After collecting estimates from the petroleum companies, petroleum tax for the 2023 income year is estimated at approximately NOK 433 billion. This represents a halving compared to the instalment tax result for 2022 which eventually ended at NOK 884 billion.

“This year’s instalment tax is still at a historical high level, and the decrease from 2022 is mainly due to the reduction in oil and gas prices. Despite uncertainty related to the future development of the energy markets and exchange rates, petroleum companies expect high energy prices and a weak Norwegian krone in 2023. Both factors affect the income as petroleum products from the Norwegian Continental shelf are mainly sold in foreign currencies” says Director General Nina Schanke Funnemark.

Paid instalment tax was NOK 884 billion in 2022, which was the highest ever, and almost three times as high as for 2021 with NOK 295 billion. The high tax revenue in 2022 can mainly be explained by extreme gas prices and a weak Norwegian krone compared to USD/EUR/GBP.

The tax paid by the petroleum companies is deposited into the Government Pension Fund Global.

Changes to the Special Tax System

New rules for petroleum taxation were decided by the Storting on 8 June 2022 and approved by the King in Council on 17 June 2022. The changes in the Petroleum Taxation Act consist of a shift of the special tax for petroleum production into a cash flow tax that grants immediate deductions for new offshore investments.

The special rules in the petroleum tax regime that apply to uplift and to the refund of exploration and termination costs are being dismantled. Instead, companies receive payment of the special tax value of their deficit in connection with the tax assessment. As a result of these changes, a transitional rule has been decided according to which the petroleum companies will receive payment of the tax value of their deficit and uplift carried forward from preceding years in connection with the tax assessment for 2022.

The changes came into effect from and including the 2022 income year, while the temporary rules (see information on instalment tax) continue to apply to investments under section 11 of the Petroleum Taxation Act (also including deductions of uplift in connection with investments that come under these rules).

Assessment of Instalment Tax

Petroleum companies engaging in extraction and pipeline transportation on the Norwegian Continental shelf pay advance tax through so-called instalment tax. The instalment tax is paid in six instalments - three in the second half-year of the income year and three in the first half-year following the income year. The assessment is based on the figures (both actual and estimated) reported by the petroleum companies.

There is a revision of the instalment tax in January of the year following the income year prior to the deadline for the fourth instalment. The companies have an option to make higher payments than the assessed amounts with their second and fifth instalments. The final payment may therefore end up either higher or lower than the present assessment.

Facts About Instalment Tax

• The Petroleum Taxation Act has a special advance tax scheme called instalment tax, according to section 7 of the Petroleum Taxation Act.
• Instalment tax is assessed by the Oil Taxation Office for each income year and is payable in six instalments, three in the income year and three in the year following the income year.
  
  
• The instalment tax for each income year is assessed in June/July in the income year. The assessment is based on information collected from the companies and consists of actual figures for parts of the first half-year and of estimates for the rest of the year.
  
  
• The Oil Taxation Office may revise the instalment tax before the payment deadline of the fourth instalment. This revision is based on actual figures for most of the income year.
  
  
• The deadlines for payment of the instalment tax are respectively 1 August, 1 October and 1 December in the income year, and 1 February, 1 April and 1 June in the year following the income year.
  
  
• The companies have an option to make payments higher than the assessed amounts with their second and fifth instalments if they consider their original estimates to be too low.
  
  
• Interest is calculated when there is a discrepancy between the instalment tax for the three first and the three final instalments.
  
  
• Temporary changes in the Petroleum Tax Act for the 2020 and 2021 income years introduced negative instalment tax, which meant that the tax value of the deficit and unused uplift was paid to the companies in advance for these years. This scheme is discontinued from and including the 2022 income year.
  
  
• The tax assessment for each income year is due by 1 December of the year following the income year. There will be a reconciliation between the assessed tax/tax refund and the instalment tax.

More information about petroleum tax is to be found here.

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