaves the EU without any agreement on 31 December, it will affect trade in goods for Norway. There are still some aspects of the trade in goods that have not been fully clarified. Below we briefly outlined some effects for trade in goods that are known.
The Ministry of Foreign Affairs and the Ministry of Trade and Fishery have pointed out that a free trade agreement cannot fully replace the EEA agreement. The industry must prepare for the fact that they will experience new trade barriers when the UK leaves the EU and the internal market.
Brexit will also affect taxation and immigration of British citizen. We have below therefore listed some updates.
New temporary free trade agreement for industrial goods from 1 January 2021 is ready
Norway and UK have agreed to enter into a temporary agreement for trade in goods from 1 January 2021 until a free trade agreement enters into force. The new free trade agreement is expected to be finalised a few months later in 2021. The agreement is based on the free trade agreement that Norway and the United Kingdom signed in April 2019 and which entails continued duty free exemption on industrial goods. The new and temporary agreement will be implemented if the UK leaves the EU without any agreement.
In the temporary free trade agreement, we are informed that the scope of goods is the same as in the EEA agreement. The general customs preferences are also continued under the agreement. This means that all goods in the Norwegian customs tariff chapters 25-97 (with the exception of certain processed agricultural goods specified in protocol 3) can still be exported duty free to the UK. For Norwegian industry, it is also important that the rules on origin from the agreement signed in April 2019 will apply in the new temporary agreement.
Lapse of the exemption from the requirement for VAT representative in Norway
The UK's withdrawal from the EEA agreement will have an impact on UK companies with VAT-liable activity in Norway without having a place of business here. As a starting point, such businesses must be registered in the VAT register with a representative. This requirement does not apply to businesses from EEA states provided that they have entered into an agreement to exchange information and to assist in the collection of VAT with Norway. Where such a company nevertheless elects a representative, the requirement for joint and several liability of the representative that otherwise applies does not apply.
After the end of the transitional period, this exception no longer applies to UK businesses, and they must therefore appoint a representative who will be jointly and severally liable for the VAT together with the UK company.
We have been informed by the Directorate of Taxes that UK companies that are currently directly registered for VAT purposes without a VAT representative, will receive information on the registration status from the tax authorities early in 2021. Until UK companies are contacted by the Norwegian tax authorities in 2021, the current registration is expected to be valid. Registration in accordance with the rules for companies resident outside the EEA should therefore take place after notification from the tax authorities.
Excise duty - the basic tax on mineral oil for vessels
The scheme with excise duty exemption and reduced excise duty rates applies to all companies that meet the conditions, regardless of which country the company has its business address. The UK's withdrawal from the EU / EEA will therefore in principle not be of significance to UK companies that have activities that fall within the excise duty regulations.
There is currently an exemption from the basic tax on mineral oil for vessels that carry goods and/or passenger transport for commercial purposes. A condition for the exemption is that the vessel is registered in the Norwegian Ship Register or ship register in another EEA country. If a British vessel used for the carriage of goods and/or passengers is not registered in such a register, the conditions for tax exemption will not be met.
Investments and the freedom of establishment may not be adequately safeguarded through the final free trade agreement. It is also not addressed in the transitional agreement. Potential consequences for corporate taxation may include:
- Restrictions on UK companies' ability to establish and operate subsidiaries or branches in Norway;
- Dividends and gains in UK companies may become subject to tax;
- Companies in the UK may become subject to Norwegian controlled foreign companies’ legislation, whereby Norwegian owners may be subject to tax directly on the profits of UK companies.
In addition, restructurings including cross border mergers and demergers involving the United Kingdom will become more difficult.
Brexit - Immigration:
Transition period for British citizens in Norway until 31. December 2020
During the transitional period, the United Kingdom will be treated as if it is still a member of the EU and EEA (European Economic Area). There will be no changes of the rights of British citizens and their family members that live in Norway or that are going to move to Norway before 31 December 2020.
British citizens living in Norway by 31 December 2020
1) Workers that are employed locally in a Norwegian company
Workers that have been practicing the right to free movement and will continue to do so after 31 December 2020 will have a right to continue to do so. The Directorate of Immigration (UDI) will set up a new type of residency permit for British citizens that move to Norway before 31 December 2020 to work for a Norwegian company. They cannot apply for the new kind of residency permit yet. They will have time to apply after 1 January 2021. Meanwhile, they will have the right to stay in Norway, just as before.
2) Assigned workers from a British company (service providers).
Until 31 December 2020, they can carry out assignments as before. However as UK wanted to keep 'service providers' out of the separation agreement with Norway, this group must have a residence permit according to the 'third country regulations' to continue their assignment or take new assignments in Norway after 1 January 2021. As processing times can be long during Covid-19, they should start the application process as soon as possible.
3) Assigned workers (service provider) employed by a company registered in an EU/EEA country (not UK)
Employees of a company in an EU/EEA country other than the United Kingdom, will not be affected by Brexit. This means that from 1 January 2021, they have the right to stay for up to three months without applying for a residence card. They also have the right to stay beyond three months as long as the work takes place as part of a service's performance according to the EU/EEA agreement, or the work necessary to establish a business in Norway.
Travel to Norway for UK citizens who do not live in Norway
Employees that are moving to Norway after 31 December 2020, have to apply for a residence permit for work according to the 'third country regulations'.
UK nationals will still be able to visit Norway for 90 days without a visa or residency permit after 31 December 2020 (as visa free nationals), but they will usually not be allowed to work when they visit. If they are going to work, they have to apply for a residency permit for work.
The biggest change for UK nationals that will work in Norway is probably that as third country nationals they will be subject to stricter requirements to obtain a residence permit for work. When under the EU/EEA immigration regime there were no requirements related to the employee’s competence, relevance of his/her education or minimum salary requirements in the Immigration Regulation. However, when regarded as third country nationals it is required that they can provide documentation that they are 'skilled workers', that their education is relevant for the position they have been offered in Norway and that they are paid in accordance with minimum wage requirements. Hence, unskilled labor will experience more difficulties obtaining a work permit.
- Trade & Customs: Director Kjerstin Ongre
- Corporate Tax: Partner Thor Leegaard and Senior Manager Lene Lodde
- Immigration: Director Unn Kristin Mardal