Norway – Taxation of international executives

Taxation of international executives

Taxation of international executives

  

Overview and Introduction

Individuals resident in Norway are subject to income tax on their worldwide income unless exempt under the provisions of a treaty.

Non-residents are subject to tax on the under-noted categories of income from Norwegian sources unless exempt under the provision of a treaty:

  • remuneration derived from employment in Norway for work carried out for a Norwegian source
  • remuneration paid to employees, hired out to a Norwegian source to carry out work in Norway
  • income derived from business activity carried out in Norway
  • remuneration derived from being a managing director or member of the board of directors in a Norwegian company
  • income derived from real estate or movable assets in Norway
  • income derived from the sale of shares, options, or any other type of financial instrument if considered to be business assets in relation to any business activity carried out in Norway (PE)
  • dividends received from a Norwegian company.

The official currency of Norway is the Norwegian Krone (NOK).

Herein, the host country/jurisdiction refers to the country/jurisdiction where the expatriate is going on assignment. The home country/jurisdiction refers to the country/jurisdiction where the expatriate lives when they are not on assignment.

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Income Tax

Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

30 April is the due date for tax returns.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Norway?

All individuals who are considered employees have to file a tax return by the end of April the year following the income year. Individuals on tax card according to Pay As You Earn system (PAYE) are exempt. A pre-filled return will be mailed to all taxpayers by mid-March. This return has to be checked, reviewed, and if necessary corrected by the taxpayer. The revised tax return has to be signed and returned to the tax authorities by 30 April preferably by using the web portal Altinn or Skatteetaten. When the tax return has been checked and reviewed and corrections are not necessary the tax return will be regarded as delivered and accepted even though it is not returned to the tax authorities.

It is possible to obtain an extension of the due date, normally up to 1 month, to file the return. The application for an extension must be sent to the tax office before the end of April. If a tax return is not submitted, the income may be arbitrarily assessed.

Please note that the tax returns are usually filed electronically via www.altinn.no or www.Skatteetaten.no. It is possible to make changes in your tax return after it is submitted. This can be done for the following 3 years after the filing deadline. This means that you no longer have to file a complaint on the tax assessment in order to make changes after the submission deadline.

Tax rates

What are the current income tax rates for residents and non-residents in Norway?

Residents

The Norwegian tax system has two bases of income. The ordinary income base is a net base. The tax on ordinary income is 22 percent for 2021.

In addition, we have the personal income base. This is a gross base for taxation. The bracket tax and the social security contributions for employees are based on this. Bracket tax is a progressive tax on gross salary and other personal income.

The bracket tax rates for 2021 are as follows:

  • from NOK180,800above NOK184,000: 1.7 percent
  • from NOK254,500above NOK260,100: 4.0 percent
  • from NOK639,750above NOK651,250: 13.2 percent*
  • above NOK999NOK1 021,550: 16.2 percent.

*residents of some parts of Finnmark and North-Troms 11.2 percent

Employee’s social security contribution is 8.2 percent of gross income.

Please note that the Norwegian tax system is divided into different tax classes. This has an effect on the size of some deductions. Resident taxpayers are allowed a personal tax-free amount in year 2021:

  • tax-free amount class 1: NOK52,450

The classes are defined as follows:

  • Class 1: Applies to residents. For tax-free amount, see the following.

The above mentioned tax rates are directly applicable for persons resident in Norway for tax purposes for a full 12-month calendar year. For individuals resident in the country/jurisdiction for tax purposes for less than 12-months, or for persons not resident in Norway for tax purposes, the tax-free amounts and the tax rate intervals in regard to the calculation of the tax, municipal and top tax, are reduced according to how many months the person is considered to have been in Norway.

From 2019, a new and simplified tax scheme has taken effect (PAYE) with a flat tax rate of 25 percent (16.8 percent if not a member of the Norwegian social security scheme). Please see below.

Non-residents

The same tax percentages for residents are applicable for non-residents, except for the residents that should choose the simplified tax scheme (PAYE), please see below.

PAYE (Pay As You Earn) for foreign workers

From 2019, a new and simplified tax scheme has taken effect. The scheme is meant for you as a foreign worker in Norway. This scheme is called PAYE (Pay As You Earn). Most new foreign workers will fall under this scheme the first year they work in Norway.

Short on the PAYE scheme

  • Your income from employment is taxed at a rate of 25 percent (16.8 percent if not a member of the Norwegian social security scheme).
  • Your employer deducts the tax directly from your salary, and your tax is settled when you receive your salary.
  • You do not claim deductions, and you do not have to submit a tax return nor wait for your tax assessment.

Primarily, the scheme is meant for foreign workers who work in Norway for short periods of time, and who are not tax residents in Norway. In addition to this there is an income limit of NOK639,750. The scheme also applies to most foreign workers the year in which they become tax residents in Norway. The PAYE scheme will be applicable if a tax payer lives abroad and receive director’s fees and similar remuneration from Norwegian companies.

Note that the scheme does not apply for foreign seafarers and offshore workers and workers that have business income or taxable income from property in Norway.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Norway?

An individual will be considered resident in Norway for tax purposes if any one of the following requirements is met.

  • The individual stays in Norway for more than 183 days in one or more periods during any 12-month period. Residency will take place from the income year for which the requirement is fulfilled.
  • The individual stays for one or more periods in Norway for more than 270 days during any 36-month period. Residency will take place from the income year for which the requirement is fulfilled.

Is there, a minimums number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.

For establishing residency in Norway according to the Norwegian Tax Act, the above mentioned requirements apply. Every day, and part of a day, in Norway is counted, without taking into consideration the purpose of the stay in Norway.

