Norwegian tax authorities have published a hearing proposal (white paper) introducing Norwegian VAT on all type of intangible services.The introduction of VAT on all type of intangible services implies that all type of intangible services supplied by foreign suppliers will be subject to Norwegian VAT independent of the status of the customer.
The Norwegian Ministry of Finance published a white paper 8 April proposing to extend the scope of services subject to Norwegian VAT supplied by foreign service suppliers.The deadline for submitting response to the hearing proposal is 8 July 2022.
The scope of the proposed new rules
The white paper implies an extension of the scope of intangible services subject to Norwegian VAT provided by foreign service suppliers (B2C). The foreign service supplier will become responsible for collecting VAT not only on electronic deliverable services, including electronic communication services, but all type of intangible services not explicitly exempt according to the Norwegian VAT legislation. We have included a further description of the scope of the current rules in Norway in the last chapter of the article.
Taking the white paper into consideration, intangible services supplied by a foreign established supplier will be subject to Norwegian VAT in the following circumstances;
- Norwegian VAT will be applicable if the customer is resident in Norway, but the customer will be responsible for collecting VAT reverse charge (B2B)
- Norwegian VAT will be applicable if the customer is resident in Norway (B2C). The foreign service provider will be responsible for collecting VAT and will therefore have to register for VAT either through the simplified VAT registration system (VOEC) or through the standard VAT registration scheme.
The proposed scope of the new rules are in line with the VAT principles in the OECD guidelines and is also aligned with the main principles for place of supply of services B2C in the EU VAT Directive 2006/112. The place of supply of services falling under the definition in art 59 in the EU VAT Directive to non-taxable persons established or has its permanent address or usually resides outside the Community, will be where the customer is established, has his permanent address or usually resides. The scope of services listed in art 59 will cover services of intangible nature in the Norwegian VAT legislation, implying that it is not likely that an EU established supplier of services will have to charge both VAT in the EU Member state of establishment and in Norway where the consumer is resident. The use & enjoyment rules in art 59a will serve as an additional safety layer to avoid a double taxation scenario in these circumstances.
The impact of the proposed new rules
The proposed extension of the scope of intangible services subject to Norwegian VAT will imply that foreign service providers of intangible services always will have to apply Norwegian VAT to consumers.
Services that are proposed to be become applicable to Norwegian VAT will typically involve all type of services delivered online, including consultancy services, legal services (besides court related services), services delivered online not qualifying as electronic deliverable services (e.g. not fulfilling the essential automatization criteria) etc.
Consumers will involve private persons, but also all type of customers not considered as a business/entrepreneur. The latter category of customers may therefore involve companies and organisations not considered as conducting business activities. The white paper will therefore not only impact private persons purchasing intangible services subject to Norwegian VAT, but also most likely e.g. companies not considered as a business/entrepreneur (no other activities than holding shares in a subsidiary). This will for sure have an impact for business restructurings, including the M&A market. Accordingly, a long list and volumes of deal related services is expected to be impacted by this proposed change. The foreign providers of these services will accordingly most likely have to charge Norwegian VAT to these passive holding companies according to the current white paper.
Supplying deals related services from a foreign service supplier to a passive holding company will imply that a foreign service supplier, like a company providing legal services, will have to register for Norwegian VAT and charge 25 % Norwegian VAT to a passive holding company.
An important distinction to make after the potential introduction of the white paper is the suppliers obligation to keep track of the customers classification as business and consumer. On this point, the white paper is silent and provide no guidance besides referring to the guidance made when the introduction of the same principle for electronic deliverable services were made 1 July 2011. Based on our experience as practitioners of the rules from 2011, we see great need for further guidance from the Ministry of Finance to make a practical distinction between the different categories of customers.
We expect the rules in the white paper to be introduced in connection with the Government budget for 2023 taking effect not earlier than as from 1 January 2023. Based on the fact that EU is looking into introducing an extension of the scope of services forming part of the MOSS reporting obligation, we consider it likely that Norway will introduce these rules to be competitive with our neighbor countries, both from the angle of businesses providing these services from Norway as opposed to businesses providing these services from abroad.
In the Norwegian VAT legislation there is a main distinction between services of tangible and intangible nature. Services of intangible nature are defined as services capable of delivery from a remote location, involving services that by nature are possible to deliver from everywhere, in practise by electronic means (software, electronic communication services, consultancy services, legal advice, engineer services etc). Services of tangible nature cover the services not considered as falling into the definition as intangible services. Tangible services are taxed at the place where the services are physically carried out, implying that tangible services physically carried out outside Norway will fall outside the scope of Norwegian VAT. Tangible services physically carried out in Norway, will be subject to Norwegian VAT unless they are considered merely for use outside the Norwegian VAT territory.
Intangible services supplied by a Norwegian established supplier will be subject to Norwegian VAT unless an exception will be applicable, including the following circumstances;
- The customer is resident outside the Norwegian VAT territory (B2B)
- The service is merely for use outside the Norwegian VAT territory (B2C)
Intangible services supplied by a foreign established supplier will be subject to Norwegian VAT in the following circumstances;
- Norwegian VAT will be applicable if the customer is resident in Norway, but he customer will be responsible for collecting VAT reverse charge (B2B)
- Norwegian VAT will be applicable for electronic deliverable services, including electronic communication services (B2C). The foreign service provider will be responsible for collecting VAT and will therefore have to register for VAT either through the simplified VAT registration system (VOEC) or through the standard VAT registration scheme.
Jeg heter Espen Qvist og er advokat/partner i Advokatfirmaet PwC. Jeg leder PwC Norges satsning innenfor indirekte beskatning ved internasjonal handel. Til daglig jobber jeg med å bistå norske og utenlandske virksomheter med blant annet rådgivning, strukturering og spørsmål knyttet til rapportering av merverdiavgift og tilsvarende indirekte skatter i Norge og utlandet. Jeg har mer enn 20 års erfaring med arbeid knyttet til merverdiavgift og har også erfaring fra Skatteetaten.
Å ta steget ut og drive virksomhet også utenfor Norges grenser blir stadig kortere i takt med økt globalisering og den økende takten i den teknologiske utviklingen. Norske virksomheter som er involvert i kjøp og salg av varer og tjenester utenfor Norges grenser, vil måtte håndtere regelverk innenfor merverdiavgift og andre indirekte skatter, herunder toll og særavgifter i ulike land. Jeg håper mine refleksjoner og analyser kan gi deg økt kunnskap og en alternativ innfallsvinkel til ulike temaer enn hva tradisjonelle nyhetsbrev gir. Ta gjerne kontakt dersom du har spørsmål, kommentarer eller innspill.
My name is Espen Qvist and I am a lawyer / partner in PwC Tax and Legal Services. I am head of international indirect tax in PwC Norway and has been working with Norwegian and international indirect tax queries for more than 20 years. On a daily basis, I work with assisting multinational businesses with advice, structuring and issues related to handling VAT and corresponding indirect taxes in Norway, but mostly on countries abroad. He has advised a number of multinationals in specific transaction based VAT and cross border planning, mergers and acquisitions, restructuring and cross border transactions.
Taking the step out and conducting business also outside Norway's borders is becoming increasingly shorter in step with increased globalization and the increasing pace of technological development. Norwegian companies involved in the purchase and sale of goods and services outside Norway's borders will have to deal with regulations within VAT and other indirect taxes, including customs and excise duties in various countries. I hope my reflections and analyzes can give you increased knowledge and an alternative approach to different topics than what traditional newsletters provide. Feel free to contact me if you have questions, comments or suggestions.