More competitive Norway tax regime for corporates?

Norway recently released their 2016 budget with Corporate tax rates set to reduce from 27% to 25% from 1 January 2016 and proposals to further reduce rates to a more competitive 22% by 2018.

These rate reductions make it more appealing for UK companies to undertake work in Norway, reducing the additional corporate tax burden currently suffered, although Norwegian rates will still exceed UK corporation tax rates (currently 20%, but set to reduce to 18% by 2020).

However, many UK companies working in Norway are unaware that Norwegian tax reporting obligations exist upon commencement of work in Norway, whether or not Norwegian tax liabilities arise. UK companies failing to report contracts for work in Norway, or employees or subcontractors working there, normally suffer higher costs, by way of penalties levied by the Norwegian authorities for noncompliance.

Corporate Tax Requirements

A UK company, carrying on ‘offshore activities’ on the Norwegian Continental Shelf (NCS) for more than 30-days during any 12 month period, triggers a Norwegian corporate tax liability on the profits earned on the NCS activity. Offshore activities are broadly defined and similar liabilities can arise for work performed onshore Norway, dependent on the nature and duration of the work. Often, there are also requirements to prepare Norwegian accounts and have Norwegian audits performed when turnover exceeds a certain limit. Failure to comply with all corporate filing requirements can result in substantial penalties.

The filing deadline for 2015 Norwegian Corporate tax returns, on paper, is 31 March 2016. We urge companies to act early and have returns prepared and submitted well in advance, to avoid last minute rushes.

Norwegian Payroll Requirements

Few employers realise that UK resident employees, performing offshore activities on the NCS, are liable to Norwegian income tax from the first day of working there. The Norwegian tax authorities impose fines on employers for failure to report employees and account for Norwegian ‘PAYE’ on employees’ salaries.

From 1 January 2015, the Norwegian equivalent of RTI online payroll reporting was introduced. Standard forms must now be filed electronically, each month via Altinn, the Norwegian online filing portal. Employers must also ensure that their subcontractors do likewise, otherwise they can be held responsible. National Insurance (the hidden tax), should not be forgotten. UK employees are, in principle, liable to Norwegian National Insurance when working in Norway unless an exemption certificate is secured, in which case, UK National Insurance may continue instead.

Help is at hand

Our International Tax and Payroll Consulting specialists possess a depth of expertise and experience in all aspects of Norwegian Corporate and Employment taxes. If you have previously worked, or plan to work, in Norway, call the experts, get peace of mind, and avoid unnecessary and costly compliance failures.

For more information contact Ruth MacNamee, Tax Assistant Manager, ruth.macnamee@aab.uk