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Norway: New VAT registration process proposed, online retailers and marketplaces

Norway: New VAT registration process proposed

A proposal to amend the Norwegian regulations relating to low-value shipments (that is, a value below NOK 3,000) would include a new registration process. The aim is to simplify customs clearances of eligible shipments as well as to provide a simplified value added tax (VAT) system.

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Overview

The proposal reflects a decision to repeal the VAT exemption and other indirect taxes on low-value goods from foreign sellers delivered to consumers in Norway. The Ministry of Finance proposed to introduce new legislation whereby sellers and online marketplaces would be liable for VAT on cross-border sales of low-value goods to final consumers in Norway. The new system would be effective 1 January 2020.

A simplified system would apply for online sellers and marketplaces to register, declare, and pay VAT on business-to-consumer (B2C) supplies of low-value goods. The system will be implemented as an extension of the existing VAT on VOES (VAT on small consignments) system—that is, a simplified scheme for VAT on cross-border B2C sales of electronic services.

The proposed simplified VAT regime is in accordance with principles under OECD guidelines (especially the guidelines from 2016) and more recently, the report related to marketplace platforms from 2019. The proposal also has some similarities with the EU VAT e-commerce package that is to be effective 1 January 2021—in particular, the extension of the scope of the EU MOSS scheme to encompass distance sales of low-value goods imported from third countries, and repeal of the current VAT exemption for imports of small consignments.


KPMG observation

There are similarities between the Norwegian proposals with the Australian rules related to goods and services tax (GST) on low-value imported goods (effective 1 July 2018), and the simplified system that has been put in place for sellers and online marketplaces to register, report, and pay GST.


Background of the Norwegian VAT system

Norway is not a member of the EU. Thus, comprehensive “secondary legislation” regarding VAT (e.g., the VAT directive 2006/112/EC)  is not binding for Norway. Even so, the Norwegian system is largely based on the same principles as those in the EU.

As regards VAT on international transactions, the Norwegian system is highly influenced by the findings of Working Party 9 of the OECD—both regarding the destination principle and the mechanism for the effective collection of VAT. Norway was among the first countries to introduce a simplified vendor regime for B2C transactions with regard to electronic services.


General rules

Foreign businesses with business activities in Norway must calculate and pay VAT to the same extent as Norwegian businesses. VAT is payable on all goods and services unless specifically exempted (e.g. financial services, health and social services and letting of real property, or zero-rated products that include books, newspapers).

Cross-border sales of goods and services are treated in accordance with the destination principle, and imports to Norway are in principle “VAT-liable”—except for the current exemption of low-value goods—through either customs clearance (of goods) or use of the reverse-charge mechanism (for services), while exportation is zero-rated.

The VAT rate structure is:

  • 25% (standard VAT rate)
  • 15% (foodstuffs)
  • 12% (transportation services, hotel services)
  • 0% (books, newspapers)

Foreign businesses must register with the Norwegian VAT registry when VAT-liable turnover exceeds a threshold amount (currently NOK 50,000 or approximately €5,000 or U.S. $5,700 during a 12-month period).

Foreign businesses without a fixed place of business in Norway can register directly in the VAT registry. However, if the country of establishment and Norway do not have an agreement on mutual administrative assistance that also covers assistance with collection of unpaid VAT, the foreign business must register through a local representative.


VOES scheme

The VOES scheme—which would be extended and made available to VOSC-suppliers—is a simplified alternative to this ordinary registration process, and would be provided to foreign businesses supplying electronic services to consumers in Norway (B2C). The VOES scheme aims to provide such businesses a simplified registration process, and simpler terms for charging, collecting, and remitting VAT to the Norwegian tax authorities. The VOES scheme is substantially similar to the EU MOSS scheme.


VOSC scheme, removal of the low-value goods threshold

The main element of the Norwegian proposal is that foreign sellers and electronic interfaces would be liable to pay Norwegian VAT when selling small consignments to Norwegian consumers. If a seller uses an electronic marketplace, the marketplace would be the “deemed supplier” according to the proposed changes in the VAT legislation.

The key features of the new rules for the VOSC segment, following the removal of low-value goods threshold, would be:

  • The VAT liability on sales of low-value goods in the VOSC segment would be shifted from the Norwegian consumer to the foreign supplier of the goods.
  • Instead of the consumers paying VAT at the point of importation (as under current rules), the supplier would have to collect Norwegian VAT at the point of sale, and then report and remit the VAT to Norwegian tax authorities.
  • The supplier would have to provide information on transport documents, import documents, and the consignments (e.g., a “vendor ID” and “VAT-paid code”) showing that VAT has been paid at the point of sale. The information requirements are not finalized.

Foreign suppliers and online marketplaces with turnover above the NOK 50,000 threshold would be allowed to manage their VAT liability on sales of low-value goods through the VOSC scheme. They might also choose to register for VAT in VOSC before the turnover has reached the threshold.

The VOSC scheme provides a simplified registration process, simpler reporting requirements, and fewer administrative burdens in general. An alternative to VOSC registration would be to register under the rules for ordinary registration in the Norwegian VAT registry. Failure to register could result in all shipments from the supplier to be subject to VAT and customs, regardless of value.  

A supplier with an existing registration in the VOES scheme could use the same registration and “vendor ID” for both electronic services and low value goods.

Defining “low-value goods”

The proposed VOSC scheme would be restricted to sales of low-value goods. For these purposes, “low value” means:

  • Goods valued between NOK 0 - 3,000 (€ 0- 300, U.S. $0 - 344, CNY 0 - 2,350).
  • The threshold is calculated exclusive of shipping and insurance costs ("intrinsic value").

