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. The conditions for a permanent establishment are that:
There is a fixed place of business (requirement for a specific geographic location), there must be a certain duration in time in connection with the location, and the business must be carried on through the fixed place of business.
Here are some examples of what may be considered a permanent operating base:
- a place of management
- a branch
- an office
- a factory
- Construction and installation projects
There is a special provision concerning building sites or construction and installation projects. The conditions for such projects being deemed to be a permanent establishement are that it lasts for more than 12 months (in some more recent treaties, this requirement is 6 months).
- Auxiliary activity
Exceptions are made for so-called 'auxiliary activity', which shall not be deemed to be a permanent establishment. An example is where premises are exclusively used to store or display goods.
- Special provision for agents
When a person who is not an independent agent acts on behalf of a business and the person has, and habitually exercises, authority to conclude contracts in the name of the business, that business shall be deemed to have a permanent establishment.
- Special provisions for the Continental Shelf
The Norwegian Continental Shelf is subject to a special tax regime through the Petroleum Taxation Act and special provisions in most tax treaties that Norway has signed with other countries.
Most tax treaties that Norway has signed with other countries contain separate provisions on tax liability for income from activity on the Continental Shelf. According to the special provisions concerning the Continental Shelf, activity that lasts for a period or periods exceeding in the aggregate 30 days in any twelve month period will be deemed to constitute a permanent establishment. In a limited number of tax treaties, the tax liability is subject to the general rules concerning permanent establishments. When there is no tax treaty in place or the tax treaty does not regulate activity on the Continental Shelf, the tax liability will arise pursuant to the Petroleum Taxation Act.
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