PAYE (Pay As You Earn) for foreign workers

Most foreign workers who are new in Norway will automatically become part of a voluntary tax scheme called PAYE (Pay As You Earn) when they apply for a tax deduction card. Under this scheme, you’re taxed at a fixed percentage that your employer deducts from your salary.

If you’re part of the PAYE scheme, your tax is completed after your salary has been paid to you. You do not submit a tax return, nor do you receive a tax assessment notice. Instead, you’ll receive a receipt for PAYE tax, which shows how much salary and tax your employer has reported to the Tax Administration for the work you did last year.

How to become part of the PAYE scheme

Everyone who works in Norway must have a tax deduction card. As a foreign worker in Norway, you can choose between two ways of paying tax. When you apply for a tax deduction card, you’ll either pay tax under the PAYE scheme or under the general tax rules. Most foreign workers automatically become part of the PAYE scheme if they have short work stays in Norway, or if it’s their first year living in Norway. 

You can opt out of the PAYE scheme and pay tax under the general tax rules if that’s more profitable for you. You can opt out when you apply for a tax deduction card, or later in the income year by changing your tax deduction card. If your employer applies for a tax deduction card for you, he or she cannot opt out of the PAYE scheme on your behalf. You can opt out in writing during your appointment for ID control.

If you’re going to live in Norway, you must pay tax under the general tax rules after one year. If you’re not living in Norway, but travelling to Norway for temporary work assignments, you’ll become part of the PAYE scheme every time you apply for a tax deduction card. If you live abroad and receive director’s fees from Norwegian companies, you can also be part of the PAYE scheme.

The difference between the PAYE scheme and the general taxation rules

General tax in Norway is calculated according to a tax rate that varies based on how much you earn during the year. The tax rate is adjusted according to your income and deductions. If you earn less, you pay less tax, and if you earn more, you pay more tax.

If you pay tax under the general rules, you’ll get a tax return the year after you’ve worked. The tax return is, amongst other things, a summary of your income. In your tax return, you can claim deductions for expenses you’ve had in connection with your work in Norway. After you’ve received your tax return, you’ll receive a tax assessment notice. The tax assessment notice will show whether you’ve paid too much or too little tax. If you’ve paid too little tax, you must pay what you owe. If you’ve paid too much tax, you’ll receive a refund into your bank account.

If you’re in the PAYE scheme, you’re taxed at a fixed percentage every month, no matter how much or little you earn. You’ll receive a tax receipt in August that shows how much salary and tax your employer has reported to the Tax Administration for the work you did last year.

You must check which way is most profitable for you.

The PAYE scheme

General tax

You pay 25% tax.

If you’re exempt from paying national insurance contributions in Norway, you pay 16.8% tax.

 

The tax rate is adjusted according to your income and deductions.

When you receive your salary, the tax has already been deducted. 

You have paid a preliminary tax, and the Tax Administration will check that the tax is correct next year.

You will not receive a tax return next year.

You will receive and submit a tax return next year.

Next year, you’ll receive a receipt for PAYE tax that shows the amount of tax you paid in Norway last year.

Next year you’ll receive a tax assessment notice that shows whether you’ve paid too much or too little tax in Norway last year. If you’ve paid too much tax, you’ll receive a refund. If you’ve paid too little tax, you’ll have to pay more tax.

The income limit for 2021 is NOK 651,250.

There’s no income limit.

You cannot claim any deductions.

You can claim deductions, for example for commuter expenses and interest expenses.

What is most profitable 

You must check how much tax you would pay in each of the two tax schemes.

To calculate how much tax you would pay under the general tax rules, you can use the tax calculator. To find out which deductions you’re entitled to, you can use the deduction wizard.

To calculate how much tax you would pay in the PAYE scheme, you can subtract 25 percent from your salary. If you’re exempt from paying national insurance contributions in Norway, you should subtract 16.8 percent from your salary.

The tax is calculated based on the tax rates for 2021, and no deductions other than the minimum standard deduction and the personal allowance have been taken into account. Other information about your employment in Norway can change the amounts, and you could be entitled to more deductions.

