DOING BUSINESS IN NORWAY
THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING
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PHOTO: ISTOCKPHOTO/ZONECREATIVE
The modern city of Bergen on Norway’s west coast makes a fascinating contrast to the dramatic nature surrounding it.
Foreword This guide has been prepared to assist those interested in doing business in Norway. It is intended as a general guide to answer certain key questions that may arise. No responsibility for any errors, omissions or loss occasioned to any person or organisation acting or refraining from acting as a result of any material in this publication can be accepted by the firm or RSM International. The material included in this guide was compiled on the basis of data and information available at 15 December 2015. About RSM International RSM is the sixth largest network of independent audit, tax and consulting firms, encompassing over 120 countries, 760 offices and more than 38,000 people internationally. The network’s total fee income is US$4.6 billion. RSM actively engages in promoting and celebrating the very best in entrepreneurship and business leadership, championing the role of the entrepreneur in today’s world economy. RSM is the lead sponsor and corporate champion of the European Business Awards promoting commercial excellence and recognition of entrepreneurial brilliance. RSM is a member of the Forum of Firms, with the shared objective to promote consistent and high quality standards of financial and auditing practices worldwide. RSM is the brand used by a network of independent accounting and advisory firms each of which practices in its own right. RSM International Limited does not itself provide any accounting and advisory services. Member firms are driven by a common vision of providing high quality professional services, both in their domestic markets and in serving the international professional service needs of their client base. About RSM Norge AS RSM Norge AS is the Norwegian member of RSM International and may be contacted through any of RSM International’s member firms around the world. We provide a full range of services such as statutory auditing, IFRS guidance, tax consultancy, transaction support, risk management and investigation of fraud. We work closely with our associated law firm, RSM Advokatfirma AS. We can also arrange contact with companies providing accounting services. Our offices are located in downtown Oslo and Bergen. We have a staff of 140 people on hand to serve your needs. We place an emphasis on efficient and personal service combined with high levels of expertise.
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Contents Foreword Country overview Business entities Taxation of companies Taxation of individuals Tax treaties Value added tax Employment Accounting and auditing Appendix: Tax rates 2015 and 2016
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PHOTO: SHUTERSTOCK/WANG SONG
Norway is the 6th largest hydropower producer in the world. Approximately 99 % of the country’s total power production is hydropower. DOING BUSINESS IN NORWAY | 5
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PHOTO: ISTOCKPHOTO/ARILD HEITMANN
Northern light over Troms county.
Country overview Geography and climate Norway is part of Northern Europe and constitutes the western part of the Scandinavian peninsula. The country is long and narrow, and shares its eastern border with Sweden, Finland and Russia. To the north, west and south, Norway’s coastline stretches along the Barents Sea, the Norwegian Sea, the North Sea and Skagerrak Its coastline, with its numerous and scenic fjords, is more than 20,000 km long. The coastline is also dotted with large and small islands, of which more than 200,000 have been registered. The Norwegian landscape is rugged and mountainous, though it is also characterised by high plateaus and wide valleys. Norway is known as the “Land of the Midnight Sun” due to the fact that part of the country is situated north of the Arctic Circle. During the summer months in this region the sun never descends beneath the horizon, while during the winter months the sun never rises above it. The Norwegian climate is mild, particularly along the coastline, where the Gulf Stream and the Arctic front create warm air currents. The Gulf Stream also keeps most Norwegian harbours ice-free during the winter. However, the inland climate is cold during the winter, and the northernmost region has a more Arctic climate. Norway is situated in one of the wettest regions in the world, outside the tropics. The number of days of precipitation varies between the different regions, but is usually somewhere between 100 and 200 per year. Population and language Norway is relatively sparsely populated, with five million inhabitants spread over approximately 350,000 square kilometres. Most of the population lives in the southern parts of the country, while the northern parts are more sparsely populated. The population of Oslo, Norway’s capital, is just over 600,000. The official spoken language in Norway is Norwegian, a North Germanic language in the Indo-European language family. It is closely related to Swedish and Danish, and most Norwegians, Swedes and Danes can understand each other. Norway has two official written languages: bokmål and nynorsk. Bokmål derives from written Danish while nynorsk is a more modern written language based on Norwegian dialects. English is compulsory in Norwegian primary and secondary school education.
