The Government Proposes Changes to the Tax Residency Rules for dispatched and NATO Employees
The government has proposed changes to the rules regarding tax residency for dispatched foreign service employees and workers serving abroad in the North Atlantic Treaty Organization (NATO). According to the proposal, these groups will be considered tax residents of Norway with full tax liability. The proposed changes to the Norwegian Tax Act aim to create a more uniform and fair tax situation that aligns with international practice. Let's take a closer look at what this means.
Current Special Taxation Rules for foreign service employees
The current rules allow certain types of capital income, such as gains from the sale of shares, to be entirely tax-free for dispatched foreign service employees.
These rules' original purpose was to shield wages from municipal taxes during service abroad, not to provide tax exemptions for capital income.
Based on treaty-based tax privileges, dispatched employees are exempt from general tax liability in the host country.
It is considered unreasonable that various types of capital income are not taxed in Norway, and the regulatory framework needs modernization to ensure that untaxed income becomes subject to taxation.
Proposed Changes for the Taxation of Diplomatic and NATO Employees
Change in Residency Rules
The proposal is to amend the Norwegian Tax Act so that dispatched employees are considered tax residents of Norway during their service abroad, with total tax liability on income and wealth both in Norway and abroad.
Exemption from Municipal Taxes:
Even after changes to the residency rules, wages from the Norwegian state will continue to be exempt from municipal and county taxes.
Proposed Legislative Amendments:
Section 2-1 (8) of the Norwegian Tax Act is proposed to be amended so that employees posted abroad are considered tax residents of Norway while serving abroad.
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