Coronavirus: The Government's tax measures
Below please find an overview of the most important tax measures (updated on 30 April 2020):
Extended closing date for submission of tax returns for business owners and companies
The closing date for submission of the 2019 tax return is extended from 31 May to 31 August 2020. No additional extensions will be granted. The spouses of those granted a closing date extension will automatically be granted the same extension. The same applies to partners in businesses assessed as a partnership
The 2019 tax assessment
Residual tax and calculation of interest
The first instalment must be paid three weeks after the completion of the tax assessment, which is at the earliest expected on 2 September 2020.
The second instalment must be paid eight weeks after the completion of the tax assessment.
Interest is calculated at 1.17 per cent per annum, but:
- In 2020, interest is calculated from 1 July 2019 until the due date of the first residual tax instalment.
- The interest is non-deductible.
Payment of additional advance tax
Payment of additional advance tax will reduce the residual tax. When paying additional advance tax within the closing date, the interest rate surcharge on the amount paid is avoided in its entirety. The closing date for payment of additional advance tax remains unchanged, 31 May 2020.
Deferred payment of advance tax
Advance tax for self-employed persons must be paid in four instalments. In 2020, the closing dates are as follows:
- The first instalment fell due on 16 March, but the extended closing date for payment is 4 May.
- The second instalment falls due on 15 May, but has been extended until 15 July.
- The third instalment falls due on 15 September.
- The fourth instalment falls due on 15 November.
The extension also includes the profit share of the finance activity tax. The extensions do not apply to ordinary income, natural resource tax and economic rent tax for taxpayers liable for such taxes.
There is no need to apply for an extension.
Should the economy change as a consequence of the coronavirus, the advance tax rate or the tax deduction card may be changed at any time at skatteetaten.no.
Deferred payment of corporation tax
Advance tax for companies is paid in arrears in the subsequent tax year. The advance tax is paid in two equal instalments. The closing date for payment of the second advance tax instalment for 2019 was originally 15 April 2020. This closing date is extended until 1 September 2020. However, the extension does not apply to natural resource tax, economic rent tax on ordinary income. Nor does the extension apply to payment of petroleum revenue tax.
Extended closing date for tax-free conversions
The closing date for tax-free conversions to limited liability companies with effect from the current year is extended until 1 September 2020. The closing date extension is set out in the Regulations of 27 April 2020. Usually, this closing date is 1 July of the tax conversion year. The extended closing date enters into force immediately and applies to the 2020 tax year.
In order for the tax conversion to be effective from 1 January 2020, the company must be established and a notification sent to the Register of Business Enterprises by 1 September 2020. The company must have made tax deductions and calculated employer’s contributions by 1 September 2020. Documentation confirming that the Register of Business Enterprises has been notified of the private limited liability company or the public limited liability company within the closing date must be attached to the tax return.
This extended closing date also applies to NUF (Norwegian-registered foreign companies) tax conversions.
Temporary initial depreciation scheme
The Norwegian Parliament has requested the Government to introduce a temporary initial depreciation scheme for balance group D (including, among others, the manufacturing industry) of 20 to 30 per cent. The Government is requested to present this in the revised national budget for 2020 on 12 May.
Furthermore, the Norwegian Parliament has requested the Government to establish a separate temporary balance group for taxation of vessels (outside the tonnage tax scheme) in domestic traffic, with a depreciation rate of 20 per cent. The proposal will be presented in connection with the revