Doing business in Norway can be an exciting venture, but it requires careful planning and adherence to Norwegian compliance. To ensure a smooth and successful start, we in Magnus Legal, a renowned business law firm in Norway, have created a brief overview on how to comply with Norwegian compliance when doing business in Norway.
Benefits of doing business in Norway
With a stable economy and a favorable, predictable business climate, Norway is a prime location for foreign investments and business activity in general. Add to that its strategic geographical position, commitment to innovation, and strong governmental support, and Norway emerges as a beacon of opportunity.
However, Norway is a highly regulated society. The Norwegian legal landscape is continuously evolving, with updates and amendments to existing laws and regulations. At first glance, the bureaucratic jungle may seem exhausting – also because Norway is not part of the European Union and therefore has a slightly different approach to registration and reporting responsibilities than most neighbouring countries. Also, Norway probably has one of the most employee friendly legislations in the world, which also foreign companies must consider before starting business activities in Norway.
Also read: 6 compelling reasons for doing business in Norway
Before embarking on your journey and conducting business in Norway, you should familiarize yourself with Norwegian compliance.
An introduction to Norwegian compliance
Norwegian compliance encompasses adhering to the rules, regulations, and standards established by Norwegian authorities and governing bodies. This involves adherence to a spectrum of legal aspects, spanning taxation, labor regulations, environmental standards, and general business operations.
Navigating these requirements can be complex, yet it's essential for companies seeking to do business in Norway. On this page, we've consolidated the most crucial obligations that you need to be aware of and fulfill when conducting business activities in Norway. Additionally, we provide valuable insights based on our experience and expertise, including relevant guides and checklists, to aid your compliance journey.
Webinar: Project work in Norway
How to master Norwegian Compliance. Download our webinar and gain a comprehensive and consise understanding of navigating Norwegian Compliance regulations.
Here’s a brief overview of how to do business in Norway
Once you've concluded on starting business activities in Norway, it's crucial to delve into the practical aspects. This phase requires meticulous consideration and planning to ensure a smooth start and prevent potential pitfalls down the road. Fortunately, you don't have to navigate this process alone. Let's take a brief overview of what this entails.
Choose the right business structure
When seeking to do business in Norway, you must consider what kind of legal entity and corporate structure to use. Selecting the right business structure is fundamental as it determines your legal obligations, tax liabilities, and personal liability.
Common business structures in Norway include:
- sole proprietorship (Enkeltpersonforetak),
- partnership (Selskap),
- branch (NUF) and,
- limited liability company (AS).
Each structure has its pros and cons. Your choice should be considered based on commercial considerations, tax and VAT consequences, Norwegian compliance obligations as well as administrative costs. With that said, most companies end up choosing either;
- A Norwegian branch of the foreign company (NUF), or
- Incorporate a limited liability company (AS) as a subsidiary.
In terms of tax and VAT liability between these two options, the distinction is minimal, primarily revolving around compliance and reporting obligations.
Also read: How to choose the right business structure for your business.
Register your business
After choosing business structure, you will need to register your company with the Norwegian Register of Business Enterprises (Brønnøysundregistrene).
As you delve into this process, you'll encounter several alternatives to consider. However, the decision-making isn't always straightforward, as it hinges on various factors such as the nature of your project, whether it's temporary or a permanent establishment, and whether you'll be employing individuals locally or importing foreign talent, among others.. Mistakes in this process can be expensive. Therefore, we strongly advise seeking legal counsel before confirming this aspect.
Also read: How to register a company in Norway
Get acquainted with Norwegian corporate tax rules and taxability
Understanding the Norwegian tax system is essential for any business owner.
If you went with the limited liability company (AS) as a subsidiary, you obviously need to pay the same corporate tax on profits – 22 percent in 2024 – as any other Norwegian company.
If you went with the Norwegian branch / NUF, the same tax rate – 22 percent – will apply. However, these profits will (presumably) be taxable in the country where the company is headquartered, Therefore, you need to sort out which country has the upper hand in imposing tax from your business profits – in practice by scrutinizing the tax treaties.
Norway has tax treaties with approximately ninety countries, Assessing tax liability for each foreign enterprise is crucial, based on the applicable tax treaty.
According to these treaties, a foreign enterprise is taxable in Norway if it has a "permanent establishment" (PE) there.
Also read: Get the basics on corporate tax in Norway
What about individual employee taxation?
As you conduct business in Norway, questions regarding employee taxation naturally arise.
The baseline is that Norway levies taxes on salaries earned from work within its borders. Nevertheless, tax treaties may constrain Norway's taxation authority. Additionally, note that employees considered as Norwegian tax residents will be subject to taxation on their worldwide income. Moreover, Norwegian tax residents will potentially encounter the slightly controversial wealth tax – a Norwegian “specialty” partly causing Norway’s billionaires to leave Norway.
