NORWAY Law and Practice Contributed by: Bernhard Getz-Jeffreys and Johannes Wiegaard, Ro Sommernes Advokatfirma AS
While the Ministry of Finance is permitted to issue rules that deviate from OECD guidelines, this provision is rarely exercised, as noted in preparatory statements (Ot.prp. nr. 62 (2006–2007)). 4.7 Transfer Pricing Disputes and Mutual Agreement Procedures The introduction of country-by-country reporting has given the tax authorities access to more detailed infor - mation on the activities of multinational enterprises. In recent years, the Norwegian tax authorities have increased their focus on transfer pricing. There are no official statistics on the use of the Mutu - al Agreement Procedure (MAP) in Norway. With an increased focus on transfer pricing and more con - trols, it is likely that the number of MAP cases will increase. However, it is important to note that the MAP process can be time-consuming, and taxpayers should therefore consider alternative dispute resolu - tion mechanisms where appropriate. The Swedish Supreme Court recently ruled on a case and ordered the local tax authorities to allow the Swedish group company to make an appropriate adjustment as a result of increased taxable income abroad. As ordi - nary court proceedings are usually shorter than MAP proceedings, this may lead to a reduction in the use of MAP in the future. 5. Taxation of Non-Local Corporations 5.1 Compensating Adjustments In Norway, compensating adjustments are permit - ted to align related-party transactions with the arm’s length principle. Such adjustments may involve both tax and customs authorities. If an adjustment affects the customs value of imported goods, it must be post-declared. Similarly, changes impacting taxable income must be reflected in the company’s tax return, ensuring compliance with independent pricing standards. Adequate transfer pricing documentation is crucial to justify these adjustments. Missing or insufficient documentation can lead to additional taxes and other penalties.
In cross-border disputes, MAP can resolve disagree - ments between tax authorities, preventing double taxation and ensuring consistent application of the arm’s length principle. 5.2 Local Branches and Local Subsidiaries Local branches of foreign companies (Nw: Norskregistrerte utenlandske foretak , NUF) and subsidiaries of foreign companies are taxed differ - ently in Norway. Branches A branch is not a separate legal entity but an extension of the parent company. It is only liable to tax in Norway on income earned in Norway. Branches are subject to ordinary corporate tax of 22%. As the branch is considered a part of the international headquarters, distributions are generally not subject to withholding taxes. Subsidiaries A subsidiary is a separate legal entity registered in Norway and is liable to tax on its global income. Sub - sidiaries also pay 22% corporate tax. Dividends to foreign owners may be subject to withholding tax, at a standard rate of 25%, but this can be reduced through tax treaties. 5.3 Capital Gains of Non-Residents In Norway, capital gains on the sale of shares are gen - erally taxable. For individuals or companies without tax residence in Norway, specific rules apply. Non- residents are generally not liable to pay tax in Norway on gains from the sale of shares in Norwegian com - panies unless the shares are linked to a permanent establishment in Norway. Similarly, gains from the sale of shares in a foreign holding company that directly owns shares in Nor - wegian companies are also not taxable in Norway for non-residents, unless the foreign company itself has a permanent establishment in Norway. Norway has entered tax treaties with many countries to prevent double taxation. These agreements often allocate the right to tax capital gains from the sale of shares to the state of the seller’s residence, except for gains related to real estate or permanent estab -
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