NORWAY Law and Practice Contributed by: Bernhard Getz-Jeffreys and Johannes Wiegaard, Ro Sommernes Advokatfirma AS
1. Corporate Structures, Residence and Tax Treatment 1.1 Corporate Forms and Their Tax Treatment In Norway, most new companies are established as limited liability companies (Nw: aksjeselskaper , AS) where the shareholders’ liability for the company’s obligations is restricted to the capital they have con - tributed. Limited liability companies are recognised as independent legal and tax entities, meaning the com - pany itself is taxed separately from its shareholders. Norwegian law also provides for other types of companies that are separate legal entities but tax- transparent. Examples include general partnerships (Nw: ansvarlige selskaper , ANS) and partnerships with pro rata liability (Nw: selskaper med delt ansvar , DA). Additionally, Norway recognises hybrid company struc - tures, such as silent partnerships (Nw: indre selskaper , IS) and limited partnerships (Nw: kommandittselskaper , KS), where the liability varies among the participants. In these cases, at least one owner has unlimited liabil - ity for the company’s obligations, while others enjoy limited liability. These entities are treated as tax-trans - parent entities. Norwegian tax law does not allow for a choice between tax transparency and tax opacity, as this depends on the corporate body of the relevant entity. 1.2 Use and Taxation of Transparent Business Structures In the consultancy and brokerage industry, it is com - mon to structure businesses as silent partnerships with a limited liability company acting as the principal. To external parties, the business operates as an ordi - nary limited company. However, profits and losses are allocated between the principal and the silent partners according to the terms of a partnership agreement. In the private equity sector, funds are typically struc - tured as either limited liability companies or silent partnerships. Silent partnerships offer a distinct advantage for foreign investors, as they are exempt from withholding tax of up to 25% on dividend dis - tributions.
Shipping companies used to be structured as limited partnerships, but the particular tax advantages of such a structure are now history. 1.3 Tests for Determining Tax Residence The tax residency assessment is a broad assessment dependent on several factors. Firstly, all companies established under Norwegian corporate law are considered tax residents of Norway. Companies that are not established in Norway under Norwegian corporate law may still be deemed tax-res - ident in Norway if the company’s actual management is exercised in Norway. This is assessed based on: • where key decisions for the company are made; • where board meetings and general meetings are held; and • where the company’s day-to-day management is carried out. If a company is considered tax-resident in more than one country, a tax treaty between Norway and the other country will determine residency. Such treaties often include “tie-breaker” rules, which resolve con - flicts by considering: • the location of the company’s “place of effective management” or management seat; and • the location of the company’s head office and prin - cipal operations. When evaluating actual management and residency, emphasis is placed on the substantive realities of the company’s operations, rather than formalities. For tax-transparent entities such as general partner - ships and limited partnerships, the partnership is looked through, and the owners are taxed based on their separate residency. The shareholders may, how - ever, be partially tax liable to Norway for its business income in Norway as a consequence of its participa - tion in a Norwegian partnership.
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