At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Norway for over 8 years. Our clients hail from all parts of the country - Oslo and Bergen, Stavanger/Sandnes and Trondheim, Fredrikstad/Sarpsborg and Drammen.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country. The expatriate Foreign Earned Income Exclusion ($92,900 for 2011 and $95,100 for 2012) can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost. We have many clients living in Norway and know how to integrate your U.S. taxes into the local income taxes you pay. Any Norwegian income tax you already pay can be claimed as against the tax liability on your U.S. 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 calendar year as is standard in Norway for U.S. tax purposes). You must, however, 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 form 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.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.
Below we include information on the Norwegian Tax System for the American Expatriates.
In Norway, the general combined rate of the national and municipal income taxes is 28%. A lower rate of 24.5% applies for the counties of Finnmark and Nord-Troms.
An additional national income tax is payable on "gross personal income" (which includes gross income from employment or self-employment, including pensions). With effect from 1 January 2010 the rates of the national income tax are:
| Taxable income (NOK) | Tax Rate |
| 0 – 456, 400 | 0% |
| 456, 401 – 741, 700 | 9% |
| 741, 701 and above | 12% |
A personal allowance of NOK 84, 420 (2010) is available to jointly assessed married couples and for single persons with dependents. The allowance for single persons without dependents and married persons assessed separately is NOK 42, 210 (2010).
In addition, social security taxes are paid. Employees pay 7.8% of gross salary income. For self-employed individuals the rate is 11%.
Wealth tax is also charged on the net value of assets. The rates are progressive from 0% to 1.1% including national and municipal net wealth taxes.
Basis – All individuals domiciled or permanently resident in Norway are subject to Norwegian income tax on their worldwide income. Nonresidents are taxed on income received from real and personal property in Norway and on directors' fees from Norwegian corporations. In addition, income from personal services carried out through private or public employment in Norway by nonresidents temporarily present in Norway, including persons sent to Norway by employment agencies, is taxable. Norway's right to tax may be limited under an applicable tax treaty.
Residence – An individual becomes a permanent resident in Norway if he/she is present in Norway for a period exceeding 183 days during any 12-month period or 270 days during any 36-month period. Individuals do not become resident during the first calendar year if the time spent in Norway that year is less than 183 days.
Taxable income – Income tax liability is based on worldwide income, net of expenses (including interest paid) and foreign income taxes. Taxable income includes salaries; dividends, interest and royalties; income from real property and other capital; industrial, commercial and agricultural profits; and shares of partnership net income, whether or not withdrawn from the partnership.
Capital gains – Capital gains are taxed at 28%. Gains from the sale of real property used as a permanent residence are taxable where the taxpayer owned the property for less than 1 year (5 years for a vacation home). Gains from the sale of securities are included in taxable income. Quoted shares are valued at their full market value. Shares in unquoted companies (Norwegian) are valued at 100% of the company's net tax value.
Tax Deductions and allowances – Losses incurred on the sale of securities are fully deductible from taxable income. A standard deduction from ordinary income is available for incidental personal expenses of up to 36% of salary, subject to a minimum of NOK 4,000 and a maximum of NOK 72,800. The standard personal deductions are NOK 42,210 for single taxpayers and NOK 84,420 for married taxpayers filing jointly. A resident taxpayer is entitled to an unlimited deduction for interest paid on debts.
Other taxes on individuals:
Capital duty – Generally none
Stamp duty – Stamp duty at 2.5% is levied on deeds of conveyance.
Capital acquisitions tax – Generally none
Real property tax – Municipal authorities levy "rates" on the occupation of real property. A property tax applies to the assessed value of real property, at rates ranging between 0.2% and 0.7%, depending on the location of the property. Some municipalities do not levy the tax.
Inheritance/estate tax – Assets gifted to certain close relatives and individuals considered in the donor's will, as well as inheritance, are subject to inheritance/gift tax if in excess of certain standard exemptions/thresholds. Progressive rates of up to 15% apply.
Social security – A person resident or working in Norway is a compulsory insured "member" under the Norwegian National Insurance Scheme (NI-scheme). The NIscheme is financed by contributions from its members, employers of members and the Norwegian state. Parliament sets the contribution rates annually. The employee's contribution is 7.8% of gross income derived from employment. The employer's contribution is differentiated regionally and ranges between 0% and 14.1%. Specific rates (maximum 10.7%) apply to income derived from self-employment and remuneration for work performed by partners in partnerships. The contribution for other types of personal income (e.g. pensions) is 3%.
Norway Tax year – Norway tax year is the calendar year
Tax Filing and Tax payment – Tax payable on employment income is withheld at source by the employer. Individuals who are required to submit a tax return to the tax office for foreign tax affairs must do so by 31 March following the year end. Most Norwegian residents will file a pre-completed return for which the deadline is 30 April following the year end.
Penalties – Penalties are normally 30% or 60% of tax. Interest also can be charged.
Norway Corporate Taxation
The company tax rate in Norway is 28%.Company tax is payable by Norwegian resident companies on non-exempt income derived from all sources. Non-resident companies are required to pay tax on income sourced in Norway.
A company is treated as resident if its central management and control or head office is located in Norway and, for all practical purposes, a company registered in Norway is also considered a resident.
