Goods crossing the Norwegian border are subject to import VAT. Depending on the nature of the goods customs and excise duties may also apply. It is usually a buyer in Norway that will be obliged to clear the goods for customs and pay/report the abovementioned taxes. In some cases a foreign supplier will be obliged to act as importer of record, pay/report the import taxes and even register for VAT in Norway. Under what circumstances will this be the case and what can be done to prevent such an obligation?
Who is responsible for import VAT?
When it comes to delivery of goods to Norway, imported goods have to go through the customs clearance procedure to be admitted to free circulation.
The importer of record will be the entity receiving the claims from the authorities related to customs/excise duties and import VAT. It will also be declared as consignee in the import declaration. Usually this will be a Norwegian buyer of goods from abroad.
Currently, if the value of the consignment is below NOK 350 (approximately EUR 40), including freight and insurance (a small consignment threshold), the importer is not obliged to submit a customs declaration at the time of import, and the goods are exempt from import VAT and customs/excise duties.
In some cases, a foreign supplier of goods to Norwegian consumers will actually be obliged to register for VAT in Norway and also act as importer of record. This is the case if the supplier is regarded as supplying goods “in Norway”, as opposed to supplying goods “to Norway”. In the latter scenario, the import procedure (and import VAT, if above the NOK 350 threshold) is imposed on the customer. If the supplier is regarded as supplying goods “in Norway”, the exemption for low value consignments does not apply.
Supply “to Norway” vs. supply “in Norway”
So what does it mean that the supply is considered to take place “in Norway” rather than “to Norway”?
Unfortunately, the VAT Act does not differentiate those two terms. The essence of the difference lies in details and comes from court judgements and tax authorities rulings. As a starting point the supply is considered as taking place “in Norway” if the ownership is transferred from the seller to the consumer after the goods have arrived in Norway. Goods that changes ownership as part of a cross border movement of goods are regarded as being supplied “to Norway”.
However, referring to the Norwegian Supreme Court’s examination of the case Ifi OY (2006), even goods that are shipped from outside Norway can be regarded as being supplied “in Norway”. If the foreign company’s operations as a whole is similar to operating like a Norwegian one (towards the consumers), then most likely the company will be obliged to register for VAT in Norway. Among the main factors for such qualification would be: the contact with customers takes place in Norway, the company serves mostly Norwegian customers, the company’s website is in a Norwegian domain, the website has Norwegian language, and for the customer it does not seem like the shipment comes from abroad.
The fine line
Most foreign suppliers of goods to Norwegian consumers would of course like to avoid VAT registration obligation if possible, especially if goods have a value below the small consignment threshold. To achieve this, the actual set-up and the marketing towards Norwegian customers should be scrutinized to avoid that the Norwegian tax authorities regard the supply as being made “in Norway”.
However, it is to mention, that during the last parliamentary elections in Norway that took place this autumn, there were voices to abolish the small consignment/ NOK 350 threshold. That would imply that all purchases from abroad will be charged with import VAT - no matter the value. The reason for that is significant growth in purchases from foreign suppliers leading sometimes to even unfair commercial practices. Beside being an additional burden for all private customers purchasing online, this solution will probably hit foreign suppliers counting on avoiding VAT-related obligations.
If you are in doubt whether your supply would be subject to local VAT in Norway, I would recommend to request a ruling since the tax authorities assess this issue on a case-to-case basis.
What about supply of services?
Regarding supply of services, different rules may apply depending on the nature of the service (tangible or intangible) as well as on the end customer type (B2B, B2C). There is a reverse charge mechanism for VAT levied on services “capable of delivery from a remote location” and special simplified scheme for VAT on electronic services when the end customer is private individual. It is worth pointing out that imported services may cause more obligations in Norway than in many other countries. Click here to find out more about VAT registration obligations in Norway for non-established suppliers.
This blog post is written by Teresa Sermak.
Mitt navn er Per Kirknes og jeg jobber som advokat i PwC. Mitt arbeidsfelt er merverdiavgift og toll, med særlig fokus på internasjonale forhold og cross border transactions. Jeg har arbeidet i PwC siden 2010, og har også erfaring fra tollmyndighetene.
My name is Per Kirknes, and I am an Attorney at Law working in the indirect tax team in PwC Oslo. I specialize in international trade with goods, including domestic and international VAT issues, as well as customs and excise duties. My work is often related to cross-border transactions, including structuring of supply chains and analyses of intra-group transactions. I also provide advice related to specific customs issues like valuation, origin, classification and customs procedures. I have been with PwC since 2010. Prior to that I worked ten years with development of the Norwegian customs legislation in the Directorate of Customs and Excise.