Foreign entities with employees currently working in Norway, is partially exempted from the duty to report income and withhold taxes.
Many foreign companies have had employees who during Covid-19 have had to work from home in Norway. The Ministry of Finance is now exempting these companies from reporting obligations and withholding tax until end of 2020.
Companies have a responsibility to report wages and to deduct taxes when they have employees working in Norway. This also applies to foreign companies and there is no formal lower limit for work in Norway before the obligation to report income and deduct tax applies.
In the practical everyday life, there will be thousands of workers who perform work in Norway without this being reported. This can be short business trips, short assignments and employees who are posted from Norway / local employees outside Norway, but who work here one day or another because it fits with private life / work conditions. Although compliance with these obligations is sparse, no formal exemption has been given by the tax authorities.
Due to Covid-19, there will be a significantly larger group of expatriates outside Norway / local employees outside Norway who still work in Norway. Those who work in Norway will also have longer stays here.
There has been a great need to clarify reporting and deduction obligations for the foreign company when the employee works in Norway. The Ministry of Finance has recently granted a long-awaited exemption for certain obligations in regulations.
The regulations provide temporary exemption for reporting and deduction obligations for work in Norway due to Covid-19. The exemption is given effect from 13 March 2020 and expires 31 December 2020.
However, there are certain limitations:
- The exemption does not apply to the extent that he or she normally works from a home office in Norway
- The exemption only applies if the work is done from a home office, ie no exemption applies if the employee works from the offices of another group company
We assume that the restriction to work at a home office is due to the fact that such work will not be run through a fixed place where the business activity can create a permanent establishment for the company.
The employer's social security contribution is closely linked to wage reporting. The social security contribution payable by the company is calculated out of the amount reported. Exemption from withholding obligations will also in principle result in a waiver of the obligation to pay employer social security contributions. However, the regulations indicate that one does not exempt the obligations that follow from section 23-4a of the National Insurance Act. However, the reference does not provide a crystal clear picture. As we understand it, it is regulated that no exemption from the obligation to pay employers' contributions is granted when the employee retains membership pursuant to the social security agreement or the EEA regulation.
The regulations do not regulate more than reporting and deduction obligations. This means that if there are other obligations, they must be respected. The activity itself will not entail a duty to register in the Central Coordinating Register for Legal Entities. A registration obligation will therefore only apply if the company conducts business activities or has VAT-reportable sales. Of course, this may be relevant in some special cases. In our opinion, work from home office will normally not be regarded as a business subject to registration. Companies that have similar activity, in Norway but with reporting obligations, normally register only in the Central Coordinating Register for Legal Entities to be able to handle the reporting. However, the issue is not fully investigated and we are keeping the door open so that requirements can be set for registration in the Unit Register / Business Register. A registration will also normally result in an obligation to submit a corporate tax return.
An obligation that will nevertheless be maintained is the employee's duty to disclose the income in his tax return. Income earned in Norway will be taxed here and this income should not be included in the basis for a reduction under the one-year rule. This can potentially result in increased taxation compared to what the company and the employee have envisaged / planned for.
The temporary exemption for reporting and deductions also does not say anything about what salary should be stated in a net salary situation. When working in Norway, the tax benefit that the employees receive must also be stated as income. This is called adjustment. The smashing takes place at Norwegian tax rates. As there is no pay reporting, this can hardly be taken care of in a normal way. Therefore, there will be a need for orderly communication with the employee so that he or she knows the amount to be entered in the tax return and then the company must subsequently cover the tax that is incurred.
The best advice we can give right now is to ensure that employees who are in Norway due to Covid-19 limit their stay at the company's office locations in Norway to an absolute minimum and that work is done from home office. This will reduce obligations as much as possible. This is also the safest solution from an infection prevention perspective.
This blog post is written by Torbjørn Sven Stokke.
Jeg heter Ståle Wangen og jobber som advokat i Advokatfirmaet PwC. Jeg leder PwC Norges avdeling for internasjonal skatt og jobber til daglig med å bistå norske og utenlandske virksomheter med skatteplanlegging, strukturering av kjøp og salg av virksomheter, internprising og andre spørsmål knyttet til bedriftsbeskatning i Norge og utlandet. Jeg har mer enn 20 års erfaring med skatterådgivning.
Skatteverdenen blir stadig mer internasjonal og kompleks. Ved kjøp og salg av varer og tjenester utenfor Norges grenser må norske virksomheter håndtere skatteregler både i utlandet og i Norge. PwC har kontorer i de fleste land og vi har et unikt nettverk av skatterådgivere som kan bistå med spesialkompetanse på de fleste områder. Jeg håper mine innspill kan gi deg en alternativ innfallsvinkel til ulike temaer enn hva tradisjonelle nyhetsbrev gir.
Ta gjerne kontakt dersom du har spørsmål, kommentarer eller innspill.
My name is Ståle Wangen and I work as a partner and lawyer in PwC Tax and Legal Services in Oslo. I am head of PwC Norway’s international taxation services, and I have more than 20 years of experience assisting Norwegian and foreign businesses with tax planning, cross border restructuring, mergers and acquisitions (M&A), transfer pricing and other issues related to corporate taxation
Tax world is becoming more international and complex. Norwegian companies must increasingly handle tax rules abroad. PwC has offices almost all over the world and we have a unique network of tax advisors who can assist with expertise in most areas.
Please feel free to contact me if you have any questions, comments or input.
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