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Details

  • Service: Tax, Global Transfer Pricing Services, International Tax
  • Type: Regulatory update
  • Date: 10/14/2013

Norway - Limiting interest deductions on intra-group loans, guarantees 

October 14:  The Norwegian government today followed up on an April 2013 initiative, and formally proposed new rules limiting tax deductions of interest costs on certain intra-group loans in the 2014 budget.

The final proposal, contained in national budget measures, is substantially similar to the Ministry of Finance’s proposal in April 2013. The final budget proposal, however, includes measures pertaining to intra-group guarantees (a provision not contained in the initial April 2013 proposal). Third-party loans guaranteed by a group company will now be considered as intra-group loans, and thus would be subject to the new legislation.


The rules are proposed to be effective 1 January 2014.

Background

In April 2013, the Norwegian Ministry of Finance proposed to amend the tax rules governing interest deductions on intra-group loans.

Final proposal

Today’s final proposal would limit intra-group interest expense deductions to an amount that is 30% of taxable ordinary income, as adjusted for the value of tax depreciation and net interest expenses for tax purposes. This value approximates “earnings before interest, taxes, depreciation and amortization” (EBITDA).


Hence, the calculation of the maximum deduction would be 30% of the taxable EBITDA (increased from the 25% limitation contained in the initial proposal in April 2013).


  • The carryforward period would be 10 years (increased from the five-year period contained in the April 2013 initial proposal).
  • The proposed rule would also apply for interest expense costs on certain short-term loans (such as cash-pool arrangements).

The interest expense limitation would be triggered only if the taxpayer has net interest expense costs (i.e., interest costs with respect to borrowings from both related and unrelated parties) of more than NOK 3 million. If the amount interest expense were to exceed this threshold amount, the limitation would apply to all related-party interest costs (i.e., the entire amount would be limited).

Application to petroleum sector is delayed

As initially proposed, the limitation would have applied to the petroleum sector. This application has been delayed, to allow the Ministry of Finance more time for a closer assessment of the implications of this proposed treatment.

KPMG observation

Comments made in response to the April 2013 proposal for the petroleum sector apparently raised certain issues within the Ministry of Finance. Tax professionals in Norway believe that even if the rules were to be implemented with respect to the petroleum sector, it may be reasonable to expect changes would be made to the Finance Ministry’s initial proposal. Officials with the Ministry of Finance have stated that they intend to provide a revised proposal for the petroleum sector within a relatively short period of time.



For more information, contact a tax professional with the KPMG member firm in Norway:


Marius Basteviken

47 4063 9032


Thor Leegaard

47 4063 9183


Jan Samuelsen

47 4063 9395


Daniel L. Høgtun

47 4063 9437


Anders Liland

47 4063 9188


Per Daniel Nyberg

47 4063 9265




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