Information for companies and entities that hold accounts with Norwegian financial institutions

Norwegian financial institutions are obliged to record information regarding where customers that are companies and entities are resident for tax purposes. In cases where the customer is a company or entity that primarily has passive income, such financial institutions must also ask the customer where the company or entity's beneficial owners/controlling persons are resident for tax purposes and whether they are US citizens. Financial institutions must report this information, together with information relating to accounts, to the Norwegian Tax Administration annually in the same way as for information that must be precompleted in the Norwegian tax return.

The purpose of the rules is to ensure that the financial affairs and insurance policies (financial accounts) of foreign customers with Norwegian financial institutions are taxed correctly in the customer's home country. To ensure this, the Norwegian Tax Administration sends the account information to the tax authorities in the customer's home country.

The rules have been introduced based on international agreements that Norway has entered into with other countries. 

Norwegian financial institutions are obliged to record information about customers who are resident abroad for tax purposes when setting up a new account. They must do this by gathering statutory information from you if you act on behalf of a company or entity.

Financial institutions must also review information concerning their existing customers to identify customers with a connection to another country. If a financial institution finds information suggesting that a company or entity may be resident in another country for tax purposes, it must in the first instance treat the customer's accounts as belonging to a foreign customer when submitting annual reports to the Norwegian Tax Administration. The financial institution must contact you as the contact person for the company or entity to ask you to provide the company or entity's foreign identification number if the affiliation is with a country that issues relevant identification numbers. The financial institution must not treat the company or entity's accounts in this way if you provide information/documentation that demonstrates that the company or entity is not resident in the country concerned for tax purposes.

The Norwegian Tax Administration has published guidelines explaining the obligations of financial institutions. You will find these guidelines here.

The obligation of financial institutions to record and report account information relating to foreign customers is laid down in Chapters 7 of Norwegian Act No. 14 of 27 May 2016 (the Tax Administration Act/Skatteforvaltningsloven). Statutory provisions are set out in  Regulation No. 1360 of 23 November 2016 (the Tax Administration Regulation/Skatteforvaltningsforskriften).

The financial institutions covered by the obligations and the customer information they must record and report are described in more detail in Section 7-3 of the Tax Administration Act and Section 7-3 of the Tax Administration Regulation.

Legal persons are considered to be resident for tax purposes in the country in which they are tax resident under the relevant country's internal law based on the location of the management’s offices, foundation and registration, etc.

Companies and entities not resident for tax purposes in any country must be considered as being resident where the head office is located. States, regional and local administrative authorities are considered to be resident in the country concerned.

If you are uncertain about whether the company or entity is resident for tax purposes in a particular country, you must contact the tax authorities in the country concerned in order to clarify the situation.

The OECD has compiled some information regarding tax residence in individual countries, which can be found here.

Authorities use different identification numbers to identify companies and entities. Organisation numbers are used in Norway. The tax authorities in other countries use corresponding identification numbers to identify companies and entities in the same way. You must specify the company’s or entity's foreign identification number so that the tax authorities in the place where the company or entity is resident for tax purposes can link the account information to it.

For example, the tax authorities in Denmark use a CVR number, in Canada a Business Number (BN) is used, and in France numéro SIREN is used as an identification number.

Such identification numbers are often referred to as a TIN ("Taxpayer Identification Number"). Not all countries use such identification numbers. More information regarding the identification numbers used in various countries can be found here.

Norwegian financial institutions are generally obliged to record information concerning where all companies and entities that are customers of theirs are resident. However, there are some exceptions for companies listed on a stock exchange, financial institutions and international organisations, etc.

Whether the company or entity is considered to be active or passive is important as regards whether the financial institution must record information regarding where the beneficial owners/controlling persons are resident for tax purposes or whether they are US citizens.  This information must be recorded if the company or entity is considered to be passive. Financial institutions must report this information, together with information relating to accounts, to the Norwegian Tax Administration annually in the same way as for information that must be precompleted in the Norwegian tax return.

The company or entity is considered to be active if one of the following conditions is met:

• Less than 50 per cent of the enterprise's gross income in the previous income year consisted of passive income and less than 50 per cent of the enterprise's assets in the previous income year consisted of passive assets;
• The company's shares are traded regularly via an established securities market, or the company is an associated unit of such a company;
• It is a government body;
• The enterprise provides financial services to one or more subsidiaries that do not operate as a financial institution, except where the object is to acquire or finance companies and subsequently maintain ownership interests for investment purposes;
• The enterprise is in a start-up phase and is investing capital in assets for the first 24 months to operate another enterprise other than a financial institution;
• The enterprise is in the process of being wound-up or reorganising its assets when it has not operated as a financial institution for the past five years and will not operate as such an institution in the future;
• The enterprise primarily provides financing or insurance transactions with or for associated entities that are not financial institutions, and provides non-financial or insurance services with respect to any entity that is not an associated entity, provided that the group comprising all such associated entities primarily does not operate as a financial institution;
• The legal person is organised as a foundation (or similar person) that is operated purely for religious, charitable, scientific, artistic, cultural or educational purposes; and
  • The foundation is regulated and exempt from income tax in accordance with legislation in the country in which it is resident;
  • Legislation or deeds of foundation prevent withdrawals being made from the enterprise for any other purpose; and
  • In the event of liquidation, all assets will fall to another charitable organisation or public authority.

