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.
Also read: Do the right things when doing business in Norway
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 124 per employee per day. The enforcement fine will keep 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 1 243 000.
Also read: What is an A-report
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 62 150.
As a starting point, the non-compliance penalty is NOK 12 430. However, it can be increased to NOK 24 860 when the failure to comply is repeated within 12 months from the first offence. In addition, a non-compliance penalty of NOK 2 486 can be imposed for each person and each company not reported in accordance with the reporting responsibilities.
An important note in this regard, is the fact that ESA previously have concluded that the Norwegian practice related to the RF-1199 / RF-1198 must cease. This reporting obligation conflicts with the principle of free movement of services in art 36 in the EEA Agreement. Since ESA concluded with this, it seems that the Norwegian practice related to enforcement fines or penalty charges has ceased.
Magnus Legal believe that the reporting rules, and sanctions, will be subject to change in the future.
Penalty tax directly related to the tax return filing obligation, can be imposed if a taxpayer gives incorrect or incomplete information, and this has given you a tax advantage. 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 willfully 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. Both the discretionary assessment and the penalty tax can be appealed.
If an enforcement fine has been imposed on you, the additional tax can be deducted.
The amount paid will be deducted from calculation the additional tax payable regarding the same circumstances.
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 feel free to contact us for a non-binding conversation.
Article first published 26 April 2018 - latest update May 2023.
Find out more about Magnus Legal’s tax services on our webpage: Corporate tax in Norway