What if the assignee enters the country/jurisdiction before their assignment begins?

The above mentioned rules still apply.

Termination of residence

Are there any tax compliance requirements when leaving Norway?

Termination of residence in Norway for persons with a total stay in Norway not exceeding 10 years happens when the following requirements are fulfilled:

  • permanent stay in a foreign country/jurisdiction
  • stay in Norway must not exceed 61 days within a 12-month period
  • do not have the disposal of a permanent home in Norway.

If all three requirements are fulfilled within the same calendar year, the termination of residency will be the latter of the dates when the person either takes a permanent stay in a foreign country/jurisdiction, or gives up the disposal of a permanent home in Norway. If the fulfillment of the requirements is spread over 2 different income years, the termination of residence will occur either 1 January the latter income year or the latter date when the person gives up the disposal of a permanent home in Norway or establishes a permanent stay in a foreign country/jurisdiction.

The same conditions apply for persons with a total stay in Norway exceeding 10 years. However, the above mentioned conditions must be fulfilled for 3 consecutive years following the year of moving. Furthermore, the taxpayer also has a duty to file a Norwegian tax return for the moving year and the following 3 years.

In addition the individual has a mandatory obligation to inform the Norwegian Registration Office of any change of address.

What if the assignee comes back for a trip after residency has terminated?

The above mentioned rules still apply.

Communication between immigration and taxation authorities

Do the immigration authorities in Norway provide information to the local taxation authorities regarding when a person enters or leaves Norway?

There is no automatic exchange of information, but the immigration authorities may collect information from the tax authorities if needed and vice versa.

Filing requirements

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?

There is a filing requirement in Norway as long as the assignee is regarded as resident in Norway according to the Norwegian Tax Act, or as long as the assignee receives salary and benefits related to work performed in Norway/or a tax return is issued by the tax office.

Economic employer approach

Do the taxation authorities in Norway adopt the economic employer approach to interpreting Article 15 of the Organization for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Norway considering the adoption of this interpretation of economic employer in the future?

Yes. Norway uses a hire of labor clause with a wide definition, and thereby the employee becomes taxable to Norway from the first day of work if the salary and costs are borne by the Norwegian company. It is sufficient to conclude that hire of labor has taken place when the employee has been put to disposal by a person (hirer), to another person (user) to carry out work for the latter in the course of an activity the user carries on in the state where the work is performed, and where the hirer does not bear the responsibility and risk for the results produced by the employee’s work.

De minimums number of days

Are there a de minimums number of days3 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimums number of days?

This will apply from the first day of work.

Types of taxable compensation

What categories are subject to income tax in general situations?

In principle, all types of remuneration and benefits received by an employee for services rendered in Norway constitute taxable income, regardless of where paid. Typical items of an expatriate compensation package are fully taxable unless otherwise indicated, as follows:

  • base salary
  • reimbursements of foreign and/or home country/jurisdiction taxes
  • cost-of-living allowances are normally taxable
    • If the employee is considered a commuter (such as has a spouse and children living abroad), cost-of-living allowances up to a fixed amount are normally not considered can in some cases be regarded as non-taxable, it is depending on type of lodging in Norway
  • housing allowances and the imputed value of housing provided directly by the employer are normally fully taxable
    • However, housing allowances and the imputed value of housing provided directly by the employer may not be taxable if the individual’s spouse and children live abroad.
  • benefits-in-kind generally form part of taxable compensation
    • Where a company car is provided, it will involve a deemed compensation for the private use of the car.
  • home leave reimbursements to the employee are normally taxable
    • If the employee receives payment to visit spouse and children living abroad, the remuneration may not be taxable if they work on their travel.

Intra-group statutory directors

Will a non-resident of Norway who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Norway trigger a personal tax liability in Norway, even though no separate director's fee/remuneration is paid for their duties as a board member?

Non-residents are subject to tax if they receive remuneration derived from being a managing director or member of the board of directors in a Norwegian company, unless exempt under the provision of a treaty. The tax liability is irrespective of whether or not the board member is physically present at the board meetings in Norway.

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Norway?

Yes.

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Norway (i.e. as a general management fee where the duties rendered as a board member is included)?

Board member fee is regarded as salary income.

c) In the case that a tax liability is triggered, how will the taxable income be determined?

See above.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Norway? If so, please provide a general definition of these areas.

  • Moving expenses from a foreign country/jurisdiction to Norway when the move is initiated by employment in Norway.
  • Business expenses.
  • Special regulations apply for commuters.

Expatriate concession

Are there any concessions made for expatriates in Norway?

The person can choose to claim deduction for actual expenses. This can especially prove useful if the person is a commuter, and thereby has the right of tax-free home leave reimbursement and free housing.

Please note that these deductions are not available when using the PAYE system

Salary earned from working abroad

Is salary earned from working abroad taxed in Norway? If so, how?

Salary earned by a Norwegian resident from working abroad is subject to income tax in Norway. Standard rates apply. A credit is given in the Norwegian national and municipal income tax for any foreign income tax paid.

Residents working abroad for a continuous 12-month period may apply for a deduction in the assessed Norwegian income tax, equaling the part of the tax that falls on the remuneration earned abroad. The tax deduction cannot exceed the tax calculated in Norway on the same type of income which is taxed abroad. Please note that there are detailed requirements which need to be fulfilled to obtain the deduction.

Taxation of investment income and capital gains

Are investment income and capital gains5 taxed in Norway? If so, how?

