Extended business travelers are likely to be taxed on employment income relating to Norwegian workdays.
Liability for income tax
A person’s liability for Norwegian income tax is determined by residence status. A person can be a resident or a non-resident for Norwegian tax purposes.
A person becomes a tax resident of Norway if their stay in Norway exceeds 183 days during a 12-month period, or 270 days during a 36-month period.
The general rule is that a person who is a resident of Norway is assessable on the individual’s worldwide income and wealth.
A non-resident of Norway is a person who does not fulfill the resident requirements, and they are generally assessable on income derived directly or indirectly from sources in Norway.
Employment income is generally treated as Norwegian-sourced if it is paid from a Norwegian source and derived from work performed in Norway. It is paid from a Norwegian source if the employer, formal or economic, has taxable activity in Norway in accordance with the domestic tax law.
Tax trigger points for employment income
Technically, there is no threshold/minimum number of days that exempts the employee from the requirements to file a Norwegian tax return, nor pay tax in Norway. To the extent that the individual qualifies in accordance with the dependent personal services article of the applicable double tax treaty, there will be no tax liability. The treaty exemption will not apply if a Norwegian entity is the individual’s economic employer.
Types of taxable income
For extended business travelers, the types of income that are generally taxed are employment income and benefits-in-kind from the employer.
The marginal income tax rate on employment income is 39 percent. Capital income is taxed at a rate of 27 percent. The rates apply for both resident and non-resident taxpayers.
Liability for social security
Employees performing work in Norway will be mandatory members of the Norwegian social security scheme, and thereby obliged to pay social security tax of 8.2 percent of gross income. The main rule is that the employer is obliged to pay 14.1 percent of the employee’s gross income to the Norwegian social security scheme. The employer’s part of Norwegian social security contribution is lower than 14.1 percent if the employer is located in certain geographical areas in Norway. The rates are applicable without any cap.
An exemption from the Norwegian social security scheme may be obtained if there is a totalization agreement between Norway and the home country. This applies both for residents as well as non-residents.
Employee compliance obligations
The tax year is the same as the calendar year.
Tax returns are due by 30 April following the tax year-end for both residents and non-residents. A 1 month extension may be granted if an application of extension is filed prior to 30 April.
Tax returns must be filed by non-residents who receive any Norwegian-sourced employment income, and shall be submitted even if the employee is exempted from taxation under reference to a tax treaty.
Employer reporting and withholding requirements
An employer, regardless of whether Norwegian or foreign, has a bimonthly reporting obligation as well as withholding obligations related to income earned while performing work in Norway.
Work permit/visa requirements
Employees from certain countries (countries that Norway has not signed a visa waiver agreement with) must apply for a visa before they enter Norway. The type of visa required will depend on the purpose of the individual’s entry into Norway.
If the purpose of a stay in Norway is to work, employees from countries outside European Union (EU)/European Economic Area (EEA) must apply for a work permit to Norway (Residence permit). They are not allowed to start working until this residence permit has been granted.
Employees from EU/EEA may work for a period of up to 90 days without a visa or work permit. If the stay will exceed 90 days, employees must register with the immigration authorities (EU/EEA-registration) within the first 90 days.
Employees from the Nordic countries can work in Norway without applying for a residence permit and without making any registration with the Immigration authorities. More information can be found on the web page of the Norwegian Immigration authorities www.udi.no.
Double taxation treaties
In addition to the Norwegian domestic regulations, Norway has entered into double taxation treaties with more than 80 countries in order to prevent double taxation and allow cooperation between Norway and overseas tax authorities when it comes to enforcing their respective tax laws.
Permanent establishment implications
There is a risk that a permanent establishment (PE) could be created as a result of business travel to Norway, depending on the type of services performed, the level of authority the employee has when performing services in Norway and the duration of the stay in Norway.
Value-added tax (VAT) is (in general) applicable at 25 percent on goods and services. Reduced rates of 15 per cent and 8 per cent or zero-rate may apply (e.g., food, passenger transport, accommodation and vessels/aircrafts/platforms ). Further, some services are VAT exempted (e.g., education, health and financial services).
Norway has a transfer pricing regime. A transfer pricing implication could arise to the extent that the employee is being paid by an entity in one jurisdiction but performing services for the benefit of the entity in another jurisdiction, in other words, a cross-border benefit is being provided. This would also be dependent on the nature and complexity of the services performed.
Local data privacy requirements
Norway has data privacy laws.
Norway does not restrict the flow of Norwegian or foreign currency into or out of the country. Certain reporting obligations, however, are imposed. The obligation to perform the reporting is levied on financial institutions. In addition there are local rules to control tax evasion and money laundering.