The Ministry of Finance today sent out a consultation paper with proposals to introduce withholding tax on interest and royalty etc. The consultation paper follows up on the Scheel Tax Committee report (NOU 2014: 13), in which a number of measures were proposed to counteract profit shifting. The consultation paper has been expected for a long time.
Withholding tax implies that tax is deducted from gross payments from Norway to a foreign recipient that is not carrying out a taxable activity in Norway. Today, Norway only have rules for withholding tax on dividends to foreign (corporate and personal) shareholders, pension payments and salary from time-limited employment activities carried out in Norway.
In the consultation paper, the Ministry proposes to impose a limited withholding tax rule entailing that only interest and royalty payments to related companies are targeted. The payments on which it is proposed to impose withholding tax are:
- interest payments to related companies resident in low-tax jurisdictions, and
- remuneration for the use of or the right to use intangible assets and rights (royalty) to related non-Norwegian companies.
It is also considered whether withholding tax on royalty should include lease payments for certain tangible assets to related non-Norwegian companies. This would apply to capital-intensive, mobile assets such as ships, vessels, rigs, aircrafts and helicopters.
The main purpose of the proposals is to counteract profit shifting from Norway in the form of high (deductible) interest and royalty payments to non-Norwegian related parties. Furthermore, it is an objective to counter double non-taxation in cases where the income is not taxed or subject to low tax at the hands of the recipient.
The proposed withholding tax rate is 15% on gross payments. The withholding tax can in many cases be reduced or eliminated by provisions in the tax treaty. For interest and royalty payments to related companies that are effectively established within the EEA, it is proposed that the recipient may alternatively choose a scheme with net taxation.
The Ministry proposes that the rules enter into force with effect from 1 January 2021. PwC will revert with a more in-depth analysis of the proposals and their consequences.
Jeg heter Hilde Thorstad, er partner i Advokatfirmaet PwC, og leder firmaets avdeling for shipping, offshore og oljeservice. Jeg har mer enn 18 års erfaring med skatterådgivning overfor norske og multinasjonale konsern. Mine spesialområder er norsk og internasjonal bedriftsbeskatning, herunder restrukturering over landegrensene, transfer pricing og EU/EØS-skatterett, samt rådgivning til aktører innenfor shipping, offshore og oljeservice.
My name is Hilde Thorstad and I am a partner in PwC Tax & Legal Services. I have more than 18 years of experience with advising Norwegian and multinational groups. I assist clients with general tax advice on Norwegian and international corporate tax law, including cross border restructurings, transfer pricing and EU/EEA tax law, and have a special focus on shipping, offshore and oil service industries.