According to the Norwegian Ministry of Finance, the purpose of the change to the exit tax rules is to protect the Norwegian tax base. The exit tax amendment has been proposed in response to a recent judgment from the European Court of Justice in National Grid Indus (C-371/10, November 2011) that concerned the Dutch exit tax rules.
The current Norwegian exit tax applies when tangible or intangible assets are moved out of the Norwegian tax jurisdiction, with the amount of exit tax being based on the market value of the assets.
For certain assets, the exit tax liability may be deferred until “actual realization” (i.e., upon certain conditions). If the assets are not “realized” within five years from exit, the exit tax will be “annulled.”
Losses, however, must be deferred until realization.
Deferral of the exit tax is conditional, provided that the taxpayer supplies a surety (collateral / security) to cover payment of the tax liability. However, for taxpayers that are residents in a country in the European Economic Area (EEA), the Norwegian exit tax rules do not require that a taxpayer provide a surety for the deferred tax liability if certain conditions are met.
The tax liability may also be reduced, if the assets’ value decreases after the exit tax is determined.
Proposed changes to exit tax
The budget’s proposed changes to the exit tax regime provide that:
- The exit tax liability could still be deferred, but subject to an interest charge. The rate of interest would be determined as of 1 January for each year (for FY 2012, the interest rate would be 2.75%). The accumulated interest charge would be payable at the date of realization of the asset.
- The five-years rule for realization of the asset would be repealed; thus, the exit tax liability would continue indefinitely.
- The taxpayer would have to provide surety for payment of the tax, regardless of the taxpayer’s location / place of residency.
- Deferral of the exit tax payment would not be available for taxpayers who are residents outside the EEA.
- There would be no reduction allowed with respect to the amount of the exit tax liability regardless of any decrease in assets’ value after the calculation of the exit tax.
- Taxpayers would not be allowed a tax credit for the exit tax with respect to any tax levied in the other country.
- Any losses could be claimed in the year of exit.
- The proposed changes to the exit tax rules would, if enacted, be effective 15 May 2012.
For more information, contact a tax professional with KPMG in Norway:
+47 40 63 91 83