For resident individuals, all worldwide income derived from investments and capital gains are treated as ordinary income with a tax rate of 22 percent for 2021. This applies to interest, dividends, and capital gains from sale of shares. When capital gains are taxable, corresponding losses may also be deducted from ordinary income.

However, please note that the gain from sale of shares and dividends will be grossed up before calculation of the tax on capital gain. Please find below and example:

 

NOK

Dividend

5000,00

Deduction 30000*0,6%

180

Taxable Dividend before tax adjustment

4,820

Multiplied by adjustment factor of 2020 (1.44) (the factor for 2021 is not yet settled)

6,940

Tax on dividend NOK6, 940,* 22%

1,508

*Cost of acquisition of share NOK 30,000

 

Dividends, interest, and rental income

Rental income

The principal rule is that income derived from renting out a private house is taxable. Exemption is made when more than half of the house, based on the imputed rent value, is disposable to the owner. Likewise the income is not taxable if it is a semi-detached house/duplex and more than half of one of the two sections is at the disposal of the owner. If the whole house or main parts of the house is rented out, the rental income is taxable if gross income from the rental exceeds NOK20,000. If the rental income is considered taxable, operating expenses are deductible.

Rental income derived from renting out an apartment in Norway is taxable with a tax rate of 22 percent. Deductions can be made for costs related to the letting out, such as insurance costs, heating, and so on.

Separate rules apply to so-called short-term letting of your own home. If you let your own home for less than 30 days, the income is taxable under the standard method. Under this method, rental income up to NOK10,000 is tax-free. Of the surplus, 85 percent is considered taxable income. With regards to short-term letting of holiday homes and residential properties you no longer use or live in, the tax rules remain the same. This means that this form of short-term letting, for instance via Airbnb, falls under the same tax rules as the more traditional long-term letting of property.

Please see the following for dividends and interest.

Gains from stock option exercises

Gains from stock options due to conditions from employment are taxable as salary at the time of exercise.

In addition, there is exit taxation on latent capital gains from stock options in Norwegian and foreign companies at the date the individual is regarded as emigrated from Norway and thereby is no longer considered as a tax resident of Norway either by a double taxation agreement or by the Norwegian Tax Act. If the stock options are not exercised within 5 years after the break of residency, there will be no exit tax levied on the capital gain. Please be advised that the Norwegian tax authorities will require security for the exit tax in the form of mortgage on shares or a bank guarantee. This will not apply if the country/jurisdiction you leave Norway to has a treaty with Norway regarding exit taxation on shares.

Residency status

Taxable at:

 

Grant

Vest

Exercise

Resident

N

N

Y

Non-resident

N

N

Y

Other (if applicable)

N/A

N/A

N/A


Dividends

Resident shareholders are taxed on dividends as ordinary income – 22 percent. Tax on dividends for individual shareholders is subject to a basic tax-free allowance. The tax-free allowance will be equal to a risk-free interest on the shareholder’s tax base cost of the shares. The risk-free interest for the income year 2020 is 0,6 percent. There will be a separate determination of the allowance for all shares of a company on shareholder level. Any unused allowance may be carried forward and set off against future distributions or against a gain on the sales of the shares. It may not be set off against income from other sources. Please note that the risk-free interest for 2021 is set in January 2022.

Example (2021)

 

NOK

Company Profit

100.00

Company tax

22.00

Dividend

78.00

Tax free allowance

 

Tax base cost (NOK1,000*0,6 percent)

6.00

Taxable income

72.00

Multiplied by adjustment factor 1,44

103.68

Tax 22 percent

22.80

Net income

49.2


Note: Based on the presumption that the individual paid NOK1,000 for the shares.

Shareholders in other EEA Member States may be allowed the same basic tax-free allowance on dividend payments. Shareholders resident outside the EEA-area do not receive the basic tax-free allowance. The tax rate / withholding tax are either 22 percent or a lower rate according to an applicable tax treaty.

Interest and royalty

Residents are taxed on interest as ordinary income. Non-residents are not subject to any Norwegian taxation on interest as long as the interest is not related to business income (PE) in Norway.

Capital gains on real estate

Capital gains on real estate located in Norway are, in general, taxable as ordinary income whether or not the owner is resident in Norway for tax purposes. A gain from the disposal of a private residence is not taxable if it has been owned by the resident for at least 1 year prior to the date of sale and has been used by the owner as private residence, for at least 1 year, within the last 2 years prior to the date of sale. Without going into detail, other exemptions may apply, for instance moving abroad.

Capital gains on shares

Residents are taxed on capital gains on shares as ordinary income. In addition, there is exit taxation on latent capital gains from shares in Norwegian and foreign companies at the date the individual is regarded as emigrated from Norway, and thereby is no longer considered as a tax resident of Norway either by a double taxation agreement or by the Norwegian Tax Act. If the shares are not sold within 5 years after the break of residency, there will be no tax levied on the capital gain. Please be advised that the Norwegian tax authorities will require security for the exit tax in the form of mortgage on shares or a bank guarantee. This will not apply if the country/jurisdiction you leave Norway to has a treaty with Norway regarding exit taxation on shares.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Norway? If so, please discuss?

As mentioned above, there is exit taxation on latent capital gains from shares or parts in limited or general partnerships in Norwegian and foreign companies at the date the individual is regarded as emigrated from Norway, and thereby is no longer considered as a tax resident of Norway in regard to national law or tax treaty. If the shares or parts are not sold within 5 years after the break of residency, there will be no tax levied on the capital gain. Please be advised that the Norwegian tax authorities will require security for the exit tax in the form of mortgage on shares or a bank guarantee. This will not apply if the country/jurisdiction you leave Norway to has a treaty with Norway regarding exit taxation on shares.

