Tax Guide for US Expats Living and Working in Norway
Who Is Liable For Income Taxes in Norway
Individuals resident in Norway are subject to tax on their worldwide income. Nonresidents are taxable on Norwegian-source income only. Wages and remuneration may be considered Norwegian-source even if an employer has no permanent establishment in Norway.
Individuals present for a period or periods exceeding in aggregate 183 days in any 12-month period or 270 days in any 36-month period are considered to be resident for tax purposes.
After emigrating from Norway, an individual continues to be considered a resident for tax purposes if the individual, or someone closely related to him or her, maintains a home in Norway. After emigrating from Norway, an individual who does not maintain a home in Norway is considered to be a resident if the individual stays in Norway for more than 61 days per income year.
Notwithstanding the conditions mentioned above, an individual who has been resident in Norway for more than 10 years is considered to be resident for tax purposes in the three-year period after emigration and for as long as he or she maintains a home in Norway or stays in Norway for more than 61 days during a year.
Special rules may apply to individuals working on the Norwegian Continental Shelf.
Income subject to tax. The taxation of various types of income is described below. For a table outlining the taxability of income items.
Employment income. Taxable income generally includes salaries and wages, bonuses, directors’ fees, benefits in kind, annuities and pensions, whether the benefit is earned over a period of time, occasionally or on a single occasion. Most allowances and fringe benefits are considered taxable income.
Nonresidents are subject to tax at various rates on income earned from work carried out in Norway and on wages earned on ships registered with the Norwegian common shipping register.
Self-employment and business income. Residents are subject to tax on worldwide self-employment and business income. Non-residents are subject to tax if they engage or participate in business or other economic activities carried on or administered in Norway. Furthermore, persons with assets in Norway in the form of real property or tangible assets are subject to tax on income derived from such assets at the ordinary 28% rate described in Rates. Special rules may apply to shipping activities.
The special tax regime for active owners was abolished, effective from 1 January 2006.
A partnership model has been introduced for partnerships that are subject to the so-called net-assessment. As a result, the model applies to general partnerships (ANS), limited partnerships (KS), silent partnerships (IS) and shipping partnerships (Partsrederier).
Partners are subject to a 28% tax on all income, regardless of distribution, and to an additional tax of 28% on distributed profits. To compensate for the initial 28% tax, only 72% of the distributed profits is taxable. In addition, only the distributed profit exceeding a risk-free interest on the capital invested in the partnership is taxable. The Department of Finance determines the risk-free interest each year. For 2011, the rate is 1.3%. Such partnership taxation ensures the same level of taxation on both retained and distributed profit as in limited companies. The maximum marginal tax rate for distributed income is 48.16% (0.28 + [0.72 x 0.28]).
The partnership model applies to all partners, regardless of whether the partners are active. However, partners, other than partners who are individuals, are not subject to additional taxation at distribution under the exemption method.
For self-employed individuals, all business profits exceeding a risk-free interest on the capital invested are taxed as personal income.
Taxable personal income serves as the basis for levying both personal income tax (top tax) at a rate of up to 12% and the social security contribution at a rate of 11%. It also entitles an individual to pension points in the social security system.
Nonresidents are also subject to tax at the same rates that apply to residents on the following amounts:
- Income from, and capital invested in, activities carried on or managed either in Norway or on the Norwegian Continental Shelf
- Income derived from providing employees for principals who are carrying on activities in Norway
- Income derived from, and capital invested in, real and movable property located in Norway
- Fees paid to foreign entertainers and artists for performances in Norway
Nonresidents may also be subject to Norwegian taxes if they participate as general partners or limited partners in businesses carried on in Norway. For example, a leasing business with property in Norway is taxable, even if the activity is not carried out through a fixed place of business in Norway.
Investment income. Interest, rental income and royalties are subject to tax with other ordinary income at a rate of 28%.
For dividends received by shareholders who are individuals, a shareholders’ model has been introduced. Under the shareholders’ model, dividends exceeding a risk-free return on the investment (the cost base of the shares) are taxed as general income when distributed to individual shareholders. Taking into account the company taxation of 28%, the total maximum marginal tax rate on dividends is 48.16% (0.28 + [0.72 x 0.28]). The part of the dividend that does not exceed a risk-free return on the investment is not taxed in the hands of the shareholder, and is consequently subject only to the company taxation of 28%. If the dividend for one year is less than the calculated risk-free interest, the tax-free surplus amount can be carried forward to be offset against dividends distributed in a subsequent year or any capital gain derived from the alienation of the shares on which the dividend is paid.
