From 2019, a new and simplified tax scheme has come into effect. The scheme is meant for foreign workers who have time-limited work stays in Norway. This scheme is called PAYE (Pay As You Earn). Most new foreign workers will fall under this scheme the first year they work in Norway.
About the PAYE scheme
- You pay 25 percent tax on your employment income. The rate includes national insurance contributions at 8.2 percent.
- Your employer deducts the tax directly from your salary, and your tax is settled when you receive your salary.
- You do not claim deductions, and you do not have to submit a tax return nor wait for your tax assessment.
Who is the scheme for?
Primarily, this scheme is meant for foreign workers who work in Norway for short periods, and who are not tax residents in Norway. The scheme also applies to most foreign workers the year in which they become tax residents in Norway.
Workers who live abroad and receive director’s fees and similar remuneration from Norwegian companies will also fall under the PAYE scheme.
The scheme does not apply for
- employees with other taxable income that are not covered by the PAYE scheme, see “PAYE and other income
- foreign seafarers and offshore workers
- workers who have business income or income from letting property in Norway
If you have such income during the income year, you cannot use the PAYE scheme. This applies even if you also have salary income or receive director’s fees initially covered by the PAYE scheme. If you have such income, you must notify the tax office so that you can receive a correct tax deduction card.
How to join the scheme
All foreign workers who work in Norway must have a tax deduction card. Generally, most foreign workers join the scheme automatically when they apply for their tax deduction card. You must provide all necessary information in your application, so that we can determine whether you can participate. If any information changes, you must notify the tax office so that you can receive a correct tax deduction card. Married couples do not have to choose the same tax rules.
You can opt out of the scheme
If you do not want to be taxed under the PAYE scheme, but rather under the general tax rules, you can opt out of the scheme. You do this when apply for a tax deduction card by ticking off the box for taxation under the general tax rules.
If you’re not sure which tax scheme to choose, you can start with the PAYE scheme and then opt out at any time during the income year.
When you’ve opted to be taxed under the general tax rules, you cannot re-join the PAYE scheme that income year. This applies regardless of the reason you opted out. You can re-join the PAYE scheme at the turn of the income year if you meet the conditions.
Tax that’s already deducted will be converted to an ordinary advance tax payment when you opt out of the scheme. This will be accounted for in your new tax deduction card. You’ll also receive a tax return and a tax assessment notice for this income year.
You may choose to opt out of the PAYE scheme at any time during the income year and no later than 30 April the year after the income year.
You can calculate your potential tax if you chose to be taxed according to the general rules under "Calculate your tax".
Tax deduction cards for PAYE
You’ll be issued a tax deduction card with a PAYE rate of 25 percent when you apply for a tax deduction card.
Remember to tick the box for taxation under the general tax rules when you want to opt out of the scheme or if you do not or no longer meet the criteria for taxation under the PAYE scheme.
When your employer applies for a tax deduction card on your behalf, you’ll be issued a PAYE tax deduction card if you meet the criteria to join the PAYE scheme. Your employer does not have all the information about you or your income, and therefore cannot choose to join the PAYE scheme or not on your behalf.
Your employer/the payer must deduct tax under the PAYE scheme for the following income:
- salary and other benefits from sources in Norway for work performed in Norway, including holiday pay
- allowances received as a director or member of a board in companies in Norway
- bonuses and remuneration or similar benefits from Norwegian companies
- salary for foreign employees who are hired out, including holiday pay
- expense allowances, refunds and payments in kind that are considered taxable benefits, including covered commuter expenses
Expense allowances, refunds and payments in kind that are taxable benefits for you must be included in the income basis under the PAYE scheme.
When your employer covers expenses directly incurred in connection with work, for instance extra expenses you have during work-related stays away from home, only a surplus would be considered a taxable benefit for you.
If you’re a commuter and your employer covers most of the extra expenses you have during work-related stays away from home, the coverage will still be taxable in it’s entirety. It must therefore be included when you assess whether your total income will exceed the income limit (read more in the next section).