Are there capital gains tax exceptions in Norway? If so, please discuss?

There are special rules for tax exemption for capital gains from the realization of residences.

Pre-CGT assets

Not applicable.

Deemed disposal and acquisition

Not applicable.

General deductions from income

A general allowance for expenditure relating to employment is allowed at 46 percent of gross earned income with a minimum of NOK4,000 in income from employment and similar income and a maximum of NOK106,750 for the income year 2021. Also, the general allowance is reduced according to the number of months one is resident in Norway. For pension income, maximum deduction amounts to NOK88,700.

The taxpayer may claim the following deductions:

  • interest on debt
  • travel expenses to and from working place in Norway
  • extra expenses for lodging and in some cases for food incurred (documentation of expenses is mandatory) when working away from home
  • parent deduction (expenses for childcare while the parents are working)
  • losses when selling shares or other financial instruments.

Please note that this list is not complete, but merely an overview of the most common deductions.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Norway?

Normally, a Norwegian employer who has an assignee abroad will tax equalize according to a hypothetical tax. Some employers use the tax protection method.

The following is the normal method of recognizing tax reimbursements paid by the employer:

  • current year gross-up
  • current year reimbursement

Calculation of estimates/ prepayments/ withholding

How are estimates/prepayments/withholding of tax handled in Norway? For example, Pay- As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Please see below.

Withholding taxes

Norway has a withholding tax system. The employer is obliged to withhold taxes in connection with payment of salary to the employee. The amount withheld is based on a tax card obtained by the employee from the local tax office. Withheld taxes have to be submitted to the tax collector on a bi-monthly basis. In June - October of the year following the income year, the individual will get their tax assessment. As for 2021 some tax payers might receive the tax assessment earlier. If the withheld amount is in excess of the tax assessed, the difference will be paid back to the individual, correspondingly if the assessed tax is in excess of the withheld amount, the balance has to be paid by the employee. Interest will be charged.

Pay-as-you-earn (PAYE) withholding

A simplified tax scheme meant for foreign works in Norway has taken effect as of income year 2019. For more information, see above. Should the employee choose to use the simplified tax scheme (PAYE), they will be issued a tax deduction card with a PAYE rate of 25 percent when they applies for a tax deduction card. The employer will deduct the tax directly from the salary, and the tax will be settled when you receive your salary. If you have paid too much taxes, you may apply for a refund contacting the tax office.

PAYE installments

Please see the above.

As mentioned above, the employer submits the taxes withheld on a bi-monthly basis to the Tax Collector's Office.

Payment dates are:

Salary

Taxes to be paid

January - February

15 March

March - April

15 May

May - June

15 July

July - August

15 September

September - October

15 November

November - December

15 January, the following year


When are estimates/prepayments/withholding of tax due in Norway? For example: monthly, annually, both, and so on.

Please see the above.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Norway? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Norway uses the credit system as the main rule to avoid the double taxation of persons being liable to taxation on the same income and wealth in more than one country/jurisdiction. A tax treaty with other provisions, however, takes priority.

Only persons considered resident in Norway have the right to claim tax credit in Norway. The tax credit may never exceed the actual tax paid abroad. However and furthermore, the tax deduction cannot exceed the tax calculated in Norway on the same type of income and wealth which is taxed abroad. The tax credit cannot be carried forward if there is no tax to pay in Norway for that year or in the following 5 years. The claim for tax credit must be put forward, at the latest, at the same time as the individual submits the tax return for the income year in which the foreign income is liable to Norwegian taxation. If the foreign tax cannot be substantiated in that time, the tax credit claim must be presented at the latest 6 months after the tax is finally assessed abroad.

General tax credits

What are the general tax credits that may be claimed in Norway? Please list below.

Please see the section discussing general deductions from income.

Sample tax calculation

This calculation assumes a taxpayer resident in Norway whose 2-year assignment begins 1 January 2020 and ends 31 December 2021. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 2 years.

 

2020

USD

2021

USD

Salary

100,000

100,000

Bonus

20,000

20,000

Cost-of-living allowance

10,000

10,000

Housing allowance

12,000

12,000

Company car

15,000

15,000

Moving expense reimbursement

20,000

0

Home leave

5,000

5,000

Education allowance

3,000

3,000

Interest income from non-local sources

6,000

6,000


Exchange rate used for calculation: USD1.00 = NOK10.00.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year. Interest income is not remitted to Norway.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income

Year-ended

2020

NOK

2021

NOK

Days in Norway during year

365

365

Earned income subject to income tax

 

 

Salary

1,000,000

1,000,000

Bonus

200,000

200,000

Cost-of-living allowance

100,000

100,000

Net housing allowance

120,000

120,000

Company car

150,000

150,000

Moving expense reimbursement

0

0

Home leave

50,000

50,000

Education allowance

30,000

30,000

Total earned income

1,650,000

1,650,000

Deductions

104,450

106,750

Total taxable net income

1,545,550

1,543,250


Capital income

 

2020

NOK

2021

NOK

Interest income

60,000

60,000

Norwegian tax (22%)

13,200

13,200


Calculation of tax liability

 

2020

NOK

2021

NOK

Taxable salary income as above

1,545,550

1,543,250

Norwegian tax thereon

634,482

630,891

Interest income taxes

13,200

13,200

Total Norwegian tax

647,682

644,091


The calculation is based on the following assumptions.

