Dividends from Norwegian companies to foreign shareholders - Documentation requirements for reduced withholding tax rate

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As of 1 January 2018, new rules apply concerning withholding taxation of dividends from Norwegian companies to foreign shareholders at a reduced rate compared to the ordinary rate of 25 per cent.

Under the new rules, documentation requirements are introduced for registering shares on an account in the Norwegian Central Securities Depository (VPS) at a lower withholding tax rate than 25 per cent:

  • All shares registered on a NOM (nominee) account in VPS must be registered on an account with withholding tax of 25 per cent, unless the custodian has received the documentation described in section 2 below. VPS accounts that belong to foreign dividend recipients who are directly registered must be registered with withholding tax of 25 per cent, unless the account operator has received the documentation described in section 2 below.

The new documentation requirements will also apply to dividends distributed on shares not registered in VPS; see section 3 below.

The current regime that permits foreign custodians to have VPS accounts (NOM accounts) with a withholding tax rate of less than 25 per cent will lapse when the new documetation rules enter into force 1 January 2018. A foreign custodian who still wishes to have such accounts in VPS must apply for a new permit; see section 4 below.

Shareholders who are not natural persons must document their entitlement to a reduced withholding tax rate in accordance with a double tax treaty or with the Norwegian exemption method, by either (i) presenting an approved withholding tax refund application or (ii) present an approval from the Norwegian tax authorities confirming the dividend recipient is entitled to a reduced withholding tax rate. This applies to shares registered in VPS and shares not registered in VPS. The approval regime is described under section 5 below.

The rules were announced by the Ministry of Finance in connection with the introduction of the new Tax Administration Act. For a more detailed description of the background to the rule changes, see Proposition no. 38 L (2015 – 2016) item 15.2.7.

The new rules will be incorporated into the Regulations pursuant to the Tax Payment Act.

1. Date of entry into force of the new rules on documentary requirements

The new rules will come into force on 1 January 2018 and the rules will be set out in a new Section 5-10a in the Regulations pursuant to the Tax Payment Act. The current rules and administrative practice relating to withholding tax deductions will continue to apply in 2017; see the present Section 5-10a in the same Regulations.

The reason for the new documentary rules coming into force one year after the Tax Administration Act and the associated rule changes, is to give the parties affected by the rules the opportunity to ensure that the documentary requirements applicable as of 2018 are met by 1 January 2018.

2. Documentary requirements for VPS-registered shares

For shares registered in VPS, the main rule will be that, if the dividend-paying company does not know the identity or tax status of the actual dividend recipient, the company must deduct withholding tax of 25 per cent from the dividend payment.

The actual dividend recipient (the foreign shareholder) may qualify for a withholding tax rate of less than 25 per cent. The account operator or custodian may register shares on an account in VPS that is registered with a withholding tax rate of less than 25 per cent.

As of 2018, there will be new requirements for the documentation that the account operator or custodian must receive from the shareholder before shares can be registered on a VPS account with a withholding tax rate of less than 25 per cent.

Shares that are registered on an account in a foreign custodian's name (NOM account or an account that states the dividend recipient's name) and shares registered on an account in the actual dividend recipient's name (direct registration) may only be on an account with a withholding tax rate of less than 25 per cent when the following information has been submitted to the custodian (NOM accounts) or account operator (direct registration) respectively:

  • for personal dividend recipients:
    • A certificate of residence issued by the tax authorities in the shareholder's country of residence, expressly confirming that the shareholder is resident there in accordance with the relevant double tax traty with Norway. The certificate of residence must not be older than three years at the time of the dividend payment. This means that it is not sufficient for a certificate of residence to be obtained at the request of or due to a control by the tax authorities. A valid certificate of residence must be available at the time of registration, and it must be renewed every three years.
  • for dividend recipients who are legal persons and other entities (shareholders who are not natural persons):
    • Documentation of previously received withholding tax refunds or approval from the Norwegian tax authorities that the shareholder is entitled to lower withholding tax rate under a double tax treaty.
    • A certificate of residence issued by the tax authorities in the shareholder's country of residence, expressly confirming that the shareholder is domiciled there in accordance with the double tax treaty with Norway. The certificate of residence must not be older than three years at the time of the dividend payment. A valid certificate of residence must be available at the time of registration, and it must be renewed every three years.
  • for dividend recipients who are company shareholders domiciled in the EEA area:
    • Documentation of previously received withholding tax refunds or approval from the Norwegian tax authorities that the shareholder is entitled to tax exemption under the Tax Act, Section 2-38, fifth paragraph.
    • A confirmation that the shareholder is domiciled in an EEA country, as well as a statement from the shareholder that the basis for the tax-exemption status remains unchanged. The certificate of residence and the statement must not be older than three years at the time of the dividend payment. The certificate of residence and the statement must be available at the time of registration, and must be renewed every three years.
  • In addition, for all dividend recipients: confirmation from the dividend recipient that they are the beneficial owner of the dividend.

For further details of what "approval from the Norwegian tax authorities" entails, see section 5 below.

3. Shares not registered in VPS

For shares not registered in VPS, the main rule will be that, if the Norwegian dividend-paying company does not know the identity or tax status of the beneficial dividend recipient, the company must deduct withholding tax of 25 per cent from the share dividend.

