Non-Norwegian enterprises doing business in Norway will find that the basic Norwegian compliance obligations are rather burdensome, and failure to comply commonly results in severe sanctions. As always, it is better to do the right things from the beginning than to tidy up afterwards.
This article gives a brief overview of the required actions applicable in 2020 to foreign companies with business operations in Norway, including information on registration, reporting and tax liability in Norway. For more information download our extended practical guide here.
The most essential topics that foreign companies must consider when conducting business in Norway are:
- What kind of entity should be used?
- Registration and reporting obligations
- Value added tax (VAT)
- Import and export of goods and services
- Corporate tax
- Payroll tax and employee taxation
- Employment law
- Accounting and audit
What kind of legal entity?
Each enterprise must consider which entity that best suits its particular purpose, taking into account commercial considerations, tax and VAT issues, compliance and administrative costs, limitation of liability, etc. The most common alternatives are:
- Branch, called “NUF” in Norway (may create permanent establishment for tax purposes)
- Limited Liability Company (AS or ASA)
- Partnership and joint venture (ANS, DA, KS)
- Sole proprietorship
Everyone that conducts business activities within Norway must register with the centralised Registry at Brønnøysund. The Registry provides the enterprise with a Norwegian ID number, called “organisation number” or “org.no.”. Such org.no. is required when entering into contracts, invoicing, reporting, communicating with public authorities, etc.
Note that the filing of various forms and communication with Norwegian government agencies is normally done via the internet portal www.altinn.no. In order for the enterprise to have access to Altinn, an individual with a registered role of the enterprise must have a Norwegian ID-number and Altinn access codes. In order to facility easy access to Altinn the lawyers of Magnus Legal may assist by being registered as a contact person or business manager the first time the enterprise is registered at Brønnøysund.
Read more: Register a company in Norway
There is no specific corporate tax registration, but the tax office has access to the Registry at Brønnøysund. Thus, the tax office expects that all entities comply with all the various reporting obligations and file an annual corporate tax return.
Important to note is that all foreign entities seconding employees to Norway must file reports to the tax office upon commencement of the work, provided the value of the contract exceeds NOK 20 000. The form is called “RF-1198”. Note that the contractor is obliged to report the contract with any foreign subcontractor on a form called “RF-1199”.
The employees must obtain a Norwegian personal ID number (called “D-number”) and a tax deduction card. In order to obtain these, the individual must physically meet at a particular tax office for an ID-control within 14 days after commencing work in Norway. The employee must bring:
- a valid passport or national ID card
- an application for tax deduction card (form RF-1209)
- the employment contract or written confirmation of work assignments in Norway.
Need help? Establish a business in Norway
The Norwegian default VAT rate is 25%, although reduced to 15% on food and 12% on, e.g., public transportation, hotel accommodation.
Enterprises selling goods or services exceeding NOK 50,000 over a twelve-month period are obliged to register for VAT in Norway and add VAT on the invoices. On the other hand, a VAT-registered entity is entitled to a refund of the input VAT on its own purchases of goods and services used in the business. The VAT is reported on VAT returns, which normally are filed every other month.
Also check out: Should your business register for VAT in Norway?
A foreign enterprise that is VAT liable without any fixed place of business in Norway must register via a Norwegian based VAT representative. The VAT representative is obliged to control that the VAT handling is correct and is responsible for filing the VAT return. Enterprises from certain EU/EEA countries are not obliged to appoint a VAT representative.
Need help? VAT in Norway
Import of goods and services
When importing goods and services, import-VAT and customs duties might incur, and the actual customs transaction is based on the principle of declaration. Bear in mind that Norway is not a member of the EU and thus regarded as a third country in relation to the transaction of goods and services cross-border from the EU. It is possible to obtain custom credit upon application.
In principle, all foreign enterprises conducting business activities in Norway are subject to Norwegian corporate tax at a rate of 22%.
However, Norway has entered into tax treaties with about 90 countries, which may provide exemption from Norwegian corporate tax liability. Thus, an assessment of tax liability must be made specifically for each foreign enterprise.
Note that the enterprise is obliged to file a corporate tax return even though it may be tax exempted according to a tax treaty. In such case the exemption from corporate tax liability under the tax treaty should be explained in an enclosure to the tax return.
Need help? Corporate tax in Norway
Employee - work and resident permit
An employee from a country outside the EU/EEA who is seconded to work in Norway must have a residence permit that also covers the right to work. There are various categories for such application and employees of multinationals will commonly be regarded as “skilled workers.” The application must have been accepted prior to the commencement of the work in Norway.
These restrictions are in general not applicable for EEA citizens. However also these employees must register with the police.
More information: Work permit in Norway
Need help? Work in Norway
Employee tax and social security contribution
The employer must report salary, fringe benefits, tax deduction and the number of days in Norway on a monthly basis for each employee. These reports (called “A-melding”) are submitted electronically.
More information: All you need to know about the Norwegian tax report system – A-melding
Salary is taxed at rates up to 38.2%, and the basic rule is that individuals working in Norway become subject to Norwegian tax from day one. However, a tax exemption may be granted according to the tax treaty between Norway and the home country of the individual. Such treaty-based tax exemption does not relieve the individual from the obligation to file individual tax return.
The employee will also have to pay contribution of 8.2% to the Norwegian social security system unless relief is granted according to a relevant social security agreement.
A simplified PAYE (Pay As You Earn) scheme may be applicable for employees that are not regarded as tax resident in Norway and with Norwegian income not exceeding NOK 639 750 (2020).
The PAYE-tax rate is flat 25% (when including the 8.2% employee social security contributions) and 16.8% if the employee is exempted from social security contribution.
Note that the value of certain fringe benefits, such as free accommodation and home trips, that may be tax exempted under the ordinary rules are to be included as taxable under the PAYE-system.
If PAYE applies, the employee shall not file an individual tax return.
Do you have employees who performed work in Norway in 2019? Don’t forget the annual wage report.
Also, note that employers with employees working in Norway may suffer Norwegian payroll tax of up to 14.1% (employer social security contribution) unless an exemption is granted.
The employers may further be obliged to offer the employees membership in an occupational pension plan.
Need help? Individual income tax return to Norway
More about employee taxes in Norway: Taxes in Norway - employee taxation
Employees working in Norway are covered by the Norwegian working environment regulations, including provisions on minimum salary in certain industries.
Find out more: Employee rights in Norway
The employees are protected against unjust termination, and the employer must comply with certain formal procedures including notice period in case the employment contract is to be terminated.
Need help? Labour law in Norway
Accounting and audit
In general, all entities conducting business in Norway must keep books of accounts based on the Norwegian general accepted accounting principles (“NGAAP”). The annual financial accounts must be filed with the Norwegian Registry of Accounts.
Further, note that an independent auditor shall audit the accounts when certain thresholds are met.
Sanctions and penalty charges
From a pure business perspective, the experience is that any committed business partner or principal will require that foreign contractors or business partners comply with Norwegian laws and regulations.
Further, for non-compliance, the authorities will levy sanctions including heavy penalty taxes and interest charges, late filing penalty charges, deemed discretionary assessments, etc.
Multinationals doing business in Norway must be aware of the multitude of obligations they must comply with. They should also assume that the authorities know about the activities performed here, and it is expected that everybody fulfils the registration and reporting obligations within tight deadlines. Failure to comply may imply severe sanctions.
Download our free comprehensive practical guide for more information:
The information provided in this article is valid as of January 1, 2020. Tax legislation undergoes rapid changes, and we recommend that you should contact your lawyer with Magnus Legal to obtain tailored advice for your needs.