NORWAY Trends and Developments Contributed by: Thea Slethaug, Axel Bjørke, Sigbjørn Sørensen and Jarand Aarhus, Aider Legal
Structuring the Norwegian Presence: NUF or AS? When a foreign company determines that it will have a significant or lasting presence in Norway – whether because a permanent establishment arises or because the company wishes to pursue multiple projects over time – it must decide how to structure that presence formally. The most commonly used setup is the Norwegian branch of a foreign company, registered in Norway as a NUF ( norskregistrert utenlandsk foretak ). A branch is not a separate legal entity – it is part of the for - eign parent company. All obligations and liabilities of the branch are therefore obligations of the parent. This makes the NUF a relatively straightforward and low-cost structure to establish, which is why it is the default choice for many foreign companies entering Norway for project-based work. The alternative is to incorporate a Norwegian limited liability company (AS). The minimum share capital is NOK30,000 – a low threshold – and the AS is a sepa - rate legal entity with limited liability for its sharehold - ers. For foreign groups with longer-term Norwegian ambitions, or where liability separation is commer - cially important, the AS may be the more appropriate structure. From a tax perspective, an important advantage of operating through a Norwegian AS rather than a branch is access to the Norwegian participation exemption – known as “ fritaksmetoden ”. Under this regime, a Norwegian AS that receives dividends from, or realises gains on the disposal of shares in, qualify - ing entities is generally exempt from Norwegian cor - porate tax on those receipts. This makes the Norwe - gian AS an effective intermediate holding setup within an international group structure, allowing profits to be accumulated and repatriated from Norwegian opera - tions. However, the participation exemption has important limitations. It applies in full to shareholdings within the EEA, but for non-EEA shareholdings, conditions apply – including minimum ownership thresholds and the requirement that the subsidiary is not resident in a low-tax jurisdiction. Furthermore, distributions from a Norwegian AS to a foreign parent shareholder may
be subject to Norwegian withholding tax on dividends, currently levied at a statutory rate of 25% but typically reduced under applicable tax treaties to 5%, 10% or 15%, depending on the treaty in question. The with - holding tax position must therefore be considered alongside the participation exemption when design - ing the group structure, as the two interact directly. A structure that is efficient at the Norwegian level may still give rise to withholding tax leakage on repatriation if the treaty position is not carefully analysed. Many opt for a layered Norwegian structure in which a holding company sits beneath a foreign parent and holds shares in one or more Norwegian subsidiaries. Operational activity – including employees, contracts, machines, equipment, etc – is placed in a separate operating company. Where the group holds Norwe - gian real estate, the property can be placed in a sepa - rate property company, ring-fencing real estate assets from operational and commercial risk and vice versa. If a group controls more than 90% of the shares and votes in one or more subsidiaries, group contribu - tions can be utilised to offset losses in one company against profits in another. Planning for Departure: Exit Strategy An exit strategy is frequently overlooked in the ini - tial planning phase. Investors should account for the potential impact of Norwegian exit taxation upon the winding down of Norwegian operations. Norway lev - ies tax on unrealised capital gains on certain financial assets when an AS ceases to be subject to Norwe - gian taxing jurisdiction. The rules primarily apply to shares in Norwegian or foreign companies, units in securities funds, partnership interests and employee stock options. For foreign companies that have built up Norwegian operations over the course of one or more projects, this can result in a substantial tax liabil - ity arising at the point of departure – even where no cash has been received. The practical relevance is clear in the project context. A foreign company that has operated a Norwegian permanent establishment over a multi-year project, and that has accumulated depreciable assets, con - tractual positions or other value in Norway, will need to consider what happens when the project concludes and Norwegian operations are wound down. If assets
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