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Political and legal systems Norway is a constitutional monarchy with a parliamentary democratic system. Elections are held every four years. The Norwegian Constitution (Grundloven) of 1814 builds upon the principles of popular sovereignty, the division of power and certain fundamental human rights and freedoms. The Constitution states that the King is the head of state, but the gradual introduction of the parliamentary system from 1884 has meant that the role today is more ceremonial in nature. The executive power lies with the government, which is headed by the prime minister. The government is formally appointed by the King on the recommendation of the Storting (the Norwegian parliament). Legislative power lies with the parliament, while judicial power lies with the independent courts of law. The ordinary courts of law consist of the conciliation boards, the district courts, the courts of appeal and the Supreme Court. The conciliation boards handle civil cases only. The judges in the three higher courts are appointed by the government, and are civil servants who may only be dismissed by court judgment. Economy Norway is rich in natural resources such as oil, natural gas, hydropower and fish. In recent decades oil has contributed to making Norway one of the richest countries in the world, and its inhabitants have experienced a significant increase in their standard of living. For several consecutive years the UN has ranked Norway’s living standard as the highest in the world, based on life expectancy, level of education, and gross domestic product per capita. A large portion of the country’s oil revenues are placed in funds that are used to regulate the economy and to secure economic prosperity for future generations. Due to the latest development in oil prices it is expected that the Norwegian economy will have to adapt to lower demand from the oil sector and that we will be more dependent on growth in other sectors to support growth in the economy. The Norwegian economy is based on a capitalist, welfare society. Most sectors are operated by private companies, though markets in areas such as competition and environmental policy are highly regulated. The state controls certain sectors, such as health, education and hydroelectric power production. The state also owns significant shareholdings in large listed companies, including Statoil.
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Norway is not a member of the European Union (EU). As a member of the European Economic Area (EEA), however, Norway has signed a trade agreement with the EU which allows Norway to participate in the European market on similar terms as those that apply for the EU member states. As a member of the EEA, Norway implements most EU common market legislation. Business days and hours Normal business hours are between 08.00 and 17.00 from Monday to Friday. Most government agencies are closed on Saturdays and Sundays. Please refer to the section on Employment for more information on working hours. Public holidays Public holidays in Norway are prescribed in the Public Holidays Act. This act treats all Sundays as public holidays. The same applies to the following days: Name Date New Year’s Day 1 January Maundy Thursday Moveable feast Good Friday Moveable feast Easter Sunday Moveable feast Easter Monday Moveable feast International Workers’ Day 1 May Constitution Day 17 May Ascension Day Moveable feast Whit Sunday Moveable feast Whit Monday Moveable feast Christmas Day 25 December Boxing Day 26 December
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Business entities Types of business entities Limited liability company. The most common type of business entity in Norway. A limited liability company can be a private entity, known as a private limited liability company (aksjeselskap (AS)) or a more general type, known as a public limited liability company (allmennaksjeselskap (ASA)). Both forms are regulated by specific legislation: the Limited Liability Companies Act and the Public Limited Liability Companies Act respectively. These acts are based on the same principles as the EU’s limited company legislation. The main difference between the two types of business entities is that public limited companies may not be listed on the stock exchange. The minimum capital requirement is NOK 30,000 for private limited liability companies and NOK 1,000,000 for public limited liability companies. Requirements governing the number of board directors and board composition vary according to company type, turnover, number of employees and whether or not a company has a corporate assembly. Limited partnership (kommandittselskap). Has one or more partners with unlimited liability and one or more partners with limited liability. Limited partnerships are regulated by the Partnerships Act. Unlimited partnership (ansvarlig selskap). The partners have joint and unlimited liability for an entity’s liabilities. An agreement may be made to apportion liability pro rata. As in the case of limited partnerships, unlimited partnerships are regulated by the Partnerships Act. Silent partnership (indre selskap). May be established as a limited or unlimited partnership. What distinguishes a silent partnership from other types of business entity is that it may not act as such in relation to third parties. Sole proprietorship (enkeltpersonforetak). A common type of business entity in Norway. This type of business entity requires that one, physical person is personally responsible for a business activity and has unlimited liability for the business enterprise. Norwegian branch of a foreign company (NUF). A foreign company may conduct business activities in Norway via a branch. The branch is not regarded as a legal entity, but must be registered and assigned an organisation number.
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Registration Anyone who conducts business activities in Norway must be registered, regardless of type of business entity. Registration is done by submitting the necessary documentation to the Brønnøysund Register Centre. The registration form and information on other documentation required are available on the Brønnøysund Register Centre’s website: www.brreg.no/ english/forms. In addition to registering the business entity itself, a representative for the entity must be registered. This person must hold a Norwegian personal identity number or a D-number (an ID number for foreign persons). Applications for a D-number must be accompanied by a verified copy of approved proof of identity. Outside the Nordic region this must be done by someone who is authorised to perform notarial acts. The registered representative does not need to have an ownership interest in or employment relationship with the entity; for example, he/she can be a Norwegian accountant or lawyer.
