Tax deduction card for PAYE 2020

The employees who applied for or automatically received a tax deduction card, will receive a tax deduction card with a PAYE rate, if they meet the requirements set for the scheme. This also applies if they opted out of the scheme for last year. Find more information on the PAYE scheme below.

PAYE

The PAYE scheme is a tax scheme for foreign workers who have short work stays in Norway, and the first year the worker is a tax resident in Norway.

For you as an employer, the PAYE scheme means you have to deduct tax according to a fixed rate and report both salary and deducted tax to the Tax Administration. You must calculate and deduct PAYE tax from all salary and all remunerations that are taxable for the employee. For the employee, the tax is settled when you report salary and deducted tax, so it’s important that you submit accurate reports.

Information on the tax deduction card

The employee’s tax deduction card may change during the year. In order to deduct the right amount of tax, it's important that you as an employer have an up to date overview of your employees’ tax deduction cards.

Employees in the PAYE scheme will have tax deduction cards marked “PAYE” / "KILDESKATT_PAA_LOENN" in the field for additional information. If information about the PAYE scheme from the tax deduction card is not shown in your payroll system, you must get access to this information in another way before the payroll run.

As an employer, you are responsible for submitting accurate reports  

Employees that are taxed under the general tax rules determines their own tax basis when they submit their tax return. However, for employees in the PAYE scheme, the employer is charged with this responsibility. As an employer, you determine the tax basis and calculate the tax for your employees in the PAYE scheme by reporting information in the a-melding. As an employer, you're responsible for deducting the right amount of tax, and you're responsible if tax is not deducted and paid.

Since the employee’s tax is settled when you report income and advance tax deductions in the a-melding, you must make sure that the deducted tax and the basis for the deduction is correct. Read more about how to report under “Tax basis and PAYE tax".

Useful links:

Tax basis and PAYE tax

As an employer, you’re responsible for determining the income and calculating the correct tax for employees in the PAYE scheme.

As with employees taxed under the general tax rules, you must report salary and advance tax deductions in the a-melding for employees in the PAYE scheme. However, there are some differences in how you calculate the basis for tax deduction for employees within and outside of the scheme. This depends on what type of benefits the employee receives.

Important when reporting on employees in the PAYE scheme

  • You must calculate PAYE tax on, among other things:
    • All salary and remunerations for work performed in Norway
    • All coverage of extra expenses for commuters
    • Also note:
      • Full deduction for every month, including holiday pay and salary before Christmas
      • You should not reduce the deduction basis based on pension contributions and trade union fees
  • You should not calculate PAYE tax on, among other things:
    • Salary for work performed abroad
    • Coverage of expenses directly related to the work (unless they result in a surplus)

Include the following in the basis for PAYE tax:

  • Fees, remunerations, bonuses or similar benefits to, for example, foreign chairmen of the board or board members in Norwegian companies.
  • Salary (cash benefits, fees, remunerations, etc.) for work performed in Norway. This includes holiday pay (read more below).

You should not reduce the calculation basis based on pension contributions and trade union fees that you deduct from the employee’s salary.

Coverage of extra expenses for commuters must be included in the basis

If you have employees that are commuters, and you cover their extra expenses incurred during stays away from home and home visits, you must include all you cover - the full amount - in the basis for PAYE tax. The full amount must be reported as subject to PAYE tax, and you must deduct tax according to the rate on the tax deduction card on the full amount.

The commuter benefits that are not taxable in the a-melding cannot be used when you prepare a report for an employee in the PAYE scheme.

Expense allowances, refunds and payments in kind

Expense allowances, refunds and payments in kind must be assessed under general tax rules. The only exception is coverage of expenses for commuters, see “Coverage of extra expenses for commuters must be included in the basis”.

Expense allowances, refunds and payments in kind must be included in the basis on which you assess and deduct PAYE tax from if the benefits are taxable for the employee.

If you as the employer cover expenses that are directly incurred because of work, such as extra expenses when business travels entail stays away from home, only a surplus should be included in the PAYE tax basis. The portion of the benefit, etc. that does not result in a surplus, should not be included in the basis for PAYE tax, nor do you deduct tax from this portion, and you should report this part as exempt from tax. The portion of the benefit, etc. that results in a surplus must be reported as subject to PAYE tax, and you must deduct tax from the surplus according to the rate on the tax deduction card.

If you as the employer cover private expenses for the employee, for example expenses relating to travels to and from work, the full amount must be included in the basis for PAYE tax. The full amount must be reported as subject to PAYE tax, and you must deduct tax according to the rate on the tax deduction card on the full amount.

Do not include the following in the basis for PAYE tax:

Even though you must report all salary benefits in the a-melding, some benefits are not taxable for the employee in the PAYE scheme. Do not deduct PAYE tax from these benefits.

When covering expenses directly related to work, the portion of the benefit that does not result in a surplus should not be included in the basis for PAYE tax. You do not deduct tax from this portion.

Salary and remunerations for work performed outside of Norway are not taxable for employees in the PAYE scheme and should therefore not be included in the basis for PAYE tax. You do not deduct tax from these benefits. Remember to include the country of earnings when you report these benefits in the a-melding.

Salary and remunerations for work performed outside of Norway are not taxable for employees in the PAYE scheme and should therefore not be included in the basis for PAYE tax. You do not deduct tax from these benefits. Remember to include the country of earnings when you report these benefits in the a-melding.

No months without deducted tax

For employees that have a tax deduction card marked “PAYE” / "KILDESKATT_PAA_LOENN", you must deduct a fixed tax rate for all the months of the year. There are no months in which you do not deduct tax, nor do you reduce the tax deduction before Christmas.

Holiday pay

When you pay a worker’s holiday pay, you must always check which tax deduction card is applicable at the time of the payment. If the worker has a tax deduction card for PAYE (see the field for additional information in the tax deduction card), you must deduct tax according to the rate on the tax deduction card. This also applies when paying holiday pay this year that was earned last year.

Net pay

For workers with a net salary arrangement, you must gross up the net salary with the applicable rate in the tax deduction card and enter table number “0000” in the field for the grossing-up table when you report in the a-melding.

Correct deducted pay for January when the employer uses last year’s tax deduction card

The rules for advance tax payments in January before the new tax deduction card for the income year is ready also apply to workers with a PAYE tax deduction card. The same applies to correcting the deducted tax after the tax deduction card is retrieved.

You can find information about which rate to use in the employee’s tax deduction card.

This may also affect whether you should calculate employer’s national insurance contributions on salary and other benefits.

Tax rates and employer’s national insurance contributions for the PAYE scheme in 2020

Tax rates

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

16.8% for workers who are not members of the Norwegian National Insurance Scheme

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

21.9% 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 employees, 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 send a correction for the a-melding. Read more about how to send corrections for the a-melding.