Specifically, the proposed changes would be expected to focus on international structures that have a sole purpose of providing “unreasonable deductions” from the Norwegian tax base.
The government announcement states that an “expert committee” will be formed to evaluate the Norwegian corporate tax system—particularly in light of recent corporate tax changes (and lower rates) in other countries and the global mobility of corporate taxpayers and this effect on erosion of the tax base.
Tax professionals in Norway anticipate that the to-be-issued discussion document could propose rules to limit a taxpayer’s ability to deduct interest amounts paid to other group member companies. Currently, intra-group interest is deductible provided that there is compliance with the debt/equity ratio and that the interest rate is at arm’s length.
Tax professionals also believe that it is likely that the government could introduce rules that, to a larger extent, would limit a taxpayer’s ability to deduct intra-group interest—for example, that interest could only be deductible in so far as the net financing expenses do not exceed a certain percentage of the earnings before income tax (EBIT) of the company or that the interest paid would be subject to a minimum tax in the hands of the creditor company. It is in this context that Norway’s government could look to similar rules in Sweden and Denmark on the treatment of intra-group interest payments.
Lastly, it is possible that Norway’s government may consider introducing stricter transfer pricing rules in relation to transactions with entities located in non-OECD countries and in particular tax haven jurisdictions (i.e., that the arm’s length principle and traditional pricing methods would not apply in relation to transaction conducted with entities located in such jurisdictions).
For more information, contact a tax professional in with the KPMG member firm in Norway (KPMG Law Advokatfirma DA)
Thor Leegaard, Tax partner
+47 4063 9183
Erik Landa, Senior Manager
+47 4063 9768
Daniel L. Høgtun, Manager
+47 4063 9437