The shareholders’ model applies to dividends received by Norwegian individuals and to individuals resident in other European Economic Area (EEA) states who are subject to Norwegian withholding tax.
Nonresidents are subject to a 25% withholding tax on dividends paid by Norwegian companies, unless a lower treaty rate applies. Withholding tax is not imposed on interest and royalties paid to nonresidents.
Directors’ fees. Nonresident and resident directors are taxed on directors’ fees from Norwegian companies. Directors’ fees are taxed in the same manner as employment income.
Taxation of employer-provided stock options. Stock options provided by employers to employees are taxed at the date of exercise as income from employment.
The taxable value at the date of exercise is the fair market value of the shares at the date of exercise, less the exercise price and any other costs incurred by the employee related to the grant of the options or the conversion of the options to shares.
Capital gains and losses. Capital gains derived from disposals of business assets, including real property, are subject to ordinary income tax at a rate of 28%.
Capital gains derived from disposals of shares are taxable as ordinary income at a rate of 28%, and capital losses derived from disposals of shares are deductible against ordinary income. However, the taxable gain may be reduced by any unused tax-free amount with respect to dividends received (see Investment income).
The gain derived from the sale of a personal residence is not subject to tax if the owner lived in the residence for at least 12 months during the 24 months before the sale. Otherwise, the gain derived from the sale of a private residence is subject to ordinary income tax, and losses are deductible from ordinary income.
Nonresidents are taxed on capital gains from capital assets located in Norway only.
Exit tax. Norway imposes an exit tax on unrealized profits on shares or share units in Norwegian or foreign companies including units in securities funds and stock options. The exit tax applies only to profit exceeding NOK 500,000.
Individuals who have been resident in Norway for tax purposes are taxed on profits as if the shares, units, options and similar instruments were realized on the last day the individual was considered a tax resident of Norway for either domestic or tax treaty purposes. The deemed gain is subject to capital gains tax at the normal rate of 28%. As an exception, the deemed gain on employee share options is treated as normal compensation income, which is taxable at the individual’s marginal rate.
For individuals who have resided in Norway for more than 10 years and were born in Norway, the profit is calculated as the spread between the original cost price of the asset and the market value at the time of emigration. However, individuals who have resided in Norway for less than 10 years may choose to use the market price at the time he or she became tax resident in Norway instead of the actual cost basis. However, this rule applies only to shares and share units owned by the individual when he or she took up residence in Norway.
The exit tax ceases to apply if the gain on the assets is not actually realized within five years after the emigration (or in the case of stock options, if the options are not exercised in the five-year period). The taxable profit can also be reduced if the actual sales price was lower than the value of the shares at the date of emigration.
It is possible to defer the payment of the exit tax until actual realization of gain takes place. To achieve this deferral, the taxpayer needs to furnish adequate security for the payment obligation or move to a state within the EEA with which Norway has entered into an agreement for the exchange of information and assistance with recovery of taxes.
Deemed losses on emigration are also calculated using the same rules (that is, on shares sold within five years of emigration), and any loss is offset against gains chargeable at the capital gains rate of 28%. However, the loss may be excluded on emigration outside the EEA, and no loss is granted as a result of step-up of the historic cost price.
In general, strict documentation requirements apply at the time of emigration and for the following five years. If the deemed profit is less than NOK 500,000 and, consequently, no exit tax applies, the taxpayer is still required to report the unrealized profit to the Norwegian tax authorities.
Deductions
Deductible expenses. The following expenses are deductible in calculating the ordinary income tax base if the 10% standard deduction for expatriates on temporary stay in Norway is not claimed:
- Within certain limits, costs of home leave if the individual is working and temporarily living abroad
- Premiums paid to pension plans with Norwegian insurance companies, within certain limits
- Alimony
- Interest on debts, except debts related to real property situated abroad
The 10% standard deduction applies for a maximum of two income years, and only up to a maximum of NOK 40,000 each year. In addition, the 10% standard deduction for nonresidents does not apply to directors’ fees received from Norwegian companies.
Personal allowances. In calculating ordinary income tax for 2011, individuals are allowed a standard minimum allowance of 36% of gross compensation, up to a maximum of NOK 75,150 and down to a minimum of NOK 4,000. This allowance is reduced proportionately if the individual is taxable in Norway for only part of the fiscal year.
Business deductions. To be deductible for tax purposes, items must be included in the statutory financial statements. In principle, all expenses for earning, securing or maintaining income, with the exception of gifts and entertainment expenses, are deductible. Valuation and depreciation rules for individuals earning self-employment or business income are the same as those for corporations.
