• Service: Tax, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 11/11/2013

Norway - Amended 2014 budget to implement interest limitation rules 

November 11:  Norway’s new government on 8 November 2013 presented its “adjustments” to the 2014 budget—but the proposal to limit interest deductions on related-party loans, for the most part, will move forward from the prior budget proposals and will be implemented with an effective date of 2014.

Application of a rule to limit for interest expenses under the related-party rule, however, was delayed for the petroleum sector.

Tax program for 2014

The new administration’s changes to the 2014 budget (as originally released in from October 2013) include the following provisions:

  • A reduced income tax rate for individuals and corporations, 28% to 27%
  • An increased rate of social security contributions for individuals, increased by 0.4%
  • Repeal of the inheritance tax

The proposal to limit interest deductions on loans to related parties continues to be included, and the effective date will be 1 January 2014, for accounting years ending in 2014. While the interest limitation proposal was somewhat adjusted, it would be still among the most restrictive in Europe.

Limitation of deductions for interest expenses on related-party loans

The main features of the proposal have been maintained. In essence, the proposed rules would limit the deductibility of interest paid on loans to related parties. The rules aim at discouraging the use of highly leveraged holding companies to acquire profitable Norwegian enterprises, and then attempting to use the tax deductions from the intra-group interest payments to offset the taxable profits of the target company.

Read a November 2013 report [PDF 262 KB] prepared by the KPMG member firm in Norway.

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