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The Norwegian rules for good tax sense: Skattevettreglene

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The well-known Norwegian character, Severin Suveren, always blame “bad luck” when something unexpected happens while skiing - whether it is the cross-country ski pole breaking or if a blizzard is coming. This way, he has demonstrated the importance of knowing the rules of common sense in the mountains. As opposed to Severin Suveren, do not blame “bad luck” when you deliver your tax return after the Easter holidays. Know the rules of good tax sense, and you will not have to depend on luck at all.

1. Carefully plan your stay abroad and report where you have worked ("Plan your trip and report where you go")

If you have worked abroad, you need to inform Skatteetaten (the Norwegian tax office) about this in your tax return. As a general rule income earned abroad are subject to tax in Norway. In order for a Norwegian to be tax emigrated from Norway many criterias must be met. Both internal Norwegian regulations and tax treaties with other countries affects if and how you can avoid a double taxation on your income.

If you are a foreign working in Norway, the income you earn in Norway is in principle also taxable here. The extent of the tax liability depends on whether or not you have stayed in Norway for 183 days or more, and also whether you are considered a tax resident in another country according to a tax agreement with Norway. Therefore, it is important to look into the rules that applies to you.

Also, have you thought about your social security membership? It may be possible to retain the membership in Norway even if you are working abroad (and vice versa if you are a foreigner working here). However, we have social security agreements with EEA/EU countries and some other countries that determine where you shall be covered for social security purposes. When going to countries where Norway has not concluded any social security agreements one can apply for voluntary membership. However, you might be subject to a higher social security contribution compared to what you pay as a mandatory member of the Norwegian social security scheme. This affects you, as the social security contribution is included in the tax assessment.

If you plan in advance you can prevent surprises when your tax return is due in April, and especially when you receive your tax assessment later this year.

2. Plan according to the tax rules («Adjust the trip to your abilities and the conditions. »)

Before you submit your tax return, you may want to take a look at the calendar for last year. Did something happened during the last year that may affect your tax? You want to be up to date on any changes in the tax rules. Fortunately, we in PwC keep a close eye on all changes, and we refer to most amendments on “Norway’s Tax Blog”. If you are familiar with the rules, it is easier to foresee which conditions may affect the outcome of your tax assessment. For example, it is now important to pay attention to if you or someone closely related to you have received loans from a company in which you own shares. In these cases these loans are considered as dividends.

Furthermore, note that Skatteetaten does not receive information about all the deductions you are entitled to or all the income you may have had. Therefore you must carefully fill in information about deductions and income that are not already included in the pre filled income tax return. For example:

  • Private loans and obligations
  • Taxable rental income
  • Foreign assets or income
  • Change of tax class (see below for spouses)
  • Private childminder
  • Sickness deduction (assuming you’ve gotten deduction for this in the tax assessment of 2010 and 2011 and also for the years between 2011 to 2015)
  • Purchase or sale of house
  • Standard deduction for foreigners in Norway

If you got married during the tax year, Skatteetaten may not have registered this in your tax return. The main rule is that couples who got married before November 1 in the year preceding the tax year, is to be taxed together for their overall income and assets. Spouses get separate tax assessments if this provides the lowest total tax or the same total tax as if they were assessed together. It is still possible to claim to be taxed together, even if it results in a higher overall tax. Also, if your spouse has no (or very low) income you will be taxed under tax class 2. This mean that you get a higher personal deduction (for 2015 it is NOK 51 750 for class 1 and for class 2 NOK 76 250). This also applies if you are a single parent.

3. Pay additional advance tax to avoid interest («Regard the weather- and avalanche forecast »)

When you receive your tax return you will be able to see the preliminary tax calculation of the tax office. Initially you should check that the information and the calculation is correct, but if you get tax arrears, you can pay additional advance payment in order to avoid interest charges on the taxes due. Even if the interest rates are not too high, the deadline to pay without addition of interest - May 31 - may be worth noting.

