To avoid double taxation, Norway has entered into tax treaties with many other countries.

The method used to avoid double taxation will depend on where the property is situated and the rules stipulated in the tax treaty with the country concerned.

Double taxation can also be avoided under Norwegian rules concerning credit deductions if the property is situated in a country Norway doesn't have a tax treaty with.

The credit method - deduction for tax paid abroad

The credit method is the most common method of avoiding double taxation in tax treaties. With this method, any tax on gains that is paid abroad can be deducted from the Norwegian tax on the gain. This applies for example when the property is situated in Denmark, Finland, France, Spain or Sweden. The same applies when no tax treaty has been established with the country concerned.

If you claim a deduction from your Norwegian tax for tax that you have paid abroad, you must include this in your tax return. You must also be able to document the amount of tax that you have paid abroad on the gain, if the tax office asks you to.

Example: Sale of holiday home in Sweden

In Sweden: The tax liable gain made on the sale of holiday homes is calculated according to Swedish rules and taxed in Sweden.

In Norway: The obligation to pay tax will be assessed under Norwegian rules. If you have owned and used the holiday home for long enough to fulfil the conditions for tax-free gains in the event of sale, the gain will be tax-free in Norway. In that case, you can't claim a deduction in Norway for the Swedish tax paid on the gain. If the sale is tax liable under Norwegian rules, you must calculate the gain/loss. You'll then be able to claim a deduction for the tax you have paid in Sweden against the Norwegian tax on the gain.

The distribution method - not taxable in Norway

Some tax agreements use what is known as the distribution method to avoid double taxation. This means that profit from the sale of real property in the other country is not taxable in Norway.

Even if you do not have to pay tax in Norway for a gain, you must still list the gain or loss in your tax return. You must mark the gain or loss as "not taxable" in your tax return.

As a tax resident in Norway, you still have an obligation to provide information about  the taxable value of any property owned abroad as at 31 December of the income year, in your Norwegian tax return. The reason for this is that in these cases, you’re not entitled to full deductions for all your debt and debt interest. Deductions for debt and interest on debt are limited to the proportionate part of your foreign wealth that is exempt from taxation in Norway. However, this does not apply if the property is located in Italy or Croatia.