 

Passive income/assets are considered to be:

• Dividends and other similar payments;
• Interest income;
• Rental income and royalties, with the exception of rental income and royalties from active enterprises wholly or partially operated by the enterprise's employees;
• Annuities;
• Net gains made in connection with the sale or exchange of financial instruments and other financial products giving rise to passive income corresponding to the income described above;
• Net gains from transactions in financial instruments and other financial products (including futures, forwards, options and other similar transactions);
• Net currency gains;
• Net income from financial instruments that result in the payment of amounts from one party to another at given intervals, calculated on the basis of a specific index at a nominal value in exchange for a specified fee or a pledge to pay a corresponding amount (swap);
• Amounts received from cash value insurance contracts.

The value of the assets must be assessed as the market value or book value in accordance with the enterprise's balance sheet.

 

Here are two examples:

Anne is a professional photographer and her enterprise is registered with the Brønnøysund Register Centre as Annes Foto AS. She owns all the shares herself. Last year, 70% of Annes Foto AS’ income originated from photography, and 30% was derived from interest and returns from bank deposits and shares, which collectively amounted to 25% of Annes Foto AS' assets. Annes Foto AS is considered to be an active company.

Lars is an ophthalmologist and his enterprise is registered with the Brønnøysund Register Centre as Øyelege AS.

He owns all the shares himself. Lars is preparing to retire and has cut back on the number of hours he works. Over 60% of Øyelege AS' income last year consisted of interest and other financial income, while 40% of the income was derived from consultations. Øyelege AS is considered to be a passive company, which means that financial institutions must record where Lars is resident for tax purposes, and report this information together with information concerning accounts held by Øyelege AS to the Norwegian Tax Administration annually.

Tax residency in Norway and most other countries is determined under rules associated with residence and/or domicile.  In the USA, the tax system is based on both tax residence and citizenship. US citizens are therefore liable to pay tax in the USA on the basis of their citizenship, and Norwegian financial institutions must therefore record information regarding whether customers are US citizens. 

Financial institutions must collect information regarding where the company or entity is resident before an account can be set up. This means that if you do not complete the forms requested by the financial institution, the company or entity concerned will be unable to set up a new account. If you provide inaccurate information, the financial institution must close the account if you do not provide accurate information when this is requested.

If the company or entity already has an account or an insurance policy with a financial institution, the institution must search for any information that indicates a connection abroad. If the financial institution finds such information, it must either report the account as belonging to a foreign customer, or contact you and request information/documentation demonstrating where the company or entity is resident for tax purposes. If you do not provide the financial institution with information when they request it, the account will be treated as belonging to a foreign customer when reporting to the Norwegian Tax Administration. The account information may then be exchanged with the tax authorities in the country concerned.

It is the tax rules that apply where the company or entity is resident for tax purposes that determine which information must be declared to the tax authorities and how the information must be provided.

The company or entity cannot avoid its duty of declaration abroad, even if information concerning financial accounts in Norway is sent to the tax authorities where the company or entity is resident. In many countries, it is a requirement that companies and entities declare financial accounts they have in Norway in an annual tax return. You must contact the tax authorities in the country concerned if there is any doubt over whether the company or entity must declare information to the tax authorities in a country.

Taxation may be regulated through a tax treaty if you have income and assets in several countries. Tax treaties that Norway has entered into with other countries can be found here.

In accordance with the Tax Administration Act, financial institutions are obliged to provide customers with a copy of the information being reported to the Norwegian tax authorities. This information will be sent to you in an annual statement in January/February and applies to the previous calendar year. The annual statement will state both the information that has been sent, and that this information has been sent to the Norwegian tax authorities.

If the financial institution has recorded that the company or entity is resident for tax purposes in another country, you will receive information in the annual statement regarding this country, the foreign identification numbers that have been reported and the fact that the Norwegian tax authorities may send the information to foreign tax authorities.

If there are any errors in the information that a financial institution has reported to the Norwegian tax authorities, you must contact the financial institution and give them the correct details.

The Norwegian Tax Administration sends account information to foreign tax authorities based on international agreements that Norway has entered into with other countries.

Norway and several other countries have signed up to a multilateral agreement dated 29 October 2014 concerning automatic information exchange. This agreement forms a framework for the international standard for the automatic exchange of financial information, also known as the "Common Reporting Standard" or "CRS". You can find more information about this agreement via the OECD Automatic Exchange of Information (AEOI) portal

On 15 April 2013, Norway and the USA entered into an Agreement Between the Government of the United States of America and the Government ofthe Kingdom of Norway to Improve International Tax Compliance and to Implement FATCA.  The agreement builds on the US FATCA legislation (Foreign Account Tax Compliance Act). The agreement was submitted to the Storting in Prop. 138 S (2012-13).

Information sent to the tax authorities in other countries is subject to a duty of confidentiality. It will be assessed as to whether countries have adequate legislation, systems and routines to ensure that information does not go astray.