  • The taxpayer is considered resident in Norway for tax purposes since their stay in Norway exceeds 183 days each income year. They will therefore be taxable for all their income, both in Norway and abroad. Reference is made to the fact that tax treaties are ignored for the purpose of this calculation.
  • As a resident in Norway the taxpayer will be a member of the National Social Insurance Scheme and will pay employee’s contribution, which is 8.2 percent of gross income.
  • The taxpayer will be taxed in Tax Class 1
  • The calculations is not taking into consideration the moving expenses reimbursement since this is tax-free according to Norwegian rules.

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FOOTNOTES

1 Income Tax Act of 26 Mars 1999 § 2-1 (2).

2 Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country/jurisdiction for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country/jurisdiction employer but the employee’s salary and costs are recharged to the host entity, then the host country/jurisdiction tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country/jurisdiction.

3 For example, an employee can be physically present in the country/jurisdiction for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.

4 Sample calculation generated by KPMG Law Advokatfirma AS, the Norwegian member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Norwegian Income Tax Rates Act.

  

Special considerations for short-term assignments

Residency rules

Payroll considerations

Taxable income

Additional considerations

For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than 1 year.

Residency Rules

Are there special residency considerations for short-term assignments?

The same residency rules apply for short-term assignees as for other persons.

Payroll considerations

Are there special payroll considerations for short-term assignments?

There are reporting requirements to the Norwegian authorities, equal to the reporting obligations for a Norwegian employer.

Taxable income

What income will be taxed during short-term assignments?

If the assignee is regarded as resident in their home country/jurisdiction according to the double taxation agreement with Norway, the remuneration derived from work performed in Norway will be taxable in Norway. Please note that income from real estate in Norway is also taxable. However, the relevant double taxation agreement must always be taken into consideration.

Additional considerations

Are there any additional considerations that should be considered before initiating a short-term assignment in Norway?

There are at least three main issues for short term assignees. These are tax, social security, and immigration issues.

As for tax issues, there are different planning opportunities depending on the length of the assignment in Norway. These rules are quite complex. KPMG Law Advokatfirma AS will be able to assist in these matters.

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Other taxes and levies

Social security tax

Are there social security/social insurance taxes in Norway? If so, what are the rates for employers and employees?

Employer and employee 2020

Type of insurance

Paid by employer

Paid by employee

Total

Social security contribution

14.1%

8.2%

22.3%

Total

14.1%

8.2%

22.3%

An individual working in Norway is subject to Norwegian social security contributions. The normal rate for the employer is 14.1 percent on gross earnings. Please note that the rate do differ from 0% - 14, 1 percent depending on where in Norway the company is situated. The employee’s contribution is 8.2 percent based on gross wages.

There are three exceptions from Norwegian social security membership and payment of social security contributions that can come into force.

  • A person insured under another EEA/EU country/jurisdiction social security scheme can be wholly exempted by presenting an A1 certificate.
  • Furthermore, Norway has entered into several other reciprocal agreements on social security, for example with Canada and Quebec, Australia, India and the U.S. These agreements may wholly or partially exempt, both the employee and the employer, from contributions to the Norwegian social security system by presenting a valid Certificate of Coverage.
  • A foreign employee from a country/jurisdiction without a reciprocal agreement on social security with Norway and outside the EEA-area, may in some circumstances be exempted, wholly or partially, from contribution to the Norwegian social security system.

Conditions are strict and the employee needs to have a similar and satisfactory coverage as governed by the Norwegian social security scheme. An application must be filed towards Norwegian social security body.

In Norway, there is a mandatory occupational pension. This is paid by the employer and the minimum rate is 2 percent of gross income. Exceptions can be granted under certain conditions.

Gift, wealth, estate, and/or inheritance tax

Are there any gift, wealth, estate, and/or inheritance taxes in Norway?

There are no gift or inheritance tax in Norway for 2021.

An individual resident in Norway for tax purposes on 1 January in the year following the income year is subject to net wealth tax on their worldwide wealth, please see below Non- resident individuals are only subject to wealth tax on certain property in Norway, generally on real estate and on assets connected to a permanent establishment or fixed place of business in Norway.

Municipal wealth tax on individuals 2021

The municipal wealth tax is 0.7 percent of wealth above NOK1,500,000.

State wealth tax on individuals

The state wealth tax is 0.15 percent of net wealth above NOK1,500,000. Taxable amounts are rounded down to the nearest thousand.

Marginal rate on wealth tax is 0.85 percent (0.7 percent + 0.15 percent).

Real estate tax

Are there real estate taxes in Norway?

The municipalities may levy a real estate tax. It is payable by the owner of the property, irrespective of their residence. The tax is computed on the assessed value of the property using a rate varying from 0.2 percent to 0.7 percent. The tax is payable on installments that are decided by the local authorities.

Sales/VAT tax

Are there sales and/or value-added taxes in Norway?

There are value added taxes, VAT, which is a general tax levied on sales within the country/jurisdiction and on import. Value-added tax is levied on goods and services, and applies to all stages in the chain of production and distribution. Any person engaged in trade or business is required to register and to charge and pay VAT on goods and services they supply. Value-added tax on inputs purchased by the registrants is deductible in the VAT accounts. Value-added tax is thus not a tax on the registrants but a tax on final consumption.

Unemployment tax

Are there unemployment taxes in Norway? Not applicable.

Other taxes

Are there additional taxes in Norway that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.

Please contact KPMG Law Advokatfirma AS for additional information as there are some additional taxes that may be applicable depending on the actual circumstances.

Foreign Financial Assets

Is there a requirement to declare/report offshore assets (e.g. foreign financial accounts, securities) to the country/jurisdiction’s fiscal or banking authorities?