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PHOTO: ISTOCKPHOTO/MICHAEL CAVÉN
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The Atlantic Road stretches from the city of Kristiansund to the city of Molde, linking together several small coastal communities in North-Western Norway.
Taxation of companies Basis of taxation Companies resident in Norway are taxed on the basis of worldwide income. Partnerships are taxed at the owner/partner level. Companies resident abroad are only taxed on income derived from sources in Norway. Under Norwegian law, a company is deemed to be resident in Norway if management of the company at board level can be said to be performed in Norway. In most cases the tax rate is 25 %. Taxable income In line with the principle of worldwide income, all income is essentially deemed to be taxable income, including business income, interest, dividends, capital income, profits on realisation of assets, and income derived from sources abroad. An important exception applies under the participation exemption method, whereby companies owning shares or units are exempted from paying tax on profits or dividends from shares or units, subject to certain conditions. Deductions are allowed for expenses incurred in connection with generating, maintaining or securing taxable business income. This applies to costs of goods sold, payroll expenses, and interest expenses (limited deductibility for interests paid to related parties). As a rule, operating assets are capitalised and depreciated according to set rates. Representation expenses are normally not tax-deductible. The same applies to expenses that are not related to the company’s business activities or that involve bribes. Deductions are also allowed for losses relating to a company’s business activities, including accounts receivable. Losses on realisation of assets are tax-deductible both inside and outside a company. No deductions are allowed for losses on shares or units covered by the exemption model. No deductions are allowed for bad debts related to the financing of subsidiaries when profits and dividends from these are covered by the exemption model. Tax losses may be carried forward to subsequent years.
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Source country taxation Companies resident in Norway are liable for tax on income derived from sources abroad. To avoid double taxation, provisions for tax credit are prescribed in Norwegian law. Subject to certain conditions, tax paid in a source country may be deductible from Norwegian tax. Under Norwegian domestic law, companies that are not resident in Norway but that derive income from sources in Norway are liable to pay tax to Norway on such income. This mainly applies to income from real or movable property which a company owns or controls in Norway, and income from business activities conducted by a company in Norway. Dividends from companies that are resident in Norway are liable to tax in Norway unless the recipient is covered by the exemption model. Tax on dividends must be deducted by the company paying the dividend (withholding tax). Norwegian domestic law is limited by tax treaties which Norway has signed with other countries. These tax treaties are to a large extent based on OECD’s Model Tax Convention. Permanent establishment With respect to taxation of profits from sources in Norway, it follows from most tax treaties that the enterprise must be a business activity that is conducted through a permanent establishment in Norway in order to be liable to tax. A more detailed definition of what constitutes a permanent establishment is given in OECD’s Model Tax Convention. These conditions require the existence of a fixed place of business, a certain duration in time connection to such a place, and that the business activities are conducted through the fixed place of business. Examples given in the Model Tax Convention are: a place of management, a branch, an office, a factory, or a workshop. For building and construction activities the conditions for a permanent establishment are fulfilled if an activity lasts more than twelve months (or six months in more recent agreements). Auxiliary activities are not deemed as permanent establishments. Examples of these are facilities used solely for the purpose of storage or display of goods. An independent agent who acts on behalf of an enterprise and who has, and habitually exercises, authority to conclude contracts on behalf of the enterprise, may be deemed to constitute a permanent establishment.
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Transfer pricing The main principle in Norwegian tax law is that transactions and prices between parties with a commonality of interest must be agreed between independent parties; the arm’s length principle. This applies to both domestic and cross-border transactions. The underlying assumption is that the arm’s length principle is the same as that expressed in OECD’s guidelines. Essentially, all enterprises or entities that are obligated to file tax returns or partnership statements have a duty to submit statements declaring the nature and scope of transactions and outstanding accounts with related parties or entities. By “related” is normally meant an ownership or control interest of at least 50 per cent. However, the documentation obligation is limited to a certain size of entity and amount. The issue of thin capitalisation is not directly regulated by law, though it may be subject to discretionary assessment by the tax authorities. Reclassification may be undertaken after a specific assessment of the extent to which equity and loan capital would be natural from a non-tax perspective. Type of industry and risk are relevant criteria. In 2014 Norway also implemented rules limiting deduction for interests paid to related parties. Taxation of group companies In Norway, group companies are taxed as independent taxable entities. They are not taxed as a group. Instead there are rules governing group contributions to the effect that companies within a tax-consolidated group may transfer group contributions to each other with tax effect. Group contributions are deductible for the contributor and taxable for the recipient. Rules have also been issued regarding intra-group transfers to the effect that assets may be transferred in return for compensation without triggering any tax liability. An ownership threshold greater than 90 per cent is required in order to qualify as a tax-consolidated group. Transactions – tax exemptions Subject to certain prescribed conditions, mergers and demergers may be carried out exempt of tax and stamp duty. The condition for exemption is that the companies involved are resident in Norway. As a result of the EEA Agreement, tax deferrals are allowed on cross-border mergers and demergers within the EU/EEA. Social security contributions Employers are required by law to pay social security contributions. Social security contributions are calculated on the basis of gross pay and other remunerations paid to employees. The rates for calculating social security contributions vary between different regions throughout the country: from 0 per cent to 14.1 per cent. The standard rate is 14.1 per cent.
