National budget 2019 - Proposed changes in the rules on corporate tax residency
06 November 2018
The Norwegian Government has proposed amendments in the rules on corporate tax residency. The aim is to address tax avoidance strategies and to ensure that companies with sufficient connection to Norway are deemed resident and liable to pay taxes for their world wide income in Norway.
1. Current rules
A foreign company is deemed tax resident in Norway if the company’s actual management on a board level takes place in Norway.
For companies incorporated in Norway, effective management on a board level is just one of several factors in the overall assessment regarding tax residency. Location of the central administration/daily management, distribution of responsibilities between different bodies in Norway and abroad, location of the general assembly meetings and application of Norwegian company law are additional factors which may be relevant in the overall assessment.
2. The proposal
The proposal implies that companies incorporated in Norway will be deemed tax resident here. Foreign companies will be deemed resident in Norway if the effective management is performed in Norway.
Compared to the current rules, the proposal entails a broader assessment to decide where a foreign company is tax resident. The assessment will be similar to the assessment in OECD Model Convention article 4 (3).
A company resident in another state under a tax treaty will not be deemed resident in Norway. Nevertheless, these companies are obliged to file tax papers in Norway.
The proposed rules will, if passed by the Parliament, take effect from January 1st 2019.