State budget 2017: Suggested changes in personal taxation
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The suggested state budget for 2017 was presented today. In the following we present the suggested changes related personal taxation. In short, the suggested changes include reduced tax rates on net income, increase of bracket tax rates (levied on gross employment, self employment and pension income), a higher effective tax rate on share income, new rules for personal share investments, in addition to a few minor adjustments.
Rates and thresholds
- The tax rate on net income is suggested reduced from 25 % to 24 %
- The adjustment factor, applied to the tax base of dividends, distributions from partnerships, and capital gains from disposal of shares before applying the tax rate, is suggested increased from 1,15 to 1,24. This implies an increase in the effective tax rate for dividends etc. from 28,75 % to 29,76 %.
- The bracket tax rate (levied on gross employment, self employment and pension income) is suggested increased as follows:
| Threshold | Tax rate 2017 | Tax rate 2016 |
| Below 164 100 | 0 | 0 |
| NOK 164 100 - 230 950 | 0,93 % | 0,44 % |
| NOK 230 950 - 580 650 | 2,41 % | 1,7 % |
| NOK 580 650 - 934 050 | 11,52 % | 10,7 % |
| NOK 934 050 - | 14,52 % | 13,7 % |
- The result of the suggested changes in the tax rates implies slightly lower marginal tax rates, as follows:
| 2017 | 2016 | |
| Salary | 46,7 % | 46,9 % |
| Pension | 43,6 % | 43,8 % |
| Self-employment income | 49,9 % | 50,1 % |
The suggested changes will if passed be in force from 1 January 2017.
Deductions
- It is suggested to increase the minimum deduction (minstefradrag) from 43 % to 44 %, with a maximum amount of NOK 94 750 for employment income and NOK 75 000 for pension income.
- The personal allowance deduction (personfradrag) is suggested changed from NOK 51 750 in tax class 1 and NOK 76 250 in tax class 2 (2016) to NOK 53 150 in tax class 1 and NOK 78 300 in tax class 2 (2017)
- The rates for deduction of travels to work is increased with NOK 0,06 per kilometer to:
- NOK 1,56 per kilometer up to 50 000 kilometer travel distance, and
- NOK 0,76 per kilometer up to 75 000 kilometer travel distance
- The threshold of NOK 22 000 remain unchanged
The suggested changes will if passed be in force from 1 January 2017.
Wealth tax
- The tax rate for wealth taxation is suggested unchanged at 0,85 % and the lower threshold for wealth taxation is suggested increased from NOK 1 400 000 to NOK 1 480 000 (from NOK 2 800 000 to NOK 2 960 000 for married couples).
- It is suggested that the tax base for wealth tax on shares owned by personal shareholders and working capital should be set to 90 % of their fair market value for 2017 and 80 % of their fair market value for 2018.
The suggested changes will if passed be in force from 1 January 2017.
Share saving account
It is suggested that personal taxpayers should be able to create a share savings account to be able to reinvest gross proceeds (pre tax) in new shares. The suggested model is somewhat similar to the participation exemption method for corporate shareholders, however simplified. The rules is suggested only to apply for investments in listed shares and parts in mutual share funds. Gains on sale of such investments shall then not be taxed until the money is distributed from the share saving account. A shielding deduction model will be introduced as well to aline the rules to the current rules for individual shareholdings. Dividends from shareholdings will be taxed upon distribution.
Other
- A tax free amount of maximum NOK 1 500 is currently available if certain conditions are fulfilled when employees are offered to purchase shares in the employing entity cf. the tax act § 5-14. It is suggested that the tax free amount is increased from NOK 1 500 to NOK 3 000.
- It is suggested a general tax exemption for the covering of expenses for employee representative’s exercise of labour union duties, by the employer. The exemption is provided that the cost that is covered by the employer is sufficiently attached to the duty as an employee representative. The cost coverage will be deductible for the employer and it shall not be subject to employer’s social security contributions.
- The Ministry of Finance has asked the Tax Directorate to prepare a discussion note concerning suggestions to improve the legislation regarding taxation of payments in kind, to be released this fall.
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This blog post is written by Kristine Braaten.
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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