NORWAY Trends and Developments Contributed by: Sicilie Tveøy, Thomas Alnæs, Ramborg Elvebakk and Karen Margrethe Bugge, Advokatfirmaet Hjort AS
Moving Business to Another Country:Tax Implications
• A clause requiring every founder to have an acceptable prenuptial agreement and will in place – Co-founders might mutually agree that none of them will allow a situation where a spouse could claim half the company or where shares pass freely to a spouse or outsider heir. • Consent/sale clauses on divorce or death – The agreement might say that if a shareholder divorces or dies, their shares must be offered to the other owners or to the company for purchase (often at a valuation formula). This ensures the spouse or estate receives financial compensation but does not become a long-term shareholder without the others’ consent. • Restrictions on transfers – Prevent an owner from gifting shares to a family member without consent. • Rules for valuation. Multiple shareholders can agree to collectively safe - guard the company’s interests in cases of divorce or death via a shareholders’ agreement. An agreement can mandate that each shareholder shall have a mar - riage agreement with separate property for the shares and make use of the inheritance law’s opportunities to deny unsettled estate and further limit spousal inher - itance to 4G (4 x National Insurance basic amount) through a will. In essence, co-owners can agree in advance to prevent divorce or death from disrupting the business.
If a business owner wants to move back to their origi - nal country, what are the taxes for moving out? Con - sider the scenario where, after building their business in Norway, the owner decides to move to another country. Norway imposes an exit tax on individuals who give up their tax residency. This can be especially burden - some for entrepreneurs with high-growth start-ups, as the tax is levied on unrealised gains – meaning a business owner may owe tax on potential profits that have not yet been converted into cash. What is an exit tax? It is a tax on the latent unrealised capital gains of the owner’s shares at the time they leave Norway. If Norwegian tax residents move out and thereby become non-resident for tax purposes, Norway will under some conditions treat the situation as if they had sold all their shares on their last day as a resident and tax the would-be gains accordingly. In other words, if a person started a company and their shares have gone up in value, they must pay capital gains tax on that increase even though they have not actually sold their shares. For an easy exam - ple, suppose an entrepreneur founded a start-up with shares that cost almost nothing, and now, a few years later, their shares are valued at NOK10 million. If they emigrate, Norway will calculate the tax on a gain of approximately NOK10 million. The tax could be rough - ly NOK3.78 million, as they have taken dividends. This tax is imposed even if they have not sold any shares and have no cash in hand from those shares.
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