Dividend-paying companies may, however, deduct withholding tax of less than 25 per cent without incurring any liability for deficient withholding tax deductions, if the company has received the following documentation from a shareholder (same documentary requirements as for shares registered in VPS):

  • for personal dividend recipients:
    • A certificate of residence issued by the tax authorities in the shareholder's country of residence, expressly confirming that the shareholder is resident there in accordance with the relevant double tax traty with Norway. The certificate of residence must not be older than three years at the time of the dividend payment.This means that it is not sufficient for a certificate of residence to be obtained after the dividend payment, at the request of or due to a control by the tax authorities.
  • for dividend recipients who are legal persons and other entities (shareholders who are not natural persons):
    • Documentation of previously received withholding tax refunds or approval from the Norwegian tax authorities that the shareholder is entitled to lower withholding tax rate under a double tax treaty.
    • A certificate of residence issued by the tax authorities in the shareholder's country of residence, expressly confirming that the shareholder is domiciled there in accordance with the double tax treaty with Norway.  The certificate of residence must not be older than three years at the time of the dividend payment. This means that it is not sufficient for a certificate of residence to be obtained after the dividend payment, at the request of or due to a control by the tax authorities.
  • for dividend recipients who are company shareholders domiciled in the EEA area:
    • Documentation of previously received withholding tax refunds or approval from the Norwegian tax authorities that the shareholder is entitled to tax exemption under the Tax Act, Section 2-38, fifth paragraph.
    • A confirmation that the shareholder is domiciled in an EEA country, as well as a statement from the shareholder that the basis for the tax-exemption status remains unchanged. The certificate of residence and the statement must not be older than three years at the time of the dividend payment.
  • In addition, and for all dividend recipients: confirmation from the dividend recipient that they are the beneficial owner of the dividend.

For further deatils of what "approval from the Norwegian tax authorities" entails, see the description in section 5 below.

4. Permission for custodians to register shares on NOM accounts at a reduced withholding tax rate

Based on current tax administrative practice, foreign custodians could to be granted permission from the Central Tax Office - Foreign Tax Affairs (SFU) to register shares on a VPS account (NOM account) at a reduced withholding tax rate.

An equivalent regime will established as from of 2018, however now based in the new Regulations pursuant to the Tax Payment Act. All permits issued to foreign custodians pursuant to the current administrative practice will therefore lapse from 1 January 2018.

Foreign custodians who wish to have NOM accounts with withholding tax rates lower than 25 per cent after 1 January 2018 must apply to SFU for a new permit in accordance with the rules applying as from 2018.

Such applications will be processed throughout 2017.

Application requirements

An application for permission to have a NOM account with a reduced rate (including zero rate) must include the following:

  • Confirmation from the custodian that they will provide information about the identity of the beneficial owner of the dividend payment, on request and within the deadline determined by the tax office. (The information must be up-to-date as of the date it was resolved to pay the dividend, and must include the dividend recipient's name, address, country of residence for tax purposes, tax registration number in the country of residence, as well as the number of shares subject to lower tax and the tax rate applied.)
  • Confirmation from the custodian that they will produce documentation concerning each beneficial owner of dividend payments, in line with the applicable documentary requirements, on request and within the deadline determined by the tax office, with reference to section 2 above.
  • A copy of permission pursuant to the Act of 5 July 2002 No. 64 on the Registration of Financial Instruments (Securities Register Act) Section 6-3, issued by the Financial Supervisory Authority of Norway to be registered as a custodian in VPS. (In cases where significant changes have occurred after granting of the permit, a new permit must be obtained.)
  • The VPS account numbers of NOM accounts to be registered with reduced rates, where available.

Applications and attachments must be sent to:

Central Tax Office - Foreign Tax Affairs (SFU)
Postboks 8031
4068 Stavanger, Norway

5. Application for approval as an entity entitled to a reduced withholding tax rate or exemption from withholding tax

The new documentary requirements mean that shareholders (actual dividend recipients) who are not natural persons must document their entitlement to a reduced withholding tax rate than 25 per cent in accordance with a double tax treaty or with the Norwegian exemption method, by either (i) presenting an approved withholding tax refund application or (ii) present an approval from the Norwegian tax authorities confirming the dividend recipient is entitled to a reduced withholding tax rate.. When the shares are registered in VPS, documentation must be provided either for the nominee (NOM accounts) or the account operator (direct registration); see the description in section 2 above. For shares outside of VPS, documentation must be provided direct to the dividend-paying company; see the description in section 3 above.

This approval scheme allows shareholders who are not natural persons to avoid having to submit an application for withholding tax refund in order to document their entitlement to a withholding tax rate lower than 25 per cent.

Shareholders who are not natural persons and who have not previously received a withholding tax refund may apply for such approval as of 2017.

An approval will remain valid as long as the actual conditions on which the approval is based remain unchanged.

Application requirements

The application for approval must give an account of and document that the conditions for either a reduced withholding tax rate under a double tax treaty or exemption from withholding tax under the Norwegian exemption method are met.

Applications for exemption from withholding tax under the Norwegian exemption method should include an explanation of the foreign entity's company form and an assessment of which Norwegian company type the foreign entity corresponds to.

The application must also contain the following information and documentation:

  • Full name and address of the dividend recipient (and of its representative, where relevant).
  • For applications under a double tax treaty: A certificate of residence from the tax authorities in the country where the dividend recipient is domiciled. The certificate of residence must be issued by the tax authorities and refer to the double tax treaty with Norway. The certificate of residence must not be more than six months old.
  • For applications under the Norwegian exemption method: Certification that the shareholder is domiciled in an EEA country.
  • Proxy (if the application is not signed by the actual dividend recipient).

No special form is required to make such an application. The Tax Administration will consider designing a standard form for such applications.

Applications and attachments must be sent to:

Central Tax Office - Foreign Tax Affairs (SFU)
Postboks 8031
4068 Stavanger, Norway

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