NORWAY Trends and Developments Contributed by: Thea Slethaug, Axel Bjørke, Sigbjørn Sørensen and Jarand Aarhus, Aider Legal
or functions are transferred back to the parent or to another group entity, and that transfer crosses the Norwegian border, exit tax analysis is required before any restructuring steps are taken. Exit tax may also be relevant for individuals, particular - ly foreign management employees posted to Norway for a longer period. A person who has been tax resi - dent in Norway and who holds shares or other assets at the time of departure may be subject to Norwegian exit tax on unrealised gains. Norway’s rules in this area have been significantly tightened in recent years, and the interaction with the applicable tax treaty – which may or may not preserve Norway’s right to tax gains after the individual has left – requires careful analysis on a case-by-case basis. The recommendation for both companies and indi - viduals is that exit planning must begin well before the exit. By the time a restructuring or departure is being implemented, the tax cost may already be crystallised. Planning – ideally at the point when the Norwegian structure is first being designed – can significantly affect the outcome and, in some cases, the exit tax liability can be deferred or mitigated through appropri - For international businesses considering project work in or through Norway, the following points merit par - ticular attention: • Norway has tax treaties with approximately 90 countries, but each treaty is different. The per - manent establishment threshold, the employee exemption conditions and the withholding tax rates on dividends all vary. The analysis must be carried out specifically for each company and each coun - try of residence involved. • The permanent establishment threshold for con - struction and installation projects varies by treaty. A project that creates a permanent establishment for a Portuguese company after six months may not create one for a German company until 12 months. This must be factored into bid pricing and project structuring from the outset. ate structuring. Key Takeaways
• The taxation of employees depends on the resi - dence of both the employee and the employing entity. The same individual, doing the same work in Norway, may be taxable or exempt depending on which group company employs them. These deci - sions must be made deliberately, not by default. • The hired labour arrangement versus genuine subcontract distinction is fundamental. In a hired labour arrangement, employees are taxable in Norway from day one regardless of treaty protec - tion. Contracts must be drafted and executed in a way that is consistent with genuine subcontract classification. • Corporate and employee tax outcomes are linked. A permanent establishment at the employer level removes treaty protection for employees. Both lev - els of the analysis must be modelled together. • The participation exemption makes a Norwegian AS attractive for group holding structures, but with - holding tax on dividends paid to a foreign parent must be assessed against the applicable treaty. • An exit strategy should be accounted for already at the point of entry, not when Norwegian operations are being wound down. Conclusion Norway offers international companies a long-term pipeline of well-funded, commercially attractive opportunities across the energy, infrastructure and digital sectors. The international tax framework appli - cable to foreign companies active in Norway is both intricate and may be far-reaching in its implications. Factors such as the relevant tax treaty, the contractual arrangements in place, the residence of the employer and the personal tax residence of each employee must all be weighed carefully – and this analysis should begin well before operations commence. In Norway, the contract phase is the moment at which the tax position is determined. Companies that invest in proper international tax advice before they sign their first Norwegian contract will be far better placed to capture the opportunities this market offers – and to avoid the liabilities that insufficient planning can cre - ate.
332 CHAMBERS.COM
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