Norway tax year is usually the calendar year, although this can be deviated from in certain circumstances. Tax is payable in three instalments. A preliminary assessment is issued after the end of the tax year corresponding to the accrued taxes not yet assessed. This tax is due in two instalments on 15 February and 15 April. The balance is to be paid within three weeks after the assessment is made public. Company tax returns must be filed by the end of March for the preceding tax year (this is extended to the end of May for electronically filed returns). It is possible to get an agreed postponement.
CAPITAL GAINS TAX
There is no separate capital gains tax. Capital gains are treated as ordinary income.
BRANCH PROFITS TAX
Shipping companies are not taxed on profits but when they pay dividends. There is no other special profits tax on branches of foreign companies in Norway.
FRINGE BENEFITS TAX (FBT)
Both residents and non-residents are taxed on fringe benefits. The value of the benefits is taxed as the top slice of employment income. The highest marginal tax rate is 51%.
SOCIAL SECURITY CONTRIBUTIONS
Employers are liable to pay social security contributions relating to salaries and benefits paid to their employees. The fee levied is 14.1% in Central areas. Lower rates are available for certain employees in areas in the North of Norway.
LOCAL TAXES
Property taxes in some urban areas are levied at a maximum 0.7 % of the tax value of the property.
OTHER TAXES
Real estate transactions are subject to 2.5% stamp duty. Property transferred by gift or on death is taxable at rates varying from 6% to 15%. Special taxation regimes apply to oil and gas. Tax rate for these companies is 78% (28% + 50%).
DETERMINATION OF TAXABLE INCOME
The taxable income of a company is determined by ascertaining assessable income and then subtracting all allowable deductions. Generally, to be deductible, losses and expenses must relate to producing the assessable income. Some items such as entertainment expenses and gifts are specifically non-deductible. Only realised expenses are deductible. Special rules apply to the categories listed below.
DEPRECIATION
Book depreciation is not allowable for tax purposes. Assets with an expected life of more than three years and costing more than NOK15,000 should be depreciated on a declining-balance method using the following rates:
Office machinery 30%
Goodwill 20%
Trucks, trailers, buses, taxis and vehicles for disabled persons 20%
Cars, agricultural tractors, machinery, tools, instruments etc. 20%
Ships, drilling platforms, vessels, etc. 14%
Aeroplanes 12%
Power stations, power lines 5%
Industrial buildings, hotels, restaurants 4%
Office buildings 2%
Technical installations in buildings 10%
STOCK/INVENTORY
All trading stock held at the beginning of the tax year and at the end of the tax year must be taken into account when determining taxable income. Stock is valued at cost without regard to real value. Work in progress and finished products are valued at direct variable cost of materials and labour. Real value is not taken into account. Accepted valuation method is FIFO not average cost or LIFO.
CAPITAL GAINS AND LOSSES
See text above.
DIVIDENDS
Dividends are not deductible for income tax purposes for the dividend paying company. Dividends received from other Norwegian companies are tax-exempt under the participation exemption. However, 3% of the dividend is added to the recipient's taxable income.
INTEREST DEDUCTIONS
All interest costs on business debt is deductible. Normally, there are no 'thin capitalisation' limitations (except in oil and gas production). Tax authorities can, however, make adjustments.
LOSSES
Losses may be carried forward. Losses may generally not be carried back but, when a company liquidates, the losses of the year of liquidation may be offset against profits of the two preceding years.
FOREIGN SOURCED INCOME
Norway has rules designed to ensure that profits sourced in low tax countries are included in the controlling Norwegian company's taxable income. Generally, income from a foreign company will be included if 50% or more of the company is owned or controlled by Norwegians. A low tax jurisdiction applies where the tax payable is less than two-thirds of the tax that would have been payable in Norway.
TAX INCENTIVES
Generally, there are no special incentives, although research and development credits are granted to small and medium sized companies under qualifying circumstances.
FOREIGN TAX RELIEF
Deductions are available for foreign tax paid or, as an alternative, a credit may be available against Norwegian tax payable on that income.
CORPORATE GROUPS
Group companies cannot file consolidated tax returns. Under special circumstances, income can be transferred between companies residing in Norway. The requirement is that there is more than 90% common ownership of the companies.
RELATED PARTY TRANSACTIONS
Transfer pricing should be based on an arm's length principle. Norwegian tax law gives the tax authorities the power to raise assessments if transactions between the taxpayer and associated companies are not based on an arm's length principle.
WITHHOLDING TAX
Withholding taxes must be deducted from dividends paid to non-residents, although there is no withholding on dividends paid to corporate shareholders resident within the European Economic Area. Interest payments and royalties are not subject to withholding taxes. Foreign companies and other entities within the EEA are not subject to withholding taxes.
EXCHANGE CONTROLS
Most exchange controls were phased out in 1990. However, all imports of capital in cash exceeding NOK 25,000 should be reported to the Bank of Norway. Other transfers of capital need not be reported.
Norway vat (Value Added Tax) Rates
VAT is levied on the sale of most merchandise and services and on imported goods and services.The standard VAT rate in Norway is 25% (14% on food, 8% on passenger transport, cinema tickets and letting of rooms in hotels, motels and tourist cabins etc).
Some goods are exempt but VAT on the purchase of materials and goods is still deductible. This also applies to exports, newspapers, certain periodicals and international transportation. Other areas are exempt without any credit for input tax. This is the case for health services and financial services.
VAT Registration – Businesses with annual turnover above NOK 50,000 must register for VAT purposes.
Filing and VAT payment – There are 6 filing and payment dates each year (every second month).