The VOSC scheme would apply to all goods, except:

  • Tobacco products
  • Alcoholic beverages
  • Other restricted or illegal goods according to Norwegian law
  • Foodstuffs – (any goods meant for human consumption)

The VOSC would only be relevant for VAT. Other indirect taxes—including excise duties and customs duties—would have to be collected as they currently are, upon importation / customs clearance of the goods. Excise duties are outside the scope of the proposed VOSC regime and, as a consequence of the exclusion of restricted goods and foodstuffs from the VOSC, this effectively would consist of goods that are due for excise duties in the B2C segment. Excise duties (taxes) must be paid on all goods when excise duties are imposed, including low value goods.

Because the threshold for being a low-value good is proposed at NOK 3,000, the Ministry of Finance has also proposed to adjust the de minimis value for customs duties from NOK 350 to NOK 3,000. This means that a shipment with a value below the threshold (and therefore within the scope of the VOSC) would not be subject to customs duties, even if the product itself, has customs duties. This proposal therefore would be a simplification measure for online marketplaces.

Who would be liable for VAT – “deemed supplier” – distinction between supplier and intermediary

If the supply of the goods is facilitated with the use of an intermediary, the intermediary would be the “deemed supplier.” This, effectively, would mean that online marketplaces facilitating the distance sales of imported goods using an electronic interface (e.g., marketplace, platform, app, portal) would be deemed, according to VAT legislation, to have supplied those goods themselves. The “deemed supplier” provision is, according to the proposal, mandatory—i.e., those who sell low-value goods through an intermediary would not themselves need to be registered. The supplier and intermediary cannot freely choose who would be liable for VAT on the supply. It would be the intermediary—that is, the "marketplace" that has the obligation.

The distinction between supplier and intermediary is based on an overall assessment of whether the delivery takes place through the use of an intermediary:

  • It is not decisive whether underlying agreements between the parties classify the relationship as involving a subcontractor, intermediary, agent or commissioner, etc.
  • Who is contractually responsible for the supply of goods is not necessarily decisive when assessing who must be registered.
  • When deciding who the supplier is pursuant to the VAT law, an important factor is who, from the standpoint of the consumer, appears to be the seller, and who is responsible for the actual delivery (in other words, who is, directly or indirectly, responsible for facilitating the transportation of the goods to the Norwegian consumer).
  • It must also be taken into consideration who is collecting, directly or indirectly, the payment from the recipient.
  • However, the intermediary is not a "deemed supplier" if its involvement is limited to providing access to a payment system or processing payments or transportation services. Likewise, the intermediary is not a "deemed supplier" if it only provides advertising that makes customers aware of products and links them to a merchant's website.

Simplified customs clearance for the VOSC segment – “trusted operator”

The threshold for the VOSC segment—goods valued between NOK 0 and 3,000—is aligned with the threshold for the use of existing simplified customs clearance procedures. This means that suppliers in the VOSC segment would have an option to use shipping agents/couriers/transporters, all of which have authorization and access to these simplified customs procedures (“trusted operators”). This could be the most efficient way of shipping goods to Norwegian consumers. There are, for the time being, five big courier companies, including Norwegian Mail, that have such authorization, but other traders can apply. The Norwegian customs administration handles these applications and provides authorization if the criteria are met.

The simplified procedures allow the operators to handle customs clearance on behalf of the final consumer, and clear goods in the VOSC segment in bulk, which significantly speeds up the clearance process.

VOSC scheme

The VOSC scheme would offer simplified vendor registration for the effective collection of VAT for traders not established in the jurisdiction of taxation.

How to register

The simplified registration, reporting, and payment process would take place through a Norwegian tax administration webpage. After initial registration, the supplier would be assigned an identification number and password. The duty to register would arise when the total value of deliveries to recipients in Norway exceeds NOK 50,000 during a period of 12 months. Suppliers that otherwise meet the requirements can nonetheless be registered in the simplified registration system before this threshold limit is exceeded.

Reporting and payment

VAT would need to be declared and paid by the same deadlines as apply to the already existing VOES system for electronic services, i.e., quarterly, with a deadline for the submission of returns and payment 20 days after the end of the period (as noted in the following table):
 

Reporting period

VAT declaration and payment due by

1 January to 31 March

20 April

1 April to 30 June

20 July

1 July to 30 September

20 October

1 October to 31 December

20 January

 

KPMG observation

The Ministry of Finance has stated its view that the proposed scheme would be a simplification and not burdensome for taxpayers, but some observers in Norway are not entirely sure about that viewpoint. The obligation to register requires that the tax authorities have a good overview of all foreign suppliers. The VAT return that would have to be prepared four times each year is a very simple one—but requiring taxpayers to keep a sales register with rather detailed information about their end-customers and sales in Norway (this obligation exists for VOES suppliers today).

Although it is not explicitly stated, it appears the tax authorities could require reconciliation of the import documentation/manifest information for bulk shipments that are customs-cleared under a simplified procedure, with the sales register so as to determine that all sales are charged with VAT and that all VAT-charged sales have been reported and that the VAT has been paid. Further, as a registered taxpayer, a VOSC entity would be subject to the usual control regime and possible sanctions in instances when there is a breach of that duty.

Read an August 2019 report [PDF 197 KB] prepared by the KPMG member firm in Norway


For more information, contact a KPMG tax professional in Norway:

Hans Martin Asheim | +47 406 39 631| hans.martin.asheim@kpmg.no

 

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