Conditions for tax liability to Norway

The general rule is that enterprises and self-employed persons domiciled in Norway have a general tax liability to Norway.

This means that a company is liable for tax in Norway on its entire income, known as 'global tax liability to Norway'. In most cases, a company is domiciled in the country in which it was founded or registered. In cases of doubt, it may be decisive where the company's management carries out its functions. Businesses that are registered abroad but managed from Norway may on this basis be deemed to be domiciled in Norway.

Limited tax liability

Foreign nationals who are engaged in business activity in Norway are required to pay tax on income from business activity which they are carrying on or participating in and which is being carried on here or managed from here. This includes activity where employees are placed at the disposal of others within Norway. This means that foreign nationals who are engaged in business activity in  Norway which is run for their own account and risk, including those who hire out labour, are liable for tax in Norway on the income generated by their activity. This is known as limited tax liability.

Special provisions concerning the Norwegian Continental shelf

The Petroleum Taxation Act contains provisions regarding liability for tax on income earned from exploration for, or extraction of petroleum deposits and pertaining activity  in Norwegian waters and on the Norwegian Continental Shelf. This means that all activity associated with oil and gas exploration and extraction on the Norwegian Continental Shelf may be taxed in Norway.

Tax treaties for the avoidance of double taxation

Norway has tax treaties with many states, primarily in order to prevent double taxation and tax evasion. Most tax treaties are formulated on the basis of OECD's model agreement (OECD Model Double Taxation Convention).

As regards businesses from a country with which Norway has signed a tax treaty, Norway may waive the right to levy tax either in full or in part. A tax treaty may only be cited by individuals or companies resident/domiciled in the country covered by the treaty. Each tax treaty must be read and interpreted on an independent basis.
In order for business income to be taxed in Norway when a tax treaty applies, the income must originate from commercial activity being carried on through a permanent establishment  in Norway. Read more about permanent establishments.

Income attributed to the permanent establishment

Pursuant to the tax treaties, Norway is entitled to tax profits that can be attributed to the permanent establishment. There must be a link between the activity at the permanent establishment  and the profits that are attributed to it. There is seldom doubt about which  gross revenues (turnover) are to be included, but as regards expenses, questions may arise about how joint expenses are to be divided between the head office and the permanent establishment. The principle that applies to the attributtion of income is the "arm's length principle" or "separate entity principle". The principle is that the permanent establishment is considered a separate enterprise, so that profits are attributed to it as if it were independent of the head office.

See also:

OECD's model agreement (OECD Model Double Taxation Convention).

Tax Act (only in Norwegian)

Petroleum Tax Act (only in Norwegian)

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