NORWAY Law and Practice Contributed by: Bernhard Getz-Jeffreys and Johannes Wiegaard, Ro Sommernes Advokatfirma AS
meet the documentation and calculation requirements specified in Section 16-20 of the Norwegian Tax Act. 6.6 The Substance of Non-Local Affiliates Norwegian tax regulations include provisions that address the substantive requirements for foreign sub - sidiaries. These provisions are designed to prevent companies from establishing an apparent presence in low-tax countries with no real economic activity, known as “tax havens”. A company is considered resi - dent in Norway if it is incorporated under Norwegian company law, or if it is incorporated abroad and has its real management in Norway. Consequently, a foreign company can be regarded as a Norwegian taxpayer if it has its real management in Norway, regardless of its formal registration location. Companies domiciled in Norway are generally liable for tax payments in Norway. This implies that a foreign company that is considered a Norwegian taxpayer due to its effective management being in Norway will be subject to Norwegian taxation on its global income. 6.7 The Sale of Shares in Non-Local Affiliates When a Norwegian (local) company sells shares in a foreign subsidiary, the gain from the sale may in prin - ciple be exempt from taxation in Norway pursuant to the participation exemption if the non-local affiliate is genuinely established and performs real activities within the EEA or, if it is resident outside the EEA, if it is not a resident of a low-tax jurisdiction and the Nor - wegian company owns at least 10% of the shares and the votes in the foreign subsidiary and has held them for a minimum period of two years prior to the sale. If the exemption method does not apply, any capital gains on the sale are taxed at a rate of (currently) 22%.
are artificial or primarily designed to achieve tax benefits. This ensures that transactions align with the intended purpose of the law and are based on genuine economic substance. • Section 13-3 of the Norwegian Tax Act authorises the tax authorities to revoke tax positions if the acquisition of the tax position was the main objec - tive of the transaction. • Section 8-11 of the Tax Administration Act man - dates thorough documentation for related-party transactions. Insufficient or missing documentation may lead to taxable income adjustments and pen - alties, emphasising the importance of transparency in intra-group dealings. • Section 10-60 of the Norwegian Tax Act establish - es CFC rules (see 6.5 Controlled Foreign Corpora- tion-Type Rules for details). Norway also participates in the OECD’s BEPS initia - tive and incorporates measures like the PPT and LOB in tax treaties to combat tax evasion on a global scale. The Norwegian tax administration has a system for routine tax audits, but there is no specific statutory interval for such audits. The Norwegian tax adminis - tration carries out audits based on risk assessments and has procedures and guidelines for this purpose (Tax Administration Act, Ot.prp. nr. 70 (2008–2009)). According to the preparatory work for the Tax Admin - istration Act (Ot.prp. nr. 70 (2008–2009)), auditing and control must be carried out efficiently and purposeful - ly, adapted to the individual taxpayer’s circumstances. Section 10-1 of the Tax Administration Act gives the tax authorities the right to audit taxpayers’ accounts and circumstances to ensure the accurate calculation and payment of tax and duties. Routine checks are allowed, but audits are mostly based on risk assess- ment, with higher-risk companies getting priority. Sec - tion 10-4 of the Tax Administration Act allows the tax authorities to conduct on-site audits. The Norwegian tax administration can visit a company to inspect its documentation, transactions and accounts, and verify 8. Audit Cycles 8.1 Regular Routine Audit Cycle
7. Anti-Avoidance Provisions 7.1 Overarching Provisions
Norway has implemented several measures to pre - vent tax avoidance and ensure compliance with tax regulations: • Section 13-2 of the Norwegian Tax Act author - ises tax authorities to disregard transactions that
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