Foreign multinationals that wish to expand their activities to Norway must consider which kind of legal entity and corporate structure they should use. The choice may have impact on the success in doing business in Norway as well as a multitude of legal and compliance implications.
The elements impacting on the choice of corporate legal entity
When deciding which entity form that best suits your purposes, you should consider i.a.:
Commercial considerations
It is not required to incorporate a Norwegian company when doing business in Norway, and many global finance institutions operate via branches in Norway due to financial regulations. However, in certain areas the business partners or customers would prefer to conduct business with a Norwegian company since this is the most acknowledged entity form and should normally not imply surprises for the business partner.
Further, it may be relevant to limit any liability to the operations conducted in Norway. In such case a Norwegian limited liability company may be preferred.
Tax and VAT consequences
The starting point is that corporate tax and VAT consequences are basically the same irrespective the form of the entity that conducts the business in Norway.
Although the tax and VAT rates normally will be identical irrespective the legal for of the entity, certain kinds of businesses conducted in Norway by a non-Norwegian entity should not trigger corporate tax liability and/or VAT liability.
Also read: Should your business register for VAT in Norway?
Norwegian compliance obligations
All entities conducting business activities in Norway must comply with a wide set of registration and reporting requirements.
The choice of entity has only minor impact on these compliance oblations. I.e. all entities must register with the centralized Registry for legal entities and if they have employees working in Norway, they must file monthly reports on salary, etc.
It is important to note that Norway levies rather harsh fines on failure to comply timely and correctly. Further note that your Norwegian partner or customer should expect that its service providers are compliant with all obligations, and in some cases, non-compliance is a reason to terminate the contract.
Administrative costs
The administrative costs are closely linked with the compliance obligations, and these may be done by the entity itself or outsourced to a service provider.
It is in any case important that when budgeting the costs for conduction business in Norway the enterprise should map all compliance obligations and the related expenses in order to be compliant.
Also read: Do the right things when doing business in Norway
Planning on doing business in Norway?
Download our guide and get a brief overview of how to navigate Norwegian Compliance.
What legal entity should you choose?
The most common alternatives for foreign enterprises doing business in Norway are:
- Branch (NUF);
- Limited Liability Company (AS or ASA)
- Partnership and joint venture (ANS, DA or KS)
- Sole proprietorship (ENK)
The Branch (NUF)
A branch is not a separate legal entity but a part of the same legal body as the main enterprise. Therefore, all risks and obligations of a branch also belongs to the main enterprise. Utilizing a branch will therefore not limit any potential liability for the enterprise.
A branch of a non-Norwegian enterprise is in Norway called a “NUF” (Norskregistrert utenlandsk foretak). Note that the registration as a NUF only reflects that the foreign enterprise is registered in Norway and does not indicate whether the enterprise has office premises or employees in Norway. Nor is a registration as a NUF decisive with respect to the various compliance obligations related to VAT, corporate tax, etc.
A NUF should commonly be subject to the same compliance obligations as a Norwegian limited liability company. You should however compare the two entity forms to determine the most appropriate form to be used for your business in Norway.
A NUF may or may not elect a board and/or a CEO, and there is no requirement regarding the nationality or the resident of the persons holding such positions. If no board or CEO is elected, an individual contact person must be appointed.
A NUF will often be obliged to keep books of accounts according to Norwegian GAAP (General Accepted Accounting Principles). Normally the enterprise will be required to account the same transactions in the home jurisdiction and thus this may be perceived as double work.
According to domestic law the threshold for a foreign entity to become subject to Norwegian tax is rather low if the entity conducts business activities in Norway or at the Norwegian continental shelf. However, if there is a tax treaty in place between Norway and the home state of the entity, Norwegian taxing right is only applicable if the business activities in Norway constitute a so called “permanent establishment”.
The corporate tax is based on extract of accounts which reflects the business operations carried out in Norway. The corporate tax rate of a NUF equals the tax rate of a limited liability company. Norway does not levy withholding tax on distributions of branch profits to the foreign head office.
Also read: Should I choose SSP or LLC?
Limited Liability Company (AS or ASA)
There are two forms of limited liability companies in Norway. The AS (“Aksjeselskap”) which in other countries may be regarded as a “private limited liability company”, whereas the ASA (“Allmennaksjeselskap”) would be regarded as a public limited liability company.
For foreign enterprises incorporating a subsidiary in Norway the most appropriate form would be the AS.
The minimum share capital of an AS is presently NOK 30 000 (around Euro 3 000).
The conducting an AS follows strict rules based on the Norwegian Limited Liability Company Act. e.g.:
- The AS must elect a board of directors of at least one member. Only individuals can act as board members and at least 50% of the members must be resident in the EEA/EU or the UK;
- The AS must have a set of by-laws;
- The distribution of profits from the AS by way of dividends must follow certain procedures, e.g. the company must retain enough funds to be able to continue the business operations, and the dividend distributions must be approved by the shareholder meeting;
- The AS must keep books of accounts according to Norwegian GAAP (General Accepted Accounting Principles). The annual financial report is made public available.
- The AS is deemed to be a separate subject for corporate tax. Dividends distributions to non-Norwegian shareholder may suffer additional dividend withholding tax, although such tax is abolished in certain circumstances.
Also read: Register a company in Norway
Partnership (ANS, DA or KS)
If the reason for conducting business in Norway is to cooperate with other enterprises a partnership may be the option.
There are various forms of partnership structures available in Norway. To be formerly registered the partnership must be incorporated as an ANS (Ansvarlig Selskap), a DA (Selskap med delt ansvar) or a KS (Kommandittselskap). The major difference between the three types of entities is the way potential liability is distributed to the partners.
- In the ANS (General Partnership) all partners are jointly and severally liable for the partnership’s liabilities;
- In the DA (Pro Rata Partnership) each partner has unlimited responsibility for a specific percentage of the total liability of the partnership;
- In the KS (Limited Partnership) one or more partners (general partner) have joint and severally responsibility for the partnership’s liability, whereas the limited partners are liable only up to a specific amount of their investment. The general partner must hold at least 10% of the KS and may be a limited liability company (AS).
Non-registered joint ventures (JV) are rather uncommon in Norway. Single JV projects may be based on agreements of cooperation rather than forming a registered partnership. However, some public customers may no longer accept such JVs and the participants in a JV will therefore prefer to participate via an AS, or any of the above-mentioned forms of partnerships.
Sole proprietorship (ENK)
An individual engaged in business activities may elect to do this directly and not via a company. In such case the individual must register the sole proprietorship (“Enkeltpersonforetak” or “ENK”).
The owner of the ENK has unlimited liability for the debts and liabilities of the business.
The ENK must keep books of accounts. The tax rates of the ENK deviate from the corporate tax rates as they are linked to the tax rates of employees.
How do you choose the right corporate structure for your business operations in Norway?
The choices are many and knowing what corporate structure to choose is not necessary straightforward. Additionally, there are numerous other registration and reporting obligations you also need to fulfill when doing business in Norway. If you need someone to discuss your options and help you on your way do not hesitate to reach out to us.
Planning on doing business in Norway?
Download our guide and get a brief overview of how to navigate Norwegian Compliance.
Article first published February 2019, updated August 2022.