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Tax returns The Norwegian tax system is based on the principle of self-declaration. All taxpayers must endeavour to promptly report and settle their tax obligations. The income year follows the calendar year, and tax returns must be submitted by 31 May in the following year. Deficient or incorrect information may incur additional tax of up to 60 per cent. Offshore activities Specific tax regulations apply for offshore activities related to the petroleum industry in Norway and on the Continental Shelf. Essentially, such activities incur a liability to pay tax to Norway from day one, regardless of the existence of a permanent establishment. Subsequent application of tax liability may follow from tax treaties. Many tax treaties provide that tax liability applies once an activity exceeds 30 days during a 12-month period. Shipping companies A special tax regime affords shipping companies exemption from taxation of profits derived from shipping activities. An annual tonnage tax is levied on the shipping companies’ own or chartered tonnage (including years when a shipping company shows a loss). Financial income and financial expenses fall outside the scope of this tax exemption scheme. Requirements are set as to which activities and assets companies in the tonnage tax scheme may and must have. Stamp duty With some exceptions, stamp duty is levied on real estate transfers. The stamp duty is currently 2,5 % of the market value of the real estate.
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PHOTO: SHUTERSTOCK/STEVE SKINNER
Taxation of individuals General As in the case of enterprises resident in Norway, persons who are physically resident in Norway are taxed on the principle of worldwide income. Physical persons who are not resident in Norway are taxed on income derived from sources in Norway. Citizenship has no bearing on whether or not an individual is deemed to reside in Norway. The concept of “place of residence” refers to a stay in a country and the duration of the stay. An individual is deemed to reside in Norway if he or she stays in the Kingdom for more than 183 days in the course of a twelve-month period or for more than 270 days in the course of a thirty-six-month period. More stringent rules apply in the case of moving from Norway. The standard tax rate is 25 per cent. In addition incremental surtaxes of between 0,9 and 13,7 per cent is imposed on employment income and business income, as well as between 5.1 and 11.4 per cent in social security contributions. Dividends Physical persons residing in Norway are liable to pay tax on dividends received. The dividend received is grossed up by a factor of 1.15 when determining the taxable income. However, a deduction is allowed: a so-called “skjermingsfradrag” (deductible risk-free return) on taxable dividend payments. Explained simply, the deductible risk-free return represents the original cost of the shares multiplied by a stipulated deductible interest rate. The deductible interest rate must constitute an almost risk-free interest rate, and is set every other month on the basis of treasury bills with three months’ maturity. With effect from 7 October 2015, new rules are implemented regarding loans to physical shareholders. For tax purposes, such loans are now deemed to be dividends. A few exceptions apply. Physical persons who do not reside in Norway must pay tax on dividends from companies resident in Norway. The tax rate is 25 per cent unless otherwise agreed under tax treaties. Physical persons residing outside the EU/EEA may be allowed deductible risk-free returns subject to application.
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Distributed profits from partnerships Similar rules apply for the distribution of dividends from partnerships. Physical partners are entitled to deductible risk-free returns on taxable dividends. Reporting of pay Employment income derived from Norway must be reported every month. The reporting requirement applies regardless of tax liability. On disbursement of pay, tax liabilities must be withheld in accordance with the tax deduction card or at the rate of at least 50 per cent in the absence of a tax deduction card. The employer, or the contractor in the case of hiring-out of labour, is jointly and severally responsible for withholding tax. Tax withholdings are regarded as the employee’s assets, and until paid, such assets must be placed in a tax withholding account that is legally protected from the employer’s creditors. Alternatively, other forms of security may be furnished to cover tax withholdings that are due at any given time. Employees are obligated to file Norwegian tax returns. The obligation to file a tax return applies regardless of whether or not a tax liability exists. Foreign nationals will normally be asked to complete a questionnaire, and the issue of tax liability is decided by the tax authorities on the basis of this in connection with a tax assessment conducted in the following calendar year.
