Employer with workers in the PAYE scheme

The PAYE (Pay As You Earn) scheme is a voluntary tax scheme for foreign workers who have short work stays in Norway. Most foreign workers who are new in Norway will automatically become part of the PAYE scheme when they apply for a tax deduction card. The worker can opt out of the PAYE scheme and pay tax under the general tax rules if that's more profitable.

If you, as the employer, apply for a tax deduction card for the worker, you cannot opt out of the PAYE scheme on his or her behalf. The worker can opt out during his or her appointment at the Tax Administration for ID check.

You’ll get information about whether the worker is in the PAYE scheme when you retrieve his or her tax deduction card. The tax deduction card is marked with the additional information "Kildeskatt på lønn" (PAYE). It’s important to check if the worker’s tax deduction card has this additional information before you report salary and deducted tax.

You determine the tax basis  

Workers that are taxed under the general tax rules determine their own tax basis when they submit their tax return. The tax authorities then calculate the tax. In the PAYE scheme, you determine the worker’s tax basis and calculate their tax when you report in the a-melding.

If you have a worker in the PAYE scheme, you must deduct tax according to a fixed rate every month of the year, and report both salary and deducted tax in the a-melding. You must calculate PAYE tax on all salary and all remunerations that are taxable for the worker.

The tax is settled for the worker when you report salary and deducted tax in the a-melding. The worker will not receive a tax return next year.

You're responsible for determining the correct basis for tax, and for deducting the right amount of tax. If you’ve reported incorrectly, you must correct the a-melding.

How to calculate PAYE tax

There are some important differences between the PAYE scheme and the general tax rules. One of them is that you must deduct PAYE tax from all the expenses you cover for commuters. You must also remember that in the PAYE scheme, there are no months in which you do not deduct tax, and you do not reduce the tax deduction before Christmas. You should also not reduce the deduction basis based on pension contributions and trade union fees.

Here you’ll find an overview of what you must calculate PAYE tax on, and what is not taxable for workers in the PAYE scheme.

You must calculate PAYE tax on

You should not calculate PAYE tax on

  • Salary and remunerations for work performed outside of Norway are not taxable for workers in the PAYE scheme. Such income should therefore not be included in the PAYE tax basis and you should not calculate PAYE tax on such income.

    Remember to include the country of earnings when you report this income in the a-melding.

    Here’s an example of what must be included in the basis on which you must determine and calculate PAYE tax for a worker who performs work in both Norway and Sweden:

    Benefit Amount Included in the basis for PAYE tax
    Salary (cash salary) earned in Norway 400,000 400,000
    Salary (cash salary) earned in Sweden   50,000           0
    Expense allowance, house moving allowance   10,000           0
    Payment in kind, free car in Sweden     5,000           0

  • If you cover expenses directly related to work, for example expenses related to business travels that entail stays away from home, only a surplus should be included in the PAYE tax basis and you should only calculate PAYE tax on the surplus. You should report the surplus as taxable in the a-melding. You must report the portion that does not result in a surplus as not liable for tax.

    Here’s an example of what must be included in the basis on which you must determine and calculate PAYE tax for a worker you’ve covered both commuter expenses and business travel (not surplus) for:

    Benefit Amount Included in the basis for PAYE tax Included in the basis for general tax
    Salary, cash benefit 400,000 400,000 400,000
    Payment in kind, free housing   72,000   72,000            0
    Expense allowance, coverage of home visits   10,000   10,000            0
    Expense allowance, coverage of business travel   20,000   20,000            0

Employer with workers on net salary

If you have a net salary arrangement, you must pay tax for the worker. This means that you must convert the net pay to gross salary by using the tax rate in the tax deduction card and enter table number “0000” in the field for the grossing-up table when you report the information in the a-melding.

Tax rates and employer’s national insurance contributions for the PAYE scheme

You can find information about which rate to use in the worker’s tax deduction card. The tax rate may also affect whether you should calculate employer’s national insurance contributions on salary and other benefits.

Tax rates 2022

Employer’s national insurance contributions

25% for workers who are members of the Norwegian National Insurance Scheme

The employer must pay employer's national insurance contributions according to the general rules

17.0% for workers who are not members of the Norwegian National Insurance Scheme

The employer does not have to pay employer's national insurance contributions

22.1% for workers who are only members of the healthcare portion of the Norwegian National Insurance Scheme

For workers sent to Norway from the United States or Canada, the employer must pay employer's national insurance contributions according to a special rate. For other workers, the employer must pay employer's national insurance contributions according to the general rules.

 

If you calculated incorrect employer's national insurance contributions, you must correct the a-melding 

Read more about PAYE for foreign workers.