NORWAY Law and Practice Contributed by: Bernhard Getz-Jeffreys and Johannes Wiegaard, Ro Sommernes Advokatfirma AS
Norway has adopted a tax policy to attract investment and combat tax evasion. Norway has maintained a 22% corporate tax rate and uses tax incentives, such as R&D deductions, to encourage competitiveness. The corporate tax rate is subject to ongoing political discussions and it should be anticipated that the tax rate may be increased in the upcoming years. Norway’s tax structure includes a special tax (a rent tax) on income from natural resources, including petroleum extraction, power generation and the fish - ing and seafood industries. Also, Norway imposes a net wealth tax on individuals resident in Norway. 9.5 The Competitive Tax System One of the most vulnerable aspects of the Norwegian tax system is its tax incentives, which are subject to EU state aid scrutiny under the EEA Agreement. Incen - tives like R&D tax deductions and schemes offering advantages to specific industries risk being classified as illegal state aid if they distort competition. This has been a particular concern in Norway, where interna - tional companies benefit from such measures. To address potential issues, Norway has carefully modi - fied its tax incentives to comply with EEA regulations and avoid challenges from the European Commission. In addition to state aid rules, the international tax framework significantly influences Norway’s system. International trends and rules (such as the interest deduction limitation rule and country-by-country reporting) ensure that Norway’s tax system aligns with global standards while maintaining fairness and transparency. 9.6 Hybrid Instruments and BEPS Implementation Norway has already implemented several BEPS meas - ures to address hybrid instruments. The interest deduction limitation rule limits the possi - bilities for multinational groups to shift their income to countries with lower tax rates through artificial financ - ing arrangements in Norway.
The participation exemption does not apply to divi - dends from a foreign subsidiary if such subsidiary may deduct the dividend payment in its jurisdiction. Section 8-11 of the Tax Administration Act imposes further documentation requirements for transactions with related parties, including those involving hybrid instruments, with the aim of preventing abuse and ensuring tax compliance. These measures align with BEPS recommendations, and further adjustments may be necessary to comply with future guidelines. 9.7 Interest Deductibility and Territorial Tax Regime Norway does not have a territorial tax system but instead uses a global tax system where Norwegian companies are liable for tax on all income, both domestic and foreign. Interest deduction limitations have been introduced to prevent profit shifting via artificial interest payments, in line with BEPS Action 4. Stricter interest deduction limitations may affect multi - national companies that use group financing arrange - ments, but they are unlikely to have much effect on investors operating within existing structures in Nor - way. 9.8 Controlled Foreign Corporation Reform Norway has a global tax system that addresses CFCs through Section 10-60 of the Norwegian Tax Act. These regulations tax the income of Norwegian owners of foreign companies in low-tax countries, regardless of distribution. This approach aligns with the BEPS CFC proposals, which aim to prevent profit shifting. 9.9 Anti-Avoidance Rules LOB and anti-avoidance rules in double tax treaties can have a significant impact on both inbound and outbound investments in Norway. LOB clauses pre - vent abuse of tax treaties, for example by treaty shop - ping, and require companies to have real economic activity to enjoy tax benefits. Norway also has general anti-avoidance rules ena - bling the tax authorities the right to deny tax ben -
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