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Tax treaties An updated list of tax treaties between Norway and other countries is available at: http://www.regjeringen.no/en/dep/fin/Selected-topics/taxes-and-duties/tax-treatiesbetween-norway-and-other-st.html?id=417330
Value added tax General Norwegian value added tax (VAT) is a non-cumulative, multi-stage consumption tax. Value added tax is charged on sales, withdrawals and imports of goods and services. As in most OECD countries, Norway has based its VAT model on the indirect subtraction method. The standard rate is 25 per cent. Reduced rates of 15 per cent for foodstuffs and 10 per cent for, among other items, passenger transport, hotel accommodation and cinema tickets apply. Taxable supplies Distinctions are made between supplies that are taxable, zero-rated or exempt. Zero-rated supplies are supplies that fall within the scope of the VAT Act and that give grounds for registration, but on which no VAT shall be charged. Examples are export of goods abroad, provision of services to be used entirely abroad, newspapers, books and publications, platforms/pipelines, and transfer of a business. Supplies that are exempt are supplies for which no grounds exist for registration and for which no credit for input tax is allowed. Examples are health services, alternative treatments, social services, educational services, financial services, and voluntary organisations and associations. As a general rule, all supplies of goods or services are taxable, and goods and services are broadly defined.
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Reverse charge Services capable of delivery from a remote location include consultancy services, legal services, advertising services, EDP services, commission to agents and remuneration for the hire of manpower. The sale of services capable of delivery from a remote location to non-registered foreign business entities is zero-rated. In cases where a foreign business entity has a registered representative in Norway, however, services that are invoiced to the foreign business may be invoiced free of VAT unless invoices are specifically addressed to the representative registered in Norway. In the case of purchases of services capable of delivery from a remote location from a non-registered foreign business entity with no permanent establishment in Norway, the buyer must calculate VAT according to the principle of the reverse charge mechanism. The reverse charge requirement also applies to buyers that are not registered for VAT. Whether a service is performed in Norway or abroad is of no significance to the foreign supplier of services capable of delivery from a remote location. The principle of the reverse charge mechanism does not apply to private consumers. However, foreign companies delivering electronic services, such as downloading film, music and software, to private consumers in Norway must charge Norwegian VAT. Right and obligation to register Business entities are obligated to register themselves when supplies or withdrawals that are covered by the Act exceed NOK 50,000 during a 12-month period. The requirement for a business entity is that the activity being performed must, from an objective point of view, be capable of making a profit. For business activities that are performed by charitable or benevolent institutions and organisations, the registration threshold is NOK 140,000. The obligation to register does not cover foreign business entities with no permanent establishment in Norway when supplying services capable of delivery from a remote location that are covered by the regulations for reverse charge. However, companies delivering electronic services to private consumers must register. For business activities such as lease of buildings and installations, there is an option for voluntary registration. Even if the supply threshold is not reached, advance registration may be approved if significant procurements (NOK 250,000) that are directly connected to subsequent taxable supplies are made, or if it is shown to be probable that supplies will exceed the threshold within three weeks from when sales begin to take place.
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Registration Registration is done by using the same form used for registering business entities. See www.brreg.no/english/forms. Business entities with no permanent establishment in Norway must have a VAT representative in order to be registered in the VAT register. The VAT representative is registered in the Central Coordination Register for Legal Entities. Representation arrangement The VAT representative has joint responsibility with the taxable person for any unpaid tax. This means that the VAT representative requires a guarantee or deposit to cover any unpaid tax. If Norway has signed an agreement on exchange of information and mutual assistance for recovery of VAT with the country where the taxable person is resident, the responsibility of the VAT representative is limited. The VAT representative must keep complete VAT accounts that meet the requirements laid down in the Bookkeeping Act. A company may provide bookkeeping services for another company in the same group, which means that a Norwegian company in an international group may act as the VAT representative for foreign group companies which have taxable sales in Norway. Deductions for input tax Deductions are permitted for VAT on direct and indirect procurements of goods and services that are used in the registered business entity. Indirect procurements for use both within and outside the taxable activity give grounds for proportional deductions. Adjustments shall be made to VAT deductions for capital goods when use within/outside the Norwegian VAT Act is changed. The adjustment period is ten years for buildings and constructions and five years for other capital goods. There is a requirement that input tax be legitimised by original vouchers. Deductions for certain procurements are excluded. Exclusion applies to procurements that have an element of private consumption, such as serving of meals, works of art and antiques that are not sales commodities, and passenger vehicles not intended for sale.