Number of months you’ve worked in Norway

Salary         

PAYE tax, including national insurance contri-butions

PAYE tax, not including national insurance contri-butions

General tax, including national insurance contri-butions

General tax, not including national insurance contri-butions

1

20,000

5,000

3,360

1,559

1,559

1

40,000

10,000

6,720

6,721

6,721

1

60,000

15,000

10,080

12,536

12,448

           

2

30,000

7,500

5,040

1,640

1,640

2

60,000

15,000

10,080

8,330

8,242

2

100,000

25,000

16,800

26,842

18,642

           

3

60,000

15,000

10,080

4,766

4,678

3

100,000

25,000

16,800

23,162

14,962

3

120,000

30,000

20,160

30,002

20,162

 

How to opt out of the PAYE scheme

The PAYE scheme is a voluntary tax scheme. There are two ways you can opt out.

  1. You can opt out when you apply for a tax deduction card. Tick the box to opt to not join the PAYE scheme, and choose to pay tax under the general tax rules. If your employer has applied for a tax deduction card for you, you can opt out in writing during your appointment for ID control.

or

  1. You can opt out after you’ve received a tax deduction card by logging in to My tax and changing your tax deduction card. Tick the box to opt out of the PAYE scheme, and select the relevant year. You’ll automatically receive a new tax deduction card if you opt out for this year.

If you’re not an online user, you must send us a form by post. If you want to opt out of the PAYE scheme for this year, you must send us form RF-1102 and tick the box to choose general taxation rather than taxation under the PAYE scheme. If you want to opt out of the PAYE scheme for previous years, you must send us form RF-1281 for the relevant year.

The deadline for opting out of the PAYE scheme is 31 December, 3 years after the income year. If you opt out of the PAYE scheme, you cannot rejoin the scheme in that same year.

You can also combine the PAYE scheme with income that’s neither taxable nor subject to national insurance contributions in Norway, for example salary earned in another country when you’re not a member of the Norwegian National Insurance Scheme. 

If you’re exempt from national insurance contributions, you pay 16.8 percent PAYE tax on your salary. If you were not exempt from national insurance contributions when you started paying PAYE tax, but received an exemption after a while, you can apply for a refund for the months you overpaid the PAYE tax.

Use this form to apply for a refund. The application must include the following information

  • the year the overpayment applies to
  • the month(s) for which you’re applying for a refund
  • the refund amount
  • any documents proving that you’ve paid too much PAYE tax

The refunded amount will be paid to your Norwegian or foreign bank account registered with the Tax Administration.

To change the account number for payment, you must

You’ll find the refunded amount in your receipt for PAYE tax. If we process your refund application after the receipt for PAYE tax was sent to you, you’ll not receive an updated receipt for PAYE tax. The refunded amount will be shown in the refund decision that you’ll receive from the Tax Administration. 

If you believe that the salary income you have earned in Norway is not taxable in Norway according to the provisions of a tax treaty that Norway has entered into with another country, the Tax Administration will assess this kind of application. You’ll receive a tax deduction card for taxation under the general taxation rules if your application is approved. If this is the case, you cannot be taxed under the PAYE scheme.

Nor can you be taxed under the PAYE scheme if an NT1 form has been submitted showing that tax has been deducted in another Nordic country in accordance with the Nordic Tax Withholding Agreement. 

  • earn more than NOK 639,750 per year (applies to the 2020 income year). For the 2021 income year, the maximum amount is NOK 651,250.
    • If you expect to earn more than NOK 639,750/651,250 (including holiday pay and taxable expense allowances, etc.), you must choose to be taxed under the general tax rules when you apply for a tax deduction card.
    • If you’re not sure whether you’ll earn more than the maximum amount, you can start with PAYE and opt out later on.
  • have other taxable income. This could for example be
    • public benefits from NAV, for example sickness benefit or unemployment benefit, when you’re liable to pay national insurance contributions on the benefit
    • parental benefits from NAV, also when your employer pays this in advance
    • taxable income from business activity in Norway
    • income earned on Norwegian ships
    • income earned on the Norwegian continental shelf
    • other income that’s only subject to national insurance contributions in Norway, for example salary from a Norwegian employer for work performed abroad when you’re a member of the Norwegian National Insurance Scheme
    • income that’s not taxable to Norway according to a tax treaty, for instance if your employer does not have a permanent establishment and neither you nor your employer is liable to pay tax in Norway according to a tax treaty
    • taxable salary from a Nordic employer where withholding tax is paid to another Nordic country according to the rules in the Nordic Tax Withholding Agreement (NT1)
    • income that’s taxable to Svalbard

If you have these kinds of income, you must notify the Tax Administration so that you can receive a correct tax deduction card. You do this by applying for a new tax deduction card.

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PAYE tax for foreign workers from Skatteetaten