The Taxation Act section 6-71 second paragraph.
With effect from the income year 2009, persons resident in another EU/EEA country with limited tax liability to Norway can be given a deduction for interest on debt pursuant to the same rules as apply to persons resident in Norway.
This right to a deduction applies to persons from the EU/EEA area who:
- have not stayed in Norway for so long that they become resident for tax purposes (i.e. a stay of maximum 183 days in a 12-month period and 270 days in a 36-month period)
- are only liable for tax on work carried out on the continental shelf.
It is a condition for the deduction of interest on debt that at least 90 per cent of the taxpayer’s total income in the income year is liable to tax in Norway.
The deduction for interest on debt will be limited if the taxpayer has real property abroad and the income from the real property cannot be taxed in Norway pursuant to a tax treaty, cf. the Taxation Act section 6-91. The same applies if the taxpayer is engaged in or takes part in a business that cannot be taxed in Norway.
When applying the provisions in the Taxation Act section 6-91, the taxpayer shall be dealt with in the same way as persons resident in Norway pursuant to both domestic law and the tax treaty. This means that the deduction for interest on debt shall only be limited if the taxpayer has real property or a business in a country with which Norway has a tax treaty and this country uses the exemption method in order to avoid double taxation.
Taxpayers who have real property or a business in their home country:
- Taxpayers from Belgium, Bulgaria, Italy, Malta, Portugal, Slovenia or Germany who have real property or a business in their home country and who do not have taxable capital in Norway, are not entitled to a deduction for interest in Norway. Pursuant to the Taxation Act section 6-91, all the interest will be allocated to deduction abroad.
- Taxpayers from Belgium, Bulgaria, Italy, Malta, Portugal, Slovenia or Germany who both have real property or a business in their home country and taxable capital in Norway in the form of real property or a business run through a permanent establishment here are entitled to a proportionate deduction for interest.
- Taxpayers from other EU/EEA countries who have real property or a business in their home country are entitled to the full deduction for interest in Norway.
If a taxpayer has real property or a business in a country other than his or her home country, the deduction for interest on debt shall be limited if the real property or business is situated in a country with which Norway has a tax treaty and this country applies the exemption method to avoid double taxation. In addition to Belgium, Bulgaria, Italy, Malta, Portugal and Germany, this applies to:
Barbados, Benin, Bosnia Herzegovina, Brazil, Egypt, the Ivory Coast, the Philippines, Indonesia, Israel, Jamaica, Kenya, China, Croatia, Malaysia, Morocco, the Dutch Antilles, Pakistan, Serbia, Sri Lanka, South Korea, Trinidad and Tobago, Tunisia, Turkey, the USA, Zambia and Zimbabwe.
Taxpayers from all EU/EEA countries who do not have real property or a business abroad are entitled to the full deduction for interest in Norway.
Documentation
Taxpayers claiming a deduction for interest on debt in their tax returns must enclose sufficient information about their income outside Norway for it to be possible to calculate whether at least 90 per cent of the income is liable to tax in Norway. A tax return and certificate of tax paid or similar documents from the country of residence must be submitted as documentation.
In addition, interest expenses must be documented by submitting a copy of the annual statement from a bank or similar lending institution. The documentation must be in Norwegian, Swedish, Danish or English (certified translation).
A deduction can only be claimed for interest paid during the income year (January to December). Charges paid to a lender in connection with the loan are treated in the same way as interest. The same applies to fees directly related to the loan.
The relationship to the standard deduction for foreign employees
A taxpayer who claims a deduction for interest on debt cannot claim the standard deduction for foreign employees.
Liability for tax on interest income etc.
A taxpayer who claims a deduction for interest on debt will in certain cases be taxed on interest income etc. from Norwegian sources.
NOTE. Please note that the extended right to deductions pursuant to the Taxation Act section 6-71 second paragraph does not apply to taxpayers who are deemed to be tax resident in Norway pursuant to the Taxation Act section 2-1 (a stay of more than 183 days in a 12-month period and 270 days in a 36-month period).