If the employee is considered tax resident in Norway, they will have invoked a global tax liability. All income and wealth (assets) has to be declared in the Norwegian tax return.

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Immigration

Following is an overview of the concept of Norway’s immigration system for skilled labor.

(E.g. which steps are required, authorities involved, in-country/jurisdiction and foreign consular processes, review/draft flow chart illustrating the process).

This summary provides basic information regarding business visits to, and work authorization for, Norway. The information is of a general nature and should not be relied upon as legal advice.

With regard to entry and residence into Norway it has to be differentiated between nationals of the Nordic countries/jurisdictions, nationals from the European Union respectively the European Economic Area and so-called third-country/jurisdiction nationals.

Most foreign nationals who intend to engage in activities, productive employment in Norway will need a Residence permit for Work. Depending on the purpose of travel to Norway and the nationality of the traveler, there are different types of residence permits that will apply to the occasion, and which might vary in their processes and processing times.

For Nordic nationals there is no requirement to make any Immigration related registrations or applications.

EU citizens have the right to Freedom of movement, which means they can enter Norway and start working here from day one. However, if they will stay in Norway for a period exceeding 90 days, there is an obligation to do an EU/EEA registration with the Immigration authorities.

For third-country/jurisdiction nationals there is a requirement to apply for a Residence permit for Work before the employee can start working in Norway.

Norway distinguishes further between Visa-free Nationals and Visa Nationals. Visa-free Nationals can enter Norway without the need to apply for an entry visa. Norway has entered into visa waiver agreements with over 60 countries/jurisdictions. A Visa-free national may not start working until the appropriate Residence permit for Work has been issued.

There is an online application process for Norway. The applicant must set up a user-ID in the Immigration portal and in this portal they fill in the relevant application/registration form, pay the processing fee and book an appointment with the Immigration office to submit supporting documents. From March 2020 it has been possible in many cases to upload the supporting documents electronically into the online application portal. If a meeting is required to submit documents, the appointment to submit documents can either be booked with a Foreign Service Mission in the applicants’ home country/jurisdiction or a country/jurisdiction where the applicant has had a legal stay for more than 6 months. For some applicants the meeting can also be booked with the local police or at a Service Center in Norway. For certain categories of applicants it is also possible to submit the application through a representative in Norway. This representative must then have a Power-of-attorney to represent the applicant.

If an Entry Visa is required in order for a third-country/jurisdiction national to enter Norway and to start working here, the process of obtaining the Entry Visa will be initiated automatically by the Immigration authorities when they process the application for a Residence permit for Work. The Entry Visa will be issued by the Norwegian Embassy/Consulate in the applicants home country/jurisdiction (or by a Foreign Visa Service Center, FVS), upon request from Norwegian Immigration authorities. So there is no need for a separate application for an Entry Visa if the employee has been granted a Residence permit for Work.

Also EU/EEA- registrations are submitted online in the Immigration portal.

International Business Travel/Short-Term Assignments

Describe (a) which nationalities may enter Norway as non-visa national, (b) which activities they may perform and (c) the maximum length of stay.

If Non-European nationals visit Norway as either tourists or business visitors, they are allowed to enter Norway using their passports and stay for up to 90 days within a 180 days rolling period.

Nordic nationals have an unlimited period of stay.

In some cases, a treaty or special agreement authorizes citizens of certain countries/jurisdictions to enter Norway without obtaining a visa (referred to above as Visa-free nationals). There are many countries/jurisdictions that have established visa exemptions with Norway. Norwegian visa waivers often permit foreign nationals to conduct business activities for up to 90 days, provided they are citizens of a country/jurisdiction that has a mutual immigration agreement with Norway.

Overview of visa exemptions for entry into Norway:

https://lovdata.no/dokument/SF/forskrift/2009-10-15-1286/KAPITTEL_26#KAPITTEL_26

In Norway, business travelers must generally limit their activities to participate in meetings, conferences, contract negotiations etc. By business meetings and contract negotiations is meant, in this context, the planning, reporting, presentation and handover of results/products and discussion at a more general level relating to a contract or project. In this context, certain categories of inspectors (for instance veterinary inspectors, shipping inspectors and people with similar inspection duties) can be regarded as business travelers. The definition 'business traveler' also covers people who are to sell goods at trade fairs and who engage in marketing and presentation of goods with a view to future deliveries at such trade fairs. The 'business traveler' term also covers persons in managerial positions who are to establish a branch or other commercial presence in Norway on behalf of a service provider based abroad. All work relating to the realization of a contract (product development) is however not an activity typically performed by a business traveler and falls outside the permitted activities.

Business visitors are generally prohibited from engaging in any kind of productive 'work'. By 'work' is meant in this context, and in a broad sense, any performance that represents value creation. It is irrelevant in this context whether the value creation is of a material or more intangible nature. It does not take much for a performance to be deemed to constitute work.

The following mode of calculation will apply: A traveler is required to count back 179 days from the current day of stay. The current day of stay counts as the 180th day. Within this time frame the days of stay in all Schengen member states must not exceed 90 days. Days of stay spent in the issuing Schengen member state (in this case: Norway) on the basis of a national visa or national residence permit do not count against the 90 days limitation.

The short-stay calculator on the following website can be used for calculating the period of allowed stay under the Schengen rules:

http://ec.europa.eu/dgs/home-affairs/what-we-do/policies/borders-and-visas/border-crossing/index_en.htm

Describe (a) the regulatory framework for business traveler being visa nationals (especially the applicable visa type), (b) which activities they may perform under this visa type and the (c) maximum length of stay.

