Registration exemption for foreign carriers reintroduced
Previously, an arrangement allowed non-domestic transporters of goods and people between foreign and Norwegian destinations not to register for VAT in Norway. This system was developed to address what was considered to be impractical rules (i.e., demanding that such businesses register in Norway).
This arrangement was replaced with the introduction of the new VAT Act in 2010. The loss of what had been considered to be a practical and efficient system was criticized by industry and tax professionals.
The Norwegian Parliament reinstated the registration exemption, effective 1 January 2013. Also, the legislation included favourable transitional arrangements so that VAT refunds will not be forfeited due to any ambiguity concerning these VAT registration rules. The deadline for applying for a refund incurred in 2011 is postponed until 1 March 2013. Refund claims for 2012 must be submitted by the regular deadline (30 June 2013).
Road and rail VAT exemption lapses
Until now, supply of services in connection with construction of public roads has been exempted from VAT (VAT Act § 6-7). A similar exemption existed regarding the supply of services in connection with construction of public rail transport ( § 6-8). Although the supply of services has been exempted, the supply of goods has been subject to a “regular VAT liability.”
The Ministry of Finance questioned this VAT exemption. Through the introduction of the compensation system, municipalities and counties are to be refunded the amount of VAT on both goods and services that are purchased in connection with the construction of public roads. Similarly, because of the VAT liability for public rail transport companies, an ordinary deduction for goods and services consumed by the business may be claimed.
The exemption system, therefore, is no longer necessary to determine that the VAT does not end up as a final cost for these operators. The exemption is administratively demanding, since it makes a distinction between goods and services. This can be difficult to determine and, thus, creates a risk of incorrect VAT treatment. The Ministry of Finance, therefore, concluded that the system is no longer needed. Thus, the VAT exemptions under §§ 6-7 and 6-8 as in effect on 1 January 2013 have been repealed.
For more information, contact a tax professional with KPMG in Norway:
Oddgeir Kjørsvik, Tax Partner
+47 406 39 157