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Refunds Foreign business entities without obligation to register for VAT may be entitled to refunds of input tax if: • The VAT applies to the procurement of goods or services within the Norwegian VAT area or the import of goods to the Norwegian VAT area when such goods or services are to be used in the business activity; • Sales activities conducted outside the Norwegian VAT area would have required registration or entitled voluntary registration if the sales had been conducted within the Norwegian VAT area; and • The VAT would have given entitlement to deduction if the business entity had been registered in the Norwegian VAT area. Submitting VAT returns VAT returns must be submitted every two months. Business entities with supplies worth less than NOK 1 million may apply to submit VAT returns on an annual basis.
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PHOTO: SHUTTERSTOCK/YURI ARCURS
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Employment General Central legislation governing working life includes the Working Environment Act, the Annual Holidays Act, and the Act relating to Mandatory Occupational Pensions. The Working Environment Act contains provisions on working environment, working hours and contractual protection, regulations governing temporary employees, posting of workers, transfers of undertakings, dismissals with and without notice, and procedural law governing termination of employment relationships. The Annual Holidays Act contains provisions securing employees’ rights to holiday and holiday pay. The Act relating to Mandatory Occupational Pensions contains provisions requiring most employees to provide an occupational pension scheme for their employees. Written contracts All employment relationships must be formalised by a written employment contract. The Working Environment Act requires that employment agreements must contain details regarding conditions that are significant to the employment relationship, such as: • the identity of the parties. • the place of work. If there is no fixed or main place of work, the contract of employment shall provide information to the effect that the employee is employed at various locations and state the registered place of business or, where appropriate, the home address of the employer, • a description of the work or the employee’s title, post or category of work. • the date of commencement of the employment relationship. • the expected duration of an employment relationship of a temporary nature. • provisions for trial periods, if appropriate. • the employee’s right to holiday and holiday pay and provisions concerning the setting of dates for holidays. • the periods of notice applicable to the employee and the employer. • the pay applicable or agreed on commencement of the employment, any supplements and other remunerations not included in the pay, for example pension payments and allowances for meals or accommodation, method of payment and payment intervals for salary disbursements. • the duration and disposition of the agreed daily and weekly working hours. • length of work breaks. • agreements concerning special arrangements for working hours. • information concerning any collective pay agreements regulating the employment relationship. If an agreement has been concluded by parties outside the undertaking, the contract of employment shall state the identities of the parties to the collective pay agreements.
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Working hours Pursuant to the Working Environment Act, the maximum limit for normal working hours is nine hours during a 24-hour period and 40 hours during a seven-day period. The employee and employer may, however, reach agreement to distribute the working hours so that the employee works ten hours during a 24-hour period and 48 hours during a seven-day period, for up to one year. For groups with unsocial working hours, such as shifts, rotas and Sundays, the limits are 38 hours per seven days for work carried out 24 hours a day on weekdays, and 36 hours per seven days for work carried out 24 hours a day during weekends. Overtime work and additional work are only allowed if necessitated by specific time pressures. The maximum limit on overtime work is 10 hours per seven days, 25 hours per four consecutive weeks, and 200 hours during a 52-week period. Higher limits may apply under collective agreements or subject to application to the Labour Inspection Authority. A minimum supplement of 40 per cent of the agreed hourly rate applies for overtime work. Temporary appointments The general rule is that employees must be employed on a permanent basis. Temporary employment is nonetheless permitted in certain circumstances, for example when necessary due to the nature of the work and when the work differs from that which is ordinarily performed in the enterprise, or when the work is performed for another person or persons (temporary position). Changes in 2015 now also permits the use of temporary employment with a duration of up to 12 months on general grounds – although subject to quarantine and quota restrictions. Temporary contracts expire automatically on the agreed completion date. If a temporary appointment lasts more than one year, the employee is entitled to receive one month’s written notice of when the appointment will be terminated. An employee who has held a temporary appointment consecutively for more than four years in the same enterprise is regarded as a permanent employee. Holiday and holiday pay Under the Annual Holidays Act, all employees are entitled to 25 working day’s holiday leave every year. Saturdays and included as working days, so that under the law employees are entitled to four weeks and one day of holiday leave per calendar year. However, five weeks per year is usual. Employees have the right and obligation to take their full holiday entitlement, and employers are obligated to ensure that employees take their full holiday entitlement.