Visa nationals are required to obtain a Schengen (C) visa to be able to enter into Norway for business visitor activities. The Schengen Visa can be issued for one single entry or for multiple entries. Although circumstances may vary, a business visitor may receive authorization to visit Norway for up to 90 days within a 180-day rolling period.

Schengen Visas are generally not eligible for in-country/jurisdiction extension, however in exceptional cases an extension could be possible.

The application for the Schengen Visa must be filed at the Norwegian embassy/consulate in the respective country/jurisdiction of residence in order to be allowed to enter Norway for up to 90 days within a 180 days rolling period.

In regards to the permitted activities and permitted duration of stay please see answers to question 2.

Outline the process for obtaining the visa type(s) named above and describe (a) the required documents (including any legalization or translation requirements), (b) process steps, (c) processing time and (d) location of application.

1. Set up a user-ID in the Immigration portal (application portal), fill in online application form, pay processing fee, book appointment with the Norwegian Embassy/consulate closest to where the applicant live (1 day)

2. Document gathering (1-2 weeks)

3. Submit supporting documents to the Visa application with the Norwegian embassy/ consulate at the place of residence (5-10 business days)

4. Obtain Visa and travel to Norway (1 day)

GENERAL REQUIREMENTS FOR BUSINESS VISITORS

  • Receipt for paid processing fee
  • Passport photo
  • Valid passport or travel document
  • Established purpose for the visit (i.e. Letter of Invitation (LOI) from the Norwegian company including a guarantee to cover certain expenses)
  • Confirmation letter of the employer, if requested
  • Documentation of ability to return or proof of onward travel
  • Proof of sufficient funds to cover trip and all costs while in Norway; and
  • Proof of medical insurance coverage while travelling and staying in Norway.

Original documents must be presented, and copies of the original documents must be enclosed along with a Norwegian or English translation. Documents in other languages than Norwegian or English must, as a rule, be translated by an authorized translator. It must be clear who has carried out the translation, and when.

Are there any visa waiver programs or specific visa categories for technical support staff on short-term assignments?

Yes, for some categories of work there are exemptions from the Residence permit requirement for short term assignments. One of the categories are for 'persons with technical qualifications'.

Please see the relevant Circular letter section 3.1.2;

https://www.udiregelverk.no/en/documents/udi-circulars/rs-2011-032/#_Toc467830494

Please be informed that nationals that are not Visa-free will still need to obtain a Business Visa for Norway and also for some of the categories there is an obligation to file a Notification to the local police prior to entering Norway.

Long-Term Assignments

What are the main work permit categories for long-term assignments to Norway? In this context outline whether a local employment contract is required for the specific permit type.

In Norway we mainly differentiate between the following work permit categories;

1) 'Skilled workers' with local employment (Norwegian employer/Norwegian payroll).

2) 'Service providers' that remain employees in their home country/jurisdiction.

In order to be categorized as a 'Skilled worker' (local employment – No. 1 above) it is in general a requirement to have a local employment contract, however this category of permit is also used when the employee is on Norwegian payroll (even if there is in fact not a local contract). In this latter scenario it is however a condition to prepare an 'Offer of Employment form' (standardized form from the Immigration authorities).

The 'service providers' can be categorized based on who the client in Norway is:

a) 'international companies' where the client in Norway is a branch of the same company they are employed with in home country/jurisdiction

b) where the client in Norway is a company that is not in the same group of companies as their home country/jurisdiction employer.

Provide a general process overview to obtain a work and residence permit for long- term assignments (including processing times and maximum validation of the permit).

1. Set up a User-ID with the Immigration portal /application portal (1 day).

2. Fill in relevant application form online, pay the processing fee and book appointment with the Immigration office (Norwegian embassy/consulate in home country/jurisdiction or local police/Service Center in Norway if represented by POA) to submit supporting documents (1-7 days). This meeting (no 3 below) is not required in cases where UDI allow for electronic filing of documents through the online application portal.

3. Meeting #1: meet at the Norwegian embassy/consulate in home country/jurisdiction or local police/Service Center in Norway if represented by POA) to submit supporting documents (can take up to 3 weeks depending on the waiting time for available appointment in the online booking calendar).

4. Immigration authorities process the application (3-4 weeks, might vary).

5. (Meeting #2: if Entry Visa is required the applicant need to meet at the embassy/consulate/visa service center in home country/jurisdiction to obtain the Entry Visa (1-7 days depending on where Entry Visa shall be obtained).

6. Meeting #2/#3: After arrival in Norway - applicant meet with the local police or at a Service Center to effectuate the residence permit for Work and to order the Residence Card. The applicant can start working legally in Norway from this day (waiting time for available appointment in the online booking calendar might vary).

7. Approximately 10 days after the effectuation meeting the applicant will receive their Residence card.

Is there a minimum salary requirement to obtain a long term work and residence permit for assignments? Can allowances be taken into account for the salary?

Yes. It is a requirement that the pay and working conditions are not poorer than the applicable collective agreement or pay scale for the industry in question. Any new agreements/pay scales, or adjustments, must be reflected in the applicant’s pay and working conditions from the day they enter into force, so that they are paid in accordance with the applicable collective agreement/pay scale at all times.

If no such collective agreement or pay scale exists, the pay and working conditions must not be poorer than is normal for the occupation and place concerned.

Where it is not possible to say what is 'normal' for the occupation and place it is determined that the minimum pay should be set based on what level of qualifications the job require.

If a Bachelor degree is required: NOK398,800 per year

If a Master degree is required: NOK430,500 per year.

(Please note that these are the rated applicable from May 2020. Rates are adjusted yearly).