Personal income tax. Personal income tax (top tax) is levied on income from employment and pensions, and no deductions are allowed.
Relief for losses. In general, losses may be carried forward for 10 years.
B. Other taxes
Wealth tax. A municipal wealth tax is levied at a rate of 0.7% on taxable net assets exceeding NOK 700,000. In addition, a national wealth tax is levied on taxable net assets at the following rates for 2011.
Inheritance and gift taxes.
Inheritance and gift taxes are paid on all inheritances and gifts received from resident decedents and donors. Real estate and related assets in Norway are subject to this tax, regardless of the donor’s residence or citizenship. Gifts and inheritances received from a spouse are not subject to the inheritance or gift tax. Neither inheritances nor gifts, with a few exceptions, are subject to income tax.
Inheritance and gift tax is calculated separately on a progressive scale for inheritances and gifts received from each donor. The first NOK 470,000 received from each donor is tax-free. Gifts received over several years and any inheritance received are aggregated to determine the tax-free portion and the progressive rates.
C. Social security
Contributions. Employers and employees, as well as self-employed individuals, must make social security contributions. Contributions are payable on all taxable salaries, wages and allowances and, for self-employed individuals, on personal income. For employees, contributions are withheld by employers together with income tax, and the total amount is paid to the tax authorities. Employers’ contributions, payable bimonthly, are deductible for income tax purposes. Employees’ and self-employed individuals’ contributions are not deductible. The 2011 contribution rates are 7.8% of salary for employees and 11% for self-employed persons. For 2011, the employer’s contribution is 14.1%. In certain municipalities, the rate for employers is lower.
Expatriates and foreign employers of employees working in Norway are subject to these contributions if an exemption (or reduction) is not available under a social security convention between Norway and the country where the expatriate or the employer is domiciled.
Totalization agreements. To provide relief from double social security taxes and to assure benefit coverage, Norway has entered into social security agreements with the following countries.
Australia
France (a)
Portugal (a)
Austria (a)
Germany (a)
Romania (a)
Belgium (a)
Greece (a)
Serbia
Bosnia
Hungary (a)
Montenegro (c)
Herzegovina
Iceland (a)
Slovak
Bulgaria (a)
Ireland Republic (a)
Canada (b)
Israel
Slovenia (a)
Chile
Italy (a)
Spain (a)
Croatia
Latvia (a)
Sweden (a)
Cyprus (a)
Liechtenstein (a)
Switzerland
Czech
Lithuania (a)
Turkey
Republic (a)
Luxembourg (a)
United Kingdom (a)
Denmark (a)
Malta (a)
Estonia (a)
Netherlands (a)
United States
Finland (a)
Poland (a)
(a) EEA countries’ agreement.
(b) Separate agreement with Quebec.
(c) The situation is uncertain with respect to Montenegro. The authorities in Montenegro have stated that the former agreement between Norway and Yugoslavia is applicable. However, this has not yet been confirmed by the Norwegian authorities.
On 29 October 2010, Norway and India signed a totalization agreement, but this agreement has not yet been notified.
Tax treaties
Norway’s double tax treaties generally follow the Organization for Economic Cooperation and Development (OECD) model. Norway has entered into double tax treaties with the following countries.
Albania
Greenland
Portugal
Argentina
Hungary
Qatar
Australia
Iceland
Romania
Austria
India
Russian Federation
Azerbaijan
Indonesia
Senegal
Bangladesh
Ireland
Serbia
Barbados
Israel
Sierra Leone
Belgium
Italy
Singapore
Benin
Jamaica
Slovak Republic
Bosnia
Japan
Slovenia
Herzegovina
Kazakhstan
South Africa
Brazil
Kenya
Spain
Bulgaria
Korea (South)
Sri Lanka
Canada
Latvia
Sweden
Chile
Lithuania
Switzerland
China
Luxembourg
Tanzania
Côte d’Ivoire
Malawi
Thailand
Croatia
Malaysia
Trinidad
Cyprus
Malta
Tobago
Czech Republic
Mexico
Tunisia
Denmark
Morocco
Turkey
Egypt
Nepal
Uganda
Estonia
Netherlands
Ukraine
Faroe Islands
Netherlands
United Kingdom
Finland
Antilles
United States
France
New Zealand
Venezuela
Gambia
Pakistan
Vietnam
Germany
Philippines
Zambia
Greece
Poland
Zimbabwe
To learn more about the history, culture, economy and other information about Norway
We have been preparing US income tax returns for US Citizens and permanent residents living in Norway for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Norway and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Norway.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email