Credit deduction for tax paid abroad

The credit deduction is a deduction for the tax paid abroad, so that you avoid double taxation.

To claim a deduction, it must apply to the same income, and the tax abroad must be assessed and paid.

Does this apply to me?

This applies to you if you have a company that has paid tax abroad.

What you need to do

Tax return

You must claim the credit deduction for the foreign tax in the tax return, and you must submit the tax return with the business information by 31 May at the latest.

You claim the deduction for tax paid abroad by filling in «Method in the event of double taxation»

Supporting documents

You cannot claim a credit deduction in your tax return before you have received documentation that the foreign tax has been assessed and paid.

The documentation must be in a Nordic language or in English. If you have documentation in another language, you must obtain a translation made by an authorised translator.

Requirements to be granted a deduction

You may claim a deduction in the Norwegian tax if you have proof and the following three conditions are fulfilled:

the company is domiciled in Norway
the income is taxed in Norway and abroad in the same year
the tax is assessed and paid abroad

Generally, the company is domiciled in Norway if one of the following conditions is met:

the company was established under Norwegian company law
the company is registered in the Brønnøysund Register Centre
the company’s actual management is in Norway

You cannot claim deductions for

You cannot claim a credit deduction if:

The foreign income is exempt from taxation in Norway pursuant to a tax treaty. See the countries Norway has established tax treaties with.
Tax on dividend or gains from the sales of shares are covered by the tax exemption method. The tax exemption method applies to companies domiciled in EEA countries.
The foreign tax applies to duties, fees, or tax that corresponds to Norwegian additional tax.
The foreign tax corresponds to Norwegian custom duties or value added tax.

What is the maximum credit deduction for tax paid abroad?

The maximum deduction is what Norway is obliged to grant according to the tax treaty between the individual country and Norway.
You can claim a deduction in Norwegian tax equal to the amount you’ve paid abroad.
The deduction for foreign paid income tax cannot exceed the tax amount you pay Norway.
You can claim a deduction for foreign tax that you have not claimed a deducted for in later years, up to five years in the future.

Examples

You have paid NOK 100,000 in tax abroad. The Norwegian tax is NOK 100,000.

You can claim a deduction for NOK 100,000 in the Norwegian tax.

You have paid NOK 60,000 in tax abroad. The Norwegian tax is NOK 100,000.

You can claim a deduction for NOK 60,000 in the Norwegian tax.

You have paid NOK 150,000 in tax abroad. The Norwegian tax is NOK 100,000.

You can claim a deduction for NOK 100,000 in the Norwegian tax. You can claim a deduction for the deduction you do not receive this year, NOK 50,000, in later years.

Deductions from previous years and deductions in later years

You can claim a credit deduction for foreign tax that you did not receive a deduction for in the tax assessment. You can do this for up to five years in the future.

The right to carry forward the deduction also applies regardless of whether Norway and the other country has different rules about timing.

If the credit deduction to be carried forward applies to several previous years, the oldest year must be deducted first.

Foreign tax that is not deducted in Norwegian tax can be reversed to previous years.

The deduction cannot be higher than the maximum credit deduction the year before.

You can only reverse an unused credit deduction if you can substantiate that you will not have income from abroad in the next five years.

Specific information for

Deviating financial year describes which year an income is taxed or an expense is to be recognised.

When there’s a deviating financial year, the deduction for the foreign tax must be distributed between the income years.

Period:

Calendar year in Norway (1 January - 31 December)
Deviating financial year abroad, period (1 April - 31 March)

Tax paid abroad:

1 April year 1 – 31 March year 2: Paid tax abroad NOK 90,000

1 April year 2 – 31 March year 3: Paid tax abroad NOK 30,000

1 April year 3 – 31 March year 4: Paid tax abroad NOK 60,000

Credit deduction in Norway:

Year 1

The period is 9 months.

1 April – 31 December: NOK 90,000 x 9/12 years = NOK 67,500

Credit deduction in Norwegian tax equals NOK 67,500

Year 2

The periods combined are 12 months, distributed between year 1 and year 2. 1 January – 31 March. NOK 90,000 x 3/12 years = NOK 22,500

1 April – 31 December + NOK 30,000 x 9/12 years = NOK 22,500

Total credit deduction year 2: NOK 45,000

The credit deduction in Norwegian tax is NOK 45,000

Year 3

The periods combined are 12 months, distributed between year 2 and year 3.

1 January – 31 March: NOK 30,000 x 3/12 years = NOK 7,500
1 April – 31 December: NOK 60,000 x 9/12 years = NOK 45,000
Total credit deduction year 3: NOK 52,500

The credit deduction in Norwegian tax is NOK 52,500

Year 4

The period is 3 months.
1 January – 31 March: NOK 60,000 x 3/12 year = NOK 15,000

The credit deduction in Norwegian tax is NOK 15,000

As a general rule, it pays to claim a credit deduction.

Claiming a credit deduction

A deduction in the Norwegian tax may amount to 100 percent of the tax paid abroad.

Instead of the credit deduction, you may claim a deduction for the tax you paid abroad in your Norwegian income.

Claim for deduction in income

A deduction in the Norwegian tax may amount to 22 percent of the tax paid abroad.

The maximum deduction equals the tax rate for Norwegian private limited companies.

You cannot claim both an income deduction and the credit deduction for the same foreign tax.

Norway has tax treaties with many countries to avoid double taxation.

The credit method
You may claim a deduction in Norwegian tax for tax assessed and paid abroad. This deduction is limited to the Norwegian tax on the same income. This is the most usual method.
The allocation method (the exemption method)
In some cases, income earned abroad is not taxable in Norway. The tax treaty between Norway and the country in question determines whether the allocation method can be applied.

The method used in the tax treaties: Skatte ABC U-6-10 Overview over method for avoidance of double taxation i tax treaty (in Norwegian only)

See the countries Norway has established tax treaties with