As a foreign multinational doing business in Norway you should be aware of the multitude of compliance obligations you must adhere to. Failure to comply may imply severe sanctions.
For non-compliance, the Norwegian authorities may levy serious sanctions including penalty taxes and interest charges, late filing penalty charges, deemed discretionary assessments, etc. It is now quite normal that late filing penalties, are levied automatically for each report that is not filed within due date.
All companies performing business activities in Norway are obliged to prepare and file a multitude of different forms and reports to the Norwegian authorities. Many of these obligations also rest on foreign companies, regardless of the size and scope of the assignments in Norway.
In our experience, mistakes are most commonly made in the monthly salary report for employees (a-melding), the report on contracts given to foreign companies (RF-1199), the report providing information about employee's used to fulfil the contract (RF-1198), and with regards to the annual tax return.
The A-melding, also known as the A-report scheme, is the monthly salary reporting system of the tax authorities. To ensure that accurate information is submitted, the tax authorities can impose enforcement fines. You can receive enforcement fines if you file the A-melding too late, or if it contains errors.
The enforcement fine is NOK 117 per employee per day. The enforcement fine will keep on running until the A-melding has been filed or until an erroneous A-melding has been corrected. Believe it or not, but the fine can in total be a maximum of NOK 1 172 000.
RF-1199 / RF-1198
The RF-1199 / RF-1198 is the so-called contract and employee reporting system of the tax authorities. In short, the RF-1199 form is used to give information about assignments given to foreign contractors for work in Norway.
The RF-1198 form must be completed by all foreign employers who have employees working in Norway.
Failure to comply with the reporting responsibilities can result in enforcement fines or penalty charges (so-called non-compliance penalties).
The enforcement fines can not exceed NOK 58 600.
As a starting point, the non-compliance penalty is NOK 11,720. However, it can be increased to NOK 23 440 when the failure to comply is repeated within 12 months from the first offence. In addition, a non-compliance penalty of NOK 2344 can be imposed for each person and each company not reported in accordance with the reporting responsibilities.
Annual tax return
Penalty tax directly related to the tax return filing obligation, can be imposed if a taxpayer gives incorrect or incomplete information. The penalty tax is 20 % of any tax that might have been withheld. The penalty tax can be increased by an additional 20 to 40 % if the taxpayer wilfully or with gross negligence has submitted incorrect or incomplete information. As a result, the total penalty tax could be as high as 60 % of the withheld tax.
To exemplify this, if an employee of company A has failed to inform about an income of NOK 100,000, and the tax rate on this income is 46,4 %, the tax on the income should have been NOK 46,400, and the potential penalty tax is thus NOK 27,840.
The penalty tax can be increasingly problematic if combined with a discretionary assessment. A discretionary assessment occurs when the tax authorities estimate the taxable income of a company or person. This is done in the event that information is missing or incomplete.
As an example, let’s say that Company A is a foreign contractor that has received a short-lived construction contract in Norway. Company A does not deliver a tax statement. The short-lived project did not return a profit, and as such the company should not have any payable tax in Norway.
As a result of non-delivery of the tax assessment, the tax authorities assess the income and tax on a discretionary basis, in addition to levying penalty tax. Company A will, as a result, need to pay substantial tax and penalty tax on an income they do not have.
Magnus Legal is a Norwegian business law firm. We specialize in helping foreign companies succeed when doing business in Norway. For more information about required actions applicable for foreign enterprises with business operations in Norway download our free guide:
Article first published 26 April 2018 - latest update 6 October 2020.
Find out more about Magnus Legal’s tax services on our webpage: Corporate tax in Norway