NORWAY Trends and Developments Contributed by: Bernhard Getz-Jeffreys and Johannes Wiegaard, Ro Sommernes Advokatfirma AS
are expected to grow significantly, creating fiscal pres - sure on the welfare system. Projections indicate that by 2060, dependency ratios will have doubled, putting unprecedented strain on public finances. This demographic shift means that public spending will need to increase to meet the ris - ing demand for healthcare, pensions and other welfare services. However, with fewer individuals in the work - force, tax revenues are likely to decline. Potential solutions include raising taxes, adjusting the retirement age, or creating incentives for greater work - force participation among underrepresented groups through reductions in taxes for low-income workers. Immigration policies could also play a pivotal role in addressing labour shortages while sustaining long- term tax revenues. 2.2 The “tax lottery” experiment One of the potential solutions to the aforementioned challenges came in the form of a “tax lottery”. At the start of the year, the Norwegian government introduced an innovative trial scheme called the “tax lottery” (Nw: forsøksordning med arbeidsfradrag ) aimed at creating knowledge about how a work deduction, and economic incentives generally, can influence labour market participation and how much people work. The government’s objective is to get more people into work and fewer people on benefits. To achieve this, the government recognised the need for better knowl - edge about what prevents people from participating in the labour market and how various measures work. The scheme represented a novel approach to test - ing tax-based incentives for workforce participation. Approximately 100,000 young people (8% of those born between 1991 and 2006 and registered as taxpayers in Norway) were randomly selected through a lottery to receive a work deduction for a five-year period. Those selected could receive a deduction of up to NOK125,000, which could reduce tax for young people with low and medium incomes by up to NOK27,500 per year. While a special working deduction has been proposed on several occasions before (including by the Sol - berg government in 2021 and by the Tax Commission
in 2022 (NOU 2022: 20)), and several countries have similar schemes in place (including Finland, Sweden and Denmark), the government deemed that there was not sufficient factual background to introduce such a deduction directly. Sceptics have pointed out that the experiment may not provide any new knowledge because there is no way knowing whether the result is due to the tax deduction or whether the people involved are acting upon the emotion of “having won the lottery”. The lottery has a cost of NOK2.5 billion and will hope - fully provide insight into effective ways of motivating young citizens to participate in the labour market. 2.3 Proposed changes to tax-free distribution of contributed capital Under current rules, repayment of fully paid-in share capital and premium capital from a company to a shareholder is not considered a dividend and thus not taxed. The tax position relates to each individual share, regardless of its acquisition price. Each taxpay - er must themselves manage and keep books docu - menting the paid-in capital for each share. This is an administrative burden for the taxpayers and also an administrative burden for the tax authorities. The rules also create opportunities for tax planning, particularly where shares have been traded multiple times or there have been reorganisations. To address these issues, the government sent two alter - native proposals for consultation on 15 October 2025. The first proposal involves tax-free treatment for previ - ously contributed capital on the share (as under cur - rent rules), but with tax-free treatment limited to the shareholder’s own cost base. The second proposal involves granting tax-free treatment up to the share - holder’s own cost base, regardless of what was previ - ously contributed to the share. The proposed changes are intended to take effect from 1 January 2027, providing predictability for business. For business owners, this reform addresses legitimate concerns about complexity and administrative bur - dens, though the final form of the rules will depend on the consultation process. For the government, this change is intended to effectively limit the unintended opportunities for tax planning.
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