Cash allowances can be included when calculating the salary (such as cost of living allowance and assignment allowance). The employers’ coverage of travel expenses and housing can however not be included.

Is there a fast-track process which could expedite the visa/ work permit?

No, there is no fast-track option for Norway.

At what stage is the employee permitted to start working when applying for a long term work and residence permit (assignees/ local hire)?

See our respond above regarding the application process (point 6). The employee is allowed to start working from the day of their effectuation meeting with the local police/Service Center in Norway.

Can a short term permit/ business visa be transferred to a long term permit in Norway?

No, a new application for a Residence permit for Work would be required, however some categories of applicants might be allowed to submit this application from within Norway.

Is it possible to renew work and residence permits?

Yes.

First-time Residence permits for Work can be granted for 3 years, but not, however, for longer than the period applied for and not for a period that exceeds the duration of the employment relationship.

If there are considerations indicating that the duration should be further limited, the permit shall be granted for a shorter period. An example of such considerations would be a need to check whether the conditions for the permit continue to be met. In such cases, it is therefore established practice to grant a permit for 1 year, or shorter, in accordance with the above.

An application for a residence permit as a skilled worker can be renewed provided that the requirements for a first-time permit are still met. In that connection, it shall be verified that the applicant has actually worked in accordance with the original offer of employment, including that they have received the agreed pay.

If the application for renewal is submitted no later than 1 month before the permit expires, the applicant is entitled to continue residence on the same conditions until the application has been finally decided.

Is there a quota or system or a labor market test in place?

Yes, however it hardly ever affects the possibility to obtain a Residence permit for Work.

It is a condition that the applicant is either covered by the quota stipulated by the Ministry of Labor and Social Affairs in consultation with the Ministry of Trade, Industry and Fisheries and the Ministry of Finance, or that the position cannot be filled by domestic labor or labor from the EEA.

Every year, the Ministry of Labor and Social Affairs stipulates a quota stating how many residence permits for skilled workers can be granted without carrying out an individual labor market assessment. The quota is published in a circular from the Ministry and is available on the Ministry’s website.

The requirement for a quota or labor market assessment does not apply to a permit as a skilled worker for an applicant who is a national of a country/jurisdiction that is a member of the World Trade Organization (WTO), and who is employed by an international company.

Only when the quota has been filled shall an individual labor market assessment be carried out before any more such permits can be granted in the same calendar year. In such case, a statement shall be obtained from the Norwegian Labor and Welfare Administration (NAV). A residence permit cannot be granted without NAV’s consent.

General Immigration Related Questions

Would it be possible to bring family members to Norway?

Yes, both Residence permits for Skilled Workers (local employment) and Residence permits for Service Providers (seconded employees/service providers) constitutes the basis for family immigration. Please be informed however that for Service providers (that are not employed in an international company) it is a requirement that the main applicant is granted a Residence permit for a period exceeding 6 months in order to bring family to Norway.

Is it possible to obtain a permanent residence permit?

Yes, if you have had a Residence permit for Work as a skilled worker (local employment) for 3 years, this constitutes the basis for applying for a Permanent Residence permit in Norway.

Residence permit for Work as a service provider does not constitute the basis for a Permanent Residence permit.

What if circumstances change after the Work and Residence application process (e.g. change of employment or personal situation, including job title, job role or salary)?

An employee holding a Residence permit for Work as a skilled worker (local employment) is allowed to change employer without applying for a new Residence permit. However, if there are any changes in their job title or role, the person will have to apply for a new first time application.

Changes in salary must be evaluated on a case-to-case basis. If a person’s salary is increased or decreased (even if still above minimum salary requirements), this can be an indication that also their job title/job role has changed.

An employee holding a Residence permit for Work as a Service provider is not allowed to take on assignments other than that described in the assignment offer form that was submitted for the first application. Nor is the person entitled to carry out assignments for another client or carry out work for an employer in Norway.

How long can a permit holder leave Norway without their permit becoming invalid?

Any extended absences from Norway may affect future Permanent Residency and Citizenship applications. A permit is granted under the assumption that the applicant will be working in Norway. If it is detected that the applicant does not work in Norway as stated in the application the permit might be revoked.

Must immigration permissions be cancelled by the end of the assignment/employment?

This is not a general requirement, however if the expiry date of the granted permit is long after the date the employee leave the country/jurisdiction, we recommend that the employee notify the Immigration authorities that they have left the country/jurisdiction.

The reason for this is that having a valid permit in Norway might affect the employees possibilities of obtaining a residence permit for work in a different country/jurisdiction. And also, for some categories of residence permits there is a maximum period of allowed stay in Norway before a quarantine period applies. For instance a person holding a Residence permit for Work as a service provider cannot have a permit in Norway for more than 6 years in a row. After 6 years there will be a 2 year quarantine period before a new permit on the same grounds can be granted.

Are there any penalties for individuals and/or companies in place for non-compliance with immigration law?

Yes, non-compliance can be sanctioned with both deportation, expulsion, imprisonment and fines depending on the severity of the breach.

Sanctions might apply both to the employee and the employer.

Other Important Items

List any other important items to note, or common obstacles faced, in Norway when it comes to the immigration processes.

Processing time: The most common obstacles that you need to be aware of is the processing time. Employees and employers need to start the process early in order to meet the planned start date for work in Norway. You should allow at least 8 weeks for the process. No processing guarantees can be provided.

Education/Work experience - documentation: For third-country/jurisdiction nationals there are strict requirements related to their level of education and how this must be documented.

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Disclaimer

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 Income Tax Rates Act, the Social Security Act and Immigration Act, and subsequent amendments.

Copyright

© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.