4. Be precautionary ("Prepare for bad weather and cold, even on short trips ")

If your tax situation has aspects that makes you unsure about the outcome, you can request a binding preliminary statement from Skatteetaten. The purpose of this is to provide more predictability when it comes to your transactions, disregard the volume. This in addition to Skatteetatens already existing duty to provide guidance to the taxpayer.

If you have received a preliminary statement from Skatteetaten, you can choose whether you want it to apply to your tax assessment or not. If you choose not to apply the statement, the assessment will be handled as normal.

If your tax situation is a bit more complicated than the regular cases, it could be a good idea to reach out to experienced tax advisors, who can steer you safely across the great mountain of different tax regulations. This may prevent unknown obstacles, and furthermore it will provide a smoother handling of your taxes .

5. Bring proper equipment: Find the right forms ("Bring necessary equipment in able to help yourself and others")

It may not require just as much equipment to deliver your tax return as you may need if a blizzard is coming in the mountains. However, it can still be challenging to find out how much documentation, and which document, you should attach to the tax return. The most important thing to have in mind, is to give correct and complete information about the statements included in your tax return. In this connection, you may use the section for additional information (see item 5 in the tax return). If the amount of documentation/receipts/vouchers is very large, you can consider whether it is necessary to attach all of them or not. In principle, it is not required to attach all your case papers, however you must have them available, as Skatteetaten can request to see them later.

A few forms we think you should know about are:

  • RF-1189: Applicable when you have a rental income
  • RF-1150 and RF-1147: Applicable when claiming tax reduction in order to prevent double taxation due to taxes paid abroad
  • RF-1231: Applicable if you possess bank deposits abroad
  • RF-1059: Applicable if you hold shares in foreign companies

For a complete list of forms, please follow this link: http://www.skatteetaten.no/en/Forms/

You can also find them in Altinn.

6. Do not check all the numbers at once ("Choose wisely at crossroads. Recognize avalanche terrain and thin ice")

Overviewing your tax return can be challenging. A method to identify errors is to separate all the numbers in your tax return. If you find an error, correct it and explain why you have made the correction. If the error is due to information provided by others (your employer, bank, insurance company, other organizations, the daycare center/preschool, trade union etc), you must contact them and notify them about this. If the error is caused by your employer, the tax office will require that the reporting made is amended in order for your correction to be approved.

7. Avoid tax arrears next year ("Use a map and compass. Always know where you
are")

When you have gone through your tax return and probably gotten a good overview of both your income and payroll withholding (deductions), you may want to double check your payroll withholding and tax deduction for the current year. An overview of your costs and incomes allows you to adjust your level and avoid large corrections every year. It is easy for you to adjust the amounts so that your employer can change the payroll withholding. This can be done online at Skatteetaten’s website

8. Comply with the reporting obligation ("Return in time. There is no shame in going back")

As mentioned earlier, you are obligated to report all your income (both local and global) in your tax return. You can be subjected to pay additional tax if you fail to include your taxable income in your tax return, or if the claimed payroll withholding deductions turns out to be incorrect. An additional tax will be calculated with 30%, or in aggravating circumstances additional 15 % or 30 %, of the tax that is or could have been withheld. Skatteetaten can pursue errors and investigate whether you have given "accurate and complete information" in your tax return, and they can go as far as 10 years back.

Skatteetaten can not apply additional tax if you voluntarily correct your previous years' tax returns. Based on this, according to the Norwegian rules of good tax sense there is no shame in going back.

9. Stress less and request additional time ("Save your strength and find shelter if necessary")

After reading the Norway’s tax blog and the rules of good tax sense, I am now sure you are well prepared and properly equipped to deliver your tax return. Both with the correct information and at the right time. Should you still be running late, you can request to deliver your tax return after the initial deadline of 30 April, but not longer than with 1 month's delay. The deadline to apply for postponement is 30 April. However, note that if an extension is granted, you cannot expect to get the tax assessment in June.

***

Well, I am heading off to the mountains now. Lucky, I guess. However, when I deliver the tax return after the Easter holidays, it will not be based on luck at all. I know the Norwegian rules of good tax sense.

Happy Easter, from all of us in Norway's Tax Blog!

                                                                             ***
This blog post is written by Kristine Braaten. 

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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