If you are engaged to work in Norway, you may be faced with the query on how to organise your job situation. In this case we are looking closer at employee vs. independent contractor. What are the differences when working in Norway?
We are frequently asked to advice if the individual should be an employee or work as an independent contractor. The choice may have impact on several questions related to the rights and obligations towards your principal and the authorities, in particular:
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- Does your choice have impact on the way of registering in Norway?
- Are the reporting consequences different?
- Will the choice have impact on your rights versus your principal?
- Will your principal’s obligation and costs be different?
- Is the VAT treatment different?
- Is the income tax liability different?
- Is the income tax reporting different?
- Will the choice have impact on other obligations such as bookkeeping and audit obligations?
- Are there any differences in your rights under the working environment act?
- Will the choice have any impact on your benefits in case of dismissal or if you get sick?
- Will the choice have impact on your pension rights?
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The obvious answer to all of these questions is “YES”.
For example; in an employment situation the principal, i.e. the employer, will be obliged to pay contribution to the Norwegian social security system, whereas this is not the case if you are hired as an independent contractor. Further, in certain circumstance a foreigner working on short term engagement as an independent contractor may be exempted from paying Norwegian income tax. This will never be the case if you are working as an employee for a Norwegian employer.
Also read: PAYE tax scheme in Norway
For these reasons, the tax office will commonly evaluate the facts and the contract in order to determine which of the two categories should be applied in your particular situation. Note however, that according to general anti avoidance rules the facts prevail over the form, and thus the tax office my disregards the provision of the contract.
Whether the relationship should be characterized as an employment contract or an independent contractor, depends on several factors. The main difference is that a contractor operates at his/her own expense and risk.
In order to determine on this issue the contract is essential – provided it reflects the facts. Your contract should reply to a number of queries, such as:
- Do you have a personal duty to perform the work or are you entitled to subcontract the work others?
- Are you subject to the detailed instructions on how to perform the work?
- Which of the parties provides premises and equipment to perform the work?
- Do you have a right to provide service to other principals?
- Etc., etc.
We advice a vast number of clients with determining their particular situation and on how to best structure their contractual relationship.
Visit our website for more information about how we can assist with working in Norway.