Tax planning for residents of Norway

Today we are talking about the subject of tax residency in Norway.

Norway is one of the most affluent countries in the world. GDP per capita is within the top five.

Like other Scandinavian countries, Norway has quite high taxes. It also has a good quality of life and good social programs. Because they have natural resources taxes are slightly lower than in Sweden or Denmark.

Taxes on the top end are 38+%, dividends are taxed a little higher than in Sweden which is quite interesting.

What’s important to keep in mind is that when you form a company outside of Norway, you will need to have real business activity abroad. Management and control rules are quite tough. So, if you have a company that’s abroad but you are managing it from Norway you will have to pay taxes in Norway.

The corporate tax rate is about 22%, which is not terrible but when you add up the dividend part of it suddenly it becomes very bad for you.

If you are a resident of Norway who wants to optimize their taxes, the first step is to form a company abroad. It’s also important that your company is not managed and controlled from Norway. Your actual income needs to be made abroad, so you will need to have genuine operations there.

Lots of rules in Norway are about EEA entities. Lots of rules that would cause problems, such as CFC rules will not apply if your company is formed in one of the EEA countries.

CFC rules in Norway are based on four criteria:

-Is the company formed in EEA

-Is it in a low tax country

-Is it a country they have a tax treaty with

-Do you have real economic activity there

When we design a structure to optimize for people from Norway we will want the following scenario:

Your company is formed in EEA, you will have a real economic activity.

Since your options for EEA countries are not countless, this might not be an option for you. This would create other problems, so we will need to pay more attention to CFC rules.

What happens with the participation exemption when you form abroad? If you have a Norwegian company that owns a foreign company under a bunch of circumstances you will be able to bring dividends back and 97% will be tax-exempt.

Since the tax situation is quite complicated when it comes to companies from Norway you might need a little more insight about it. For any additional questions and concerns feel free to reach out to us.