Norway: Cross-border group relief, loss carryforwards | KPMG | GLOBAL
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Norway: Cross-border group relief available, loss carryforwards

Norway: Cross-border group relief, loss carryforwards

Legislative measures proposed in the 2018 budget would allow taxpayers that are residents of the European Economic Area (EEA) to carry forward losses incurred in Norway indefinitely, even if the taxable activity in Norway has ceased. Such losses could then be used by other Norwegian group companies through group contributions.


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Cross-border relief for Norwegian companies was addressed in a September 2017 judgment of the European Free Trade Association (EFTA) Court. 

The EFTA Court held that cross-border group relief may be afforded a company in Norway in respect of final losses incurred by group entities in other EEA Member States. Under Norwegian law, this means a profit-making Norwegian company could contribute its profits to a loss-making group company in another state, for tax purposes. One condition is that the loss must be final and cannot be used in the home country of the other company in earlier periods or in the future (that is, the loss cannot be subject to being carried back or carried forward).

The case is: Yara International ASA v. Norway, E-15/16 (13 September 2017). Read the judgment and a related release on the EFTA Court’s website 


The Borgarting appeals court (located in Oslo) referred a question to the EFTA Court as to whether it was contrary under the right of establishment, to deny a deduction for group contributions made by the taxpayer to its Lithuanian subsidiary.

The taxpayer group acquired the Lithuanian subsidiary in 2007 (through its Finnish subsidiary). In April 2009, the Lithuanian subsidiary sold all its business to a third party. After the sale, it still had tax loss carryforwards. The taxpayer group bought all the shares from its Finnish subsidiary and immediately made a group contribution. The Lithuanian subsidiary was liquidated January 2010.

The Norwegian tax authorities disallowed the claim for deductibility of the group contribution. Under the Norwegian domestic tax provisions, group contributions could only be made to a company that is either a resident in Norway or liable to Norwegian tax through a permanent establishment. 

Norwegian court refers issues to EFTA Court

A district court in Norway agreed with the position of the tax authorities, and an appeal was filed to the Borgarting court of appeals which then requested an advisory opinion from the EFTA Court as to whether the requirement that the company must be liable to tax in Norway was contrary to the freedom of establishment under EEA law.

The taxpayer asserted that denying deductibility for the contribution was unlawful, and in support cited a judgment of the Court of Justice of the European Union (CJEU) in the Marks & Spencer (C-446/03) case. The taxpayer contended that access to group relief must be allowed in respect of "final losses”—i.e., the foreign company has exhausted the possibility of claiming relief for the losses in its home country, and it is impossible to use the losses in future periods. 

The Norwegian government countered that the requirement for being liable or subject to tax in Norway was a necessary condition, so that there would be a balanced distribution of the tax authority among the EEA Member States and also to address or prevent tax avoidance. The Norwegian tax authorities referred to a judgment of the CJEU in the Oy AA (C-231/05) case—when Finnish rules restricting tax deductions for group contributions from Finnish subsidiaries to a UK parent company were upheld and deemed proportional based on these justifications.

Judgment of EFTA Court

The EFTA Court stated that as a general rule, it is not contrary to the freedom of establishment for both the contributing and recipient parties to a group contribution to be liable (subject) to tax in Norway. The EFTA Court noted that under the group relief legislation, there was a legitimate purpose in allowing for a balanced allocation of taxing rights among the EEA Member States and in countering tax avoidance. 

Nevertheless, the EFTA Court concluded that in situations when there are “final losses,” the Norwegian rules went beyond what was necessary, and the EFTA Court concluded that cross-border group contributions having tax effect within the EEA must be allowed.

Generally, for losses to be accepted as final, the foreign subsidiary must have exhausted all possibilities of using the losses—either in past or future accounting periods—whether by itself, by other group companies, or by third parties in the same jurisdiction.

The EFTA Court found there was no reason to distinguish between different tax consolidation schemes. It held that the decisive factor was whether the restriction of fundamental freedoms was appropriate to allow legitimate goals, such as "to safeguard the balanced allocation of taxation powers” among EEA Member States, to be satisfied, and that the restriction does not go beyond what is necessary to achieve this goal. Thus, if the group contribution were made to cover a final deficit of foreign group companies, the restriction would then go beyond what was necessary, and therefore could not be justified. 

With this judgment, the matter is now before the Borgarting appeals court, for a determination as to whether the actual loss is final and whether this case represents a purely artificial arrangement (so that it would be appropriate to deny the claim for deduction of the loss).

KPMG observation

The judgment from the EFTA Court may be an opportunity for similarly situated taxpayers to consider whether Norwegian profit-making group entities can make tax-deductible contributions to group companies within the EEA. This would require that the losses of the foreign entity be final—meaning that the losses could not be used against future profits and also could not be set against profits of other group companies in the same EEA Member State.

Under new law (known in English as the “Taxes Management Act”), a taxpayer may seek reassessment of all tax years starting from 2015, by submission a new tax return, for a period of five years. For years prior to 2015, the tax authorities may allow a reassessment, but the decision is entirely discretionary, and a negative decision cannot be appealed to the courts.

As noted above, new legislation proposed in the 2018 budget would allow EEA residents to carry forward losses incurred in Norway indefinitely, even if the taxable activity in Norway has ceased. Such losses then could be used by other Norwegian group companies through group contributions. A typical example would be a situation when a permanent establishment with loss carryforwards is dismantled. Group contributions could then be made from a profit-making Norwegian group company or another permanent establishment in Norway.


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

Thor Leegaard | +47 4063 9183 | 

Fredrik Klebo-Espe | +47 476 40 770 |

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