Thinking beyond borders
Norwegian reporting obligations largely depends on the employee's connection to Norway.
An employee either hired by or hired out to Norwegian employer, as well as an employee hired by a foreign company with permanent establishment in Norway is liable to tax to Norway from day one.
All other employees will only be liable to tax to Norway after having either been here for more than 183 days in a 12-month period, or 270 days in a 36-month period. Tax reporting obligations will emerge from first day in Norway, regardless of tax liability.
Social security reporting obligations will be determined by the social security membership of the employee.
A person’s liability for Norwegian income tax is determined by residence status. A person can be a resident or a non-resident for Norwegian tax purposes.
A person becomes tax resident in Norway if their stay in Norway exceeds 183 days during a 12-month period, or 270 days during a 36-month period.
The general rule is that a person who is a tax resident in Norway is liable to tax on their worldwide income and wealth.
A non-resident of Norway is a person who does not fulfill the residency requirements, and who will be tax liable to Norway for income derived directly or indirectly from Norwegian sources.
Employment income is generally treated as Norwegian-sourced if it is paid from a Norwegian source and derived from work performed in Norway. It is paid from a Norwegian source if the employer, formal or economic, has taxable activity in Norway in accordance with the domestic tax law.
Technically, there is no threshold/minimum number of days that exempt the employee from the requirements to file a Norwegian tax return, or from paying tax in Norway. To the extent that the individual qualifies in accordance with the dependent personal services article of the applicable double tax treaty, there will be no tax liability. The treaty exemption will not apply if a Norwegian entity is the individual’s economic employer.
The types of income which is generally taxed is employment income and benefits-in-kind from the employer.
The marginal income tax rate on employment income is 38.2 percent for the income year 2020. Capital income is taxed at a rate of 22 percent.
Dividends are taxed after having adjusted the basis for taxation up, multiplying by 1,44.
The rates apply for both resident and non-resident taxpayers
From 2019, a new simplified tax scheme has taken effect. The scheme (Pay As You Earn – PAYE) is meant for foreign workers in Norway. If conditions for the PAYE scheme is fulfilled, income from employment is taxed at a flat rate of 25 percent. The rate includes national insurance contributions at 8.2 percent.
Commuter expenses, which would not be taxable for regular employees, will be taxable for employees on PAYE scheme. One should be very aware of this when deciding on whether or not to opt for the PAYE scheme for the employee.
Employees on PAYE scheme do not have to file tax returns.
Employees performing work in Norway will as a main rule become mandatory members of the Norwegian social security scheme, and thereby obliged to pay social security contributions of 8.2 percent on their gross income.
Additionally, the employer is obliged to pay 14.1 percent of the employee’s gross income to the Norwegian social security scheme. The employer’s part of Norwegian social security contribution is lower than 14.1 percent if the employer is located in certain geographical areas in Norway. The rates are applicable without any cap.
An exemption from the Norwegian social security scheme may be obtained if there is a totalization agreement between Norway and the home country/jurisdiction. This applies both for residents as well as non-residents.
The tax year follows the calendar year.
Tax returns are due by 30 April following the tax year-end for both residents and non-residents. A 1-month extension may be granted if an application of extension is filed prior to 30 April.
An employer, regardless of whether Norwegian or foreign, has a monthly reporting obligation as well as withholding obligations related to income earned while performing work in Norway.
Employees from the Nordic countries/jurisdictions can work in Norway without applying for a residence permit and without making any registration with the Immigration authorities
Employees from the European Union (EU)/European Economic Area (EEA) may work for a period of up to 90 days without a visa or work permit. If the stay will exceed 90 days, employees must register with the immigration authorities (EU/EEA-registration) within the first 90 days. Registration is free.
Employees from certain countries/jurisdictions (that Norway has not signed a visa waiver agreement with) must apply for a visa before they enter Norway. The type of visa required will depend on the purpose of the individual’s entry into Norway.
If the purpose of a stay in Norway is to work, employees from countries/jurisdictions outside the EU/ EEA must apply for a work permit for Norway (Residence permit). They are not allowed to start working until this residence permit has been granted.
More information can be found on the web page of the Norwegian immigration authorities.
In addition to the Norwegian domestic regulations, Norway has entered into double taxation treaties with more than 100 countries/jurisdictions in order to prevent double taxation and allow cooperation between Norway and overseas tax authorities when it comes to enforcing their respective tax laws.
There is a risk that a permanent establishment (PE) could be created as a result of business travels to Norway, depending on the type of services performed, the level of authority the employee has when performing services in Norway and the duration of the stay in Norway.
Value-added tax (VAT) is (in general) applicable at 25 percent on goods and services. Reduced rates of 15 percent and 12 percent or zero-rate may apply (e.g. food, passenger transport, accommodation and vessels/aircrafts/platforms). Furthermore, some services are VAT exempted (e.g. education, health and financial services).
Norway has a transfer pricing regime. A transfer pricing implication could arise to the extent that the employee is being paid by an entity in one jurisdiction but performing services for the benefit of the entity in another jurisdiction, in other words, a cross-border benefit is being provided. This would also be dependent on the nature and complexity of the services performed.
Norway has data privacy laws.
Norway does not restrict the flow of Norwegian or foreign currency into or out of the country/jurisdiction. Certain reporting obligations, however, are imposed. The obligation to perform the reporting is levied on financial institutions. In addition, there are local rules to control tax evasion and money laundering.
All information contained in this publication is summarized by KPMG Law Advokatfirma AS, the Norwegian member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Norwegian Tax Act 26 March 1999 and subsequent amendments, tax rates provided by the Ministry of Finance, the Social Security Act of 28 February 1997 and the Immigration Act of 15 May 2008.