The Ministry of Finance has recently proposed to repeal the current rules for voluntary correction under the Tax Administration Act. This implies that taxpayers who voluntarily correct previous errors or omissions in their tax information will no longer be able to avoid additional tax under the current scheme.
The current voluntary correction scheme
Currently, taxpayers can amend and add information to their tax return for up to three years retrospectively, per Section 9-4 of the Tax Administration Act. Taxpayers can also voluntarily amend information up to ten years retrospectively, pursuant to Section 14-4 of the Tax Administration Act, without risking additional tax penalties or criminal charges.
Taxpayers are required to pay the taxes they should have paid, along with interest. However, no additional tax penalties are imposed for voluntary correction. Voluntary correction is in all cases conditional upon the absence of any ongoing audit or enforcement measures by the tax authorities at the time of self-correction.
Obligation to declare foreign assets
Individuals who have immigrated to Norway, and are considered global taxpayers to Norway after Norwegian tax law, and still hold foreign assets that are taxed abroad are not exempt from declaring these assets in Norway. Regardless of whether or not the assets are located (or taxed) in Norway, they still have to be reported in the Norwegian tax return to comply with domestic tax regulations.
Proposed changes
In the consultation document, the Ministry suggests that additional tax penalties should follow self-amendment rules. This means that taxpayers who correct their tax assessments within the three-year self-amendment period will, in principle, not be subject to additional tax penalties. However, this exception will not apply to the most severe cases that qualify for extra additional tax.
This means that the period for voluntary correction is reduced from ten years to three years without additional tax penalties being imposed.
Act proactively
If you find yourself in a situation where voluntary correction is relevant, you should consider correcting your previous tax returns as soon as possible. The current rules will apply if you request voluntary correction before the proposed changes are implemented. While it is uncertain whether the consultation proposal will be adopted, it is unlikely that future rules will be more favorable than those currently in place.
Our view on the proposal
Magnus Legal believes that the current rules are better than those proposed by the Ministry of Finance, that the proposed changes appear insufficiently evaluated, and that they are unlikely to encourage taxpayers to rectify their own tax situations.
