Exception from limited tax liability for home office work

On October 7, 2020, the Norwegian Government presented its national budget for 2021. The national budget makes several changes to taxes and fees in Norway. In this bog post we are summarizing the temporary exception from limited tax liability for home office work.

When an employee works in a home office in Norway for a foreign employer, the foreign employer may – under certain conditions – end up with limited tax liability to Norway.

In these cases, the foreign employer will have numerous registration and reporting responsibilities to Norway. Some examples of such responsibilities are registration with the Brønnøysund Register Centre, salary reporting through the A-report scheme, and filing of a Norwegian tax return.

Due to the Covid-19 pandemic, several Norwegian employees, usually working permanently abroad with a foreign employer, have “involuntarily” been working from a home office in Norway.

In these cases, the question is whether the foreign employer is obligated to register and report in Norway, even when the presence here, is a consequence of the extraordinary situation we are currently facing.

The Ministry of Finance has chosen a pragmatic approach and agrees that foreign companies should not end up with limited tax liability to Norway solely based on having employees working from home offices in Norway as a result of the pandemic. The Ministry of Finance recognizes that these are circumstances outside of the employer’s control and acknowledges that the registration and reporting requirements are unnecessary burdensome given the situation.

Temporary exception

For this reason, the Ministry of Finance suggests a temporary exception from limited tax liability for situations as described above, in practice by introducing a temporary rule in Norwegian law, applicable for 2020. The rule introducing the exception may be extended to apply for 2021.

For the exception to apply, it is a condition that the activity of the foreign company would not have taken place in Norway under normal circumstances. Accordingly, the exception will comprise self-imposed work periods in Norway (for instance a person who chooses to work from home for health reasons), work periods due to travel restrictions, and work periods due to quarantine / isolation requirements.

A foreign company that would have carried out business activities in Norway regardless of the pandemic will, naturally, not benefit from the temporary exception from limited tax liability.

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