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Employees are entitled to holiday pay. Holiday pay must be equivalent to at least 10.2 per cent of the basis for calculating holiday pay. The basis for calculating holiday pay is the wages earned during the qualifying year, which is usually the year preceding payment of holiday pay. In the case of five weeks’ holiday regulated by contract, the holiday pay rate must be equivalent to a minimum of 12 per cent. Employees over the age of 60 are entitled to one additional week of holiday leave. The rate of holiday pay for these employees is 12.5 per cent, or 14.3 per cent in the case of a contractually agreed fifth week of holiday leave. Mandatory occupational pension The Act relating to Mandatory Occupational Pensions is intended to secure employees a pension in addition to national insurance benefits. Most employees are obligated to establish an occupational pension scheme for their employees. The pension scheme may be a defined contribution or a defined benefit scheme. Employers must pay annual contributions to the scheme. Contributions must be equivalent to a minimum of 2 per cent of the employee’s earnings between 1 G and 12 G (G= the National Insurance basic amount). Termination of employment The Working Environment Act contains stringent provisions regulating termination of employment relationships. This article covers only the main features. In order to be legally valid, notice of termination must be given in writing and must be objectively justified. An example of justified termination may be for gross breach of the employment contract on the part of the employee. An example of termination justified by the employer’s/enterprise’s circumstances may be for reasons of workforce reductions or reorganisation. Unless otherwise agreed, a mutual notice period of one month applies. For employees who have been employed for more than five years, the minimum notice period is between two and six months, according to the length of service and age of the employee. For the CEO of a company exceptions from the justification requirement and the notice period requirement may be agreed upon, but only if the CEO is compensated with severance pay. Competition clauses are strictly regulated, and compensation rules apply.
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Foreign employees Many of the provisions in the Working Environment Act also apply to foreign employees who are posted to Norway to perform work there. This means that foreign employers who send employees to Norway must comply with Norwegian regulations regarding covering conditions such as employment contracts, working environment, working hours, overtime, holidays and equal opportunities. Certain exceptions apply when the period of the posting does not exceed eight days. In cases of work that is covered by generally applied wage agreements, employers must also offer pay and working conditions that are at least commensurate with those that follow from the pertinent regulations governing general application of wage agreements. Regulations on general application of wage agreements apply for construction workers, the shipping and shipbuilding industries, the agricultural and horticultural industries, and cleaning service providers. ID cards All enterprises that perform work on building and construction sites, both Norwegian and foreign, are required to provide their employees with ID cards. These cards are ordered online via a specific website. Foreign enterprises must register a person who is authorised to order the ID cards. The requirements pertaining to the role of assigned orderer do not permit the ordering of ID cards to be transferred to an external service provider. A fee is charged for issuing ID cards. Reporting on contracts and employees in Norway When an enterprise that is not resident in Norway performs a contract or subcontract on a construction or installation site in Norway or on a site that is under the control of a client in Norway or on the Norwegian Continental Shelf, the Central Office for Foreign Tax Affairs must be duly notified. Both the client and the contractor are responsible for providing information on their own initiative regarding the assignment and the employees that are used to perform it. Such information must be provided as soon as possible and within 14 days after work on the assignment has commenced. Deficient information may incur a daily penalty for failure to pay taxes and employer’s national insurance contributions.
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Accounting and auditing Accounting obligations for foreign enterprises Pursuant to the Norwegian Accounting Act, foreign enterprises that perform and participate in activities in Norway and that are liable to pay tax to Norway under Norwegian domestic law are obligated to keep accounts. This means that financial statements and annual reports must be prepared every year. Exemptions apply in cases where an enterprise is temporary in nature and for enterprises with sales revenues of less than NOK 5 million. The Central Office for Foreign Tax Affairs may also grant exemptions in cases of sales revenues in excess of NOK 5 million, subject to application. The accounting obligation entails a bookkeeping obligation pursuant to the Bookkeeping Act. This means that all transactions that have significance for the assets, liabilities, income and expenses of an enterprise that is legally obligated to maintain accounting records must be registered in an accounting system. Note that the bookkeeping obligation may still apply even if exemption has been granted from the obligation to prepare financial statements and annual reports. The Bookkeeping Act requires that all accounting material must be stored in Norway. However, under certain circumstances it is possible to apply for dispensation to store such records outside Norway. Audit obligation for foreign enterprises All foreign enterprises that are obligated to keep accounts under the Accounting Act and that have at least NOK 5 million in sales revenues are obligated to engage a Norwegian auditor in the year after revenues have exceeded this amount.