Cover for private expenses such as travels to/from work will also be taxable from the first krone under the scheme.
Income limit of NOK 617,500
If you expect to earn more than NOK 617,500 (including holiday pay and taxable benefits), you must choose to be taxed under the general tax rules when you apply for a tax deduction card. It will not be sufficient to only report an expected income that exceeds the income limit, you must also tick off the box for requesting taxation under the general tax rules.
Not sure how much you‘ll earn? Then you can start with PAYE and, if necessary, opt out later on in the income year, see “You can opt out of the scheme". The tax office will issue a new tax deduction card when you exceed the income limit if you do not send a notification. If you earn more than the income limit, the entire income will be taxed under the general tax rules.
Are you exempt from paying national insurance contributions?
If you’re fully or partially exempt from the Norwegian National Insurance Scheme, the contributions must be deducted and the rate on your tax deduction card must be reduced accordingly. You can get a tax deduction card with a reduced rate if you show documentation to the tax office proving you’re a member of a foreign insurance scheme. For instance, you can use form A1, which will show that you’re a member of an insurance scheme in another EEA state. You cannot receive a tax deduction card with a reduced rate before you provide the necessary documentation. If the exemption from the Norwegian National Insurance Scheme applies for periods during in which you’ve paid 25 percent withholding tax, you can apply for a tax refund. See more about refunds below.
PAYE and other income
You cannot join the PAYE scheme if you have other taxable income, such as:
- taxable salary from the Norwegian State for work performed abroad
- taxable income from real property or moveable property in Norway
- taxable income from business in Norway
- income earned on Norwegian ships abroad
- income earned on the Norwegian continental shelf
- public benefits from NAV, for example sickness benefit or unemployment benefit, when you’re liable to pay national insurance contributions on the benefit
- other income that’s only liable for national insurance contributions in Norway, for instance 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 or is not liable to pay tax in Norway according to a tax treaty
If you have any of the income mentioned above, combined with other salary income or board fees during the year, you cannot join the PAYE scheme. You must notify the Norwegian Tax Administration by changing your tax deduction card.
PAYE can still be combined with these types of taxable income/wealth:
- dividend from Norwegian companies
- withholding tax on pension and disability benefits from Norway
- income for sports people and artists that is liable for tax under the Foreign Artists Tax Act
- income that’s neither taxable nor liable for national insurance contributions in Norway, for instance salary earned abroad when you’re not a member of the Norwegian National Insurance Scheme
- wealth from real property or moveable property in Norway
When you become a resident during the year – capital income
Generally, if you’re taxed under the rules in the PAYE scheme, you’re only liable for tax on income and wealth under the provisions regarding limited tax liability in Norway.
If you become a tax resident during the year, you can stay in the PAYE scheme for the remainder of the income year. Yet this only applies if your capital income in Norway and other countries amounts to less than NOK 10,000 in total. By capital income, we mean for instance dividend, interest income and income from letting property.
If such income exceeds the income limit, you must be taxed under the general tax rules for all your income and wealth for the entire income year. If you become tax resident during the income year, you must inform the tax office about your expected global capital income in your application for a tax deduction card.
Have you paid too much tax?
Then you can apply for a refund by submitting this form and include information about the amount, your bank account number and any documentation. You can claim a refund for up to 3 years after the income year when the tax was assessed under the PAYE scheme.
Tax exemption under a tax treaty and the Nordic Tax Withholding Agreement (NT1)
If you think that your salary income earned in Norway is not taxable in Norway according to the provisions in a tax treaty Norway has entered into with another country, the tax office will assess such an application and give you an ordinary tax deduction card if the application is approved. In such cases, you cannot be taxed under the PAYE scheme.
Nor can you be taxed via the PAYE scheme if NT1 has been submitted showing that tax has been deducted in another Nordic country.