Guide: What is Norwegian Wealth Tax?
Download our guide and learn everything you need to know about Norwegian Wealth Tax.
Norwegian VAT matters
Understanding VAT (Value Added Tax) regulations is essential for foreign companies looking to do business in Norway. One key legal obligation is triggered when a foreign company's turnover in Norway exceeds NOK 50,000 over a 12-month period, mandating registration for VAT in Norway. It's advisable for foreign companies to apply for advanced registration in the VAT register before any turnover accrues. This option is particularly beneficial for companies projecting taxable supplies exceeding the NOK 50,000 threshold within three weeks of commencing operations.
Moreover, VAT obligations apply even if the company does not have a physical presence in Norway. In such cases, registering a Norwegian VAT representative is necessary to comply with regulations. It's important to note that Norway's VAT regulations differ from those of the EU, adding complexity to compliance. Failure to adhere to these regulations can result in penalty taxes, highlighting the importance of thorough understanding and adherence to VAT requirements when starting a company in Norway.
Also read: Should your business register for VAT in Norway?
Employees are highly valued and protected in Norway
A very important aspect with the Norwegian business culture, is the Norwegian labor law, also known as the employment law. Employee rights are highly regulated and strict in Norway, ensuring fair, secure, and healthy employment while balancing the power dynamics between employers and employees. We'll delve deeper into this topic later in the page.
The labor law encompasses regulations overseeing various aspects of employment. This includes working hours, wages, leave privileges, as well as work safety. It highlights employees rights and protections, such as fair treatment, non-discrimination and collective bargaining. Also, Norwegian labor law promotes a healthy work-life balance through parental leave, flexible arrangements, and annual vacation time. Employers, including foreign employers, are required to adhere to these laws to ensure a safe and fair work environment for all employees.
Also read: New and upcoming changes in the Norwegian labor law
Embracing social responsibility and environmental sustainability is key
Another essential aspect of Norwegian business culture that deserves highlighting is the regulatory framework governing corporate social responsibility and environmental sustainability. In Norway, companies are obliged to adhere to specific regulations when conducting business, particularly concerning these ethical considerations. Notably, larger enterprises are required to produce and publish a comprehensive Due Diligence report, outlining their efforts and commitments in these areas.
Checklist: Company Due Diligence
What documents are required in a company Due Diligence? Download our checklist to get the overview.
Understand the regulatory landscape for foreign businesses in Norway
Norway has a robust regulatory framework in place in regards to upholding sustainability and transparency. For foreign companies seeking to do business in Norway, navigating local sustainability policies, transparency acts, societal expectations and industry specific regulations is paramount.
One important aspect of operating in Norway, is the Norwegian Transparency Act. The purpose of the act is to foster trust and accountability by ensuring companies operate openly and transparent. This relates to fundamental human rights and decent working conditions.
Also read: What is the Norwegian Transparency Act
In Norway there is also a strong commitment to sustainable business practices such as reducing carbon emissions and promoting renewable energy sources. In addition, foreign companies are expected to align with Norwegian societal values and ethical business practices. Foreign businesses operating in Norway are required to comply with these policies and operate legally and responsible.
Also read: Grants for sustainable businesses in Norway
Guide: How to establish a business in Norway?
Download our guide for a comprehensive guide on Norwegian Compliance and what it takes for foreign companies to establish a business in Norway.
Ready to start doing business in Norway?
The Norwegian legal landscape is continuously evolving, with updates and amendments to existing laws and regulations. Legal experts stay abreast of these changes, ensuring that your business remains compliant and adapts to new legal requirements as they arise. Therefore, starting a business is just the beginning of your entrepreneurial journey. As your business grows, you'll encounter new challenges and legal complexities. By partnering with Norwegian experienced legal professionals, it will be easier to navigate potential cultural and language barriers and gain insights into local business practices, customs, and norms.
In conclusion, beginning your business journey in Norway requires careful planning, meticulous attention to legal requirements, and strategic guidance from professionals. We at Magnus Legal are experienced with helping foreign companies seeking to do business in Norway. Our expertise includes business and corporate law, tax law, HR and labor law, VAT and customs, immigration of foreign workers, contract law and more.
For you as our client, you can rest assure we’ll take care of everything you need to start your business in Norway. Our mission is to support you every step of the way, making sure you succeed when doing business in Norway, from inception to expansion and beyond.
To learn more about how we can help you with your Norwegian business adventure, check out our website or reach out for a preliminary discussion.
Planning on doing business in Norway?
Contact us for legal advice. With extensive experience in assisting foreign companies, we are your trusted partner for achieving success in Norway. Reach out today!