DOING BUSINESS IN NORWAY | 29
30 | DOING BUSINESS IN NORWAY
PHOTO: ISTOCKPHOTO/EKELY
New Holmenkollen ski jump opened on 3 March 2010 and is the world’s most modern ski jump.
Appendix: Tax rates 2015 and 2016 Some direct and indirect tax rates for 2015 and 2016
2015
2016
CHANGE 2015-2016
Tax on ordinary income Individuals
27%
25%
-2 pct. unit
Enterprises
27%
25%
-2 pct. unit
Threshold
-
NOK 158,800
-
Rate
-
0.9%
-
Threshold
-
NOK 224,900
-
Rate
-
1.7%
-
NOK 550,550
NOK 565,400
2.7%
9.0%
10.7%
1.7 pct. unit
NOK 885,600
NOK 909,500
2.7%
12.0%
13.7%
1.7 pct. unit
NOK 49,650
NOK 49,650
-
25.0%
25.0%
-
Wage income (17-69 y.o.)
8.2%
8.2%
-
Income from self-employment
11.4%
11.4%
-
5.1%
5.1%
-
Surtax Bracket 1
Bracket 2
Bracket 3 Threshold Rate Bracket 4 Threshold Rate Social security contribution Lower threshold for payment of social security contribution Levelling rate Rate
Pension income, etc.
DOING BUSINESS IN NORWAY | 31
2015
2016
CHANGE 2015-2016
14.1%
14.1%
-
Employer’s social security contribution Zone I Zone Ia
14.1%
14.1%
-
Zone II
10.6%
10.6%
-
Zone III
6.4%
6.4%
-
Zone IV
5.1%
5.1%
-
Zone IVa
7.9%
7.9%
-
Zone V
0.0%
0.0%
-
47.2%
46.9%
-0.3 pct. unit
53.7%
53.5%
-0.3 pct. unit
Maximum effective marginal tax rates Wage income excl. employer’s contribution Wage income incl. employer’s contribution Pension income
44.1%
43.8%
-0.3 pct. unit
Income from self-employment
50.4%
50.1%
-0.3 pct. unit
Dividends and withdrawals
46.7%
46.6%
-0.3 pct. unit
30%
30%
-
20%
20%
-
20/22%
20/22%
-
Depreciation rates Asset group A (office equipment, etc.) Asset group B (acquired goodwill) Asset group C (lorries, buses, vans, etc., the higher rate for heavy vehicles)
32 | DOING BUSINESS IN NORWAY
2015
2016
CHANGE 2015-2016
20/30%
20/30%
14%
14%
12%
12%
-
5%
5%
-
4 (6/10)%
4 (6/10)%
-
2%
2%
-
10%
10%
-
Ordinary rate
25%
25%
-
Reduced rate
15%
15%
-
8%
10%
2 pct. unit
Asset group D (passenger cars, machinery and equipment, etc., the higher rate first year) Asset group E (ships, vessels, rigs, etc.)
-
Asset group F (aircraft, helicopters) Asset group G (systems for transfer and distribution of electricity and electrotechnical equipment in power companies) Asset group H (buildings and facilities, hotels, etc.) Asset group I (offices, etc.) Asset group J (technical installations in offices and other commercial buildings) Value added tax, percentage of sales value
Low rate Source: Ministry of Finance
DOING BUSINESS IN NORWAY | 33
Notes
34 | DOING BUSINESS IN NORWAY
PHOTO: ISTOCKPHOTO/SOMATUSCANI
The Geiranger Fjord is on the UNESCO World Heritage list.
DOING BUSINESS IN NORWAY | 35
Oktan Oslo
RSM Norge AS Filipstad Brygge 1, 0252 Oslo Pb. 1312 Vika, 0112 Oslo T +47 23114200 F +47 23114201 www.rsmnorge.no
Kanalveien 105 B, 5068 Bergen Pb. 63 Kristianborg, 5822 Bergen T +47 55557777 F +47 55557770 www.rsmnorge.no
Strandavegen 11, 5705 Voss Pb. 136, 5701 Voss T +47 56520400 F +47 56520401 www.rsmnorge.no
Sæ 132 5417 Stord T +47 53400100 F +47 55557770 www.rsmnorge.no
RSM Norge is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm, each of which practices in its own right. The RSM network is not itself a separate legal entity of any description in any jurisdiction. The RSM network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 11 Old Jewry, London EC2R 8DU. The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors © RSM International Association, December 2015 © Sapphire Innovation, December 2015
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