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Revised National budget 2020 in Norway – Corporate taxation, VAT and personal taxation

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The Norwegian Revised National Budget was presented today at 1045 am, and provides few surprises. 

Below you will find a summary of some of the proposed changes. 

New rules for delayed payment of taxes and VAT

Due to the COVID-19 situation, the Government has earlier extended the reporting and due date for a number of taxes and VAT, as follows:

Tabel new
It has now also been proposed to make the current regulations for extensions to the due dates and late payments more flexible, including, on application, further extensions in due dates due to payment difficulties caused by COVID-19. 

Whether an extension has been granted or not, it is proposed that the interest rate that applies for late payments will be a reduced rate of 6%. VAT reporting must still be filed as before.

Personal taxes

Reduced employer’s national insurance contributions for May-June

Employers’ national insurance contributions have been proposed to be reduced by 4 percentage points for the third term of May-June. The 4 percentage point reduction is proposed to also apply to social security for US and Canadian employees working in Norway with membership in the national pension system. The due date for payment is extended to October 15th, with the date for reporting unchanged. 

Expansion of the beneficial rules for share options in small startups

The rules providing beneficial tax treatment for share options in small startups is proposed to be expanded. The current rules include:

  • For up to NOK 1m of taxable benefit, taxation will be delayed from the time of exercise, to the time of sale of the shares. This is particularly beneficial when shares are illiquid and a sale may not be immediate. 
  • The minimum vesting period is 3 years, and the maximum exercise period is 10 years
  • Taxable benefit in excess of NOK 1m will be taxed at the time of exercise
  • If the shares are not sold for five years after exercise, or at the end of employment, taxes will be due as if the shares were sold at that time. 

The proposed changes are as follows:

  • The maximum number of employees to enter into the scheme is to be expanded from 12 to 25
  • The company limits to income and assets to enter into the scheme is increased from NOK 16m to NOK 25m
  • Those employed before 1st Jan 2018 will be allowed to take part in the scheme 

Corporate taxes

Temporary increase in initial amortization of machinery etc. acquired for the remainder of 2020

It is proposed to increase the initial year amortization of assets that fall within tax asset group D (machinery, personal vehicles, movable furnishings etc.) by 10 percentage points, from 20% to 30%, provided that the assets are acquired from the time the proposal enters into force and until the end of 2020. 

It will be considered in the future to extend the proposal to acquisitions made in 2021. As the proposal may be considered state aid, it needs to be approved by ESA (the EFTA surveillance authority) first. We note that the proposal only affects acquisitions after the proposal enters into force.

Temporary establishment of a special tax asset amortization group for newly acquired ships used in local seafaring

It is proposed to establish a tax asset amortization group for ships outside the tonnage tax scheme that are considered in use in local seafaring (‘nærskipsfart’), with a rate of 20%. The current amortization rate for these ships is 14%.

The proposal would apply to ships acquired after the proposal enters into force, and not ships acquired from closely related parties. As the proposal may be considered state aid, it needs to be approved by ESA first.

Asset demergers and sales may still be subject to the anti-avoidance rule

In the recent codification of the general anti-avoidance rule, it was commented that the historic practice of allowing sales of property by way of a demerger and sale of shares in the demerged company tax-free under the participation exemption should be allowed to continue. It has now been clarified that other types of assets than property were not covered by those comments, and may still be denied under the GAAR. We consider this to significantly increase the risk that such transactions will be affected.

Retroactively changing membership of the shipping tonnage tax regime will, generally, be denied

Under the current rules, companies are able to refile taxes for three years prior by their own choice. This has, in theory, allowed the company to refile as inside or outside the tonnage tax regime historically, based on later events. Under the proposal this will, in general, not be allowed. Refiling may only be done within the limits of the same scheme membership. In special cases, permissions to make such a change retroactively may still be granted on application.

VAT and other duties

Proposed to extend the submission deadline of the VAT compensation claim

Municipalities, county municipalities and private/non-profit enterprises that are subject to the VAT compensation scheme usually have a rather short deadline for filing its VAT compensation claim. For example, the requirement for January / February is already due on June 10. If the submission deadline is not met, the companies will normally not be eligible to claim VAT compensation. Due to the Covid-19 situation, the short deadlines has created a huge pressure on the compensated companies that already have been charged with extra work due to the outbreak of the virus.

In this respect, the Government has proposed new rules for when a claim for compensation for the first period of 2020 should be considered statute-barred. It is proposed that the new deadline should coincide with the filing deadline for the VAT return on VAT compensation for the third period - ie, August 31, 2020.

Reduced electricity tax for cryptocurrency extraction in large data centers 

To make Norway an attractive location for large data centers, a reduced electricity tax was introduced from 1 January 2016. However, through the national budget for 2019, the Government concluded that the reduced electricity tax scheme should not cover electric power supplied for cryptocurrency extraction in data centers. This conclusion was made because there were still necessary clarifications from the EFTA Surveillance Authority (ESA) on whether state aid will be included in the decision. When the delimitations and implementation of the decision were being consulted during the public hearing, a number of comments were raised, which mainly pointed out that it was challenging to implement and control such a delimitation in the reduced electricity charge, as well as incurred administrative costs for the taxable grid companies. It was also pointed out that such a delimitation in the reduced electricity tax would counteract the desire for the establishment of data centers in Norway. 

Therefore, after a comprehensive assessment, the Government proposes to repeal the decision that a full charge will be levied on electric power for the recovery of cryptocurrency in data centers.

Exemption from CO2 duties on natural gas and LPG reinstated

In the National Budget for 2020 it was proposed that certain businesses and activities (chemical reduction, electrolysis, metallurgical and mineralogical processes) ordinarily subject to CO2 duties yet historically exempted should no longer be granted an exemption. It is proposed that these exemptions will be reinstated, with the aim of a gradual increase to regular duties towards 2024.

                                                                ***

This blogpost is written by Jennifer Wong, Michael Anderson and Ståle Wangen.

Ståle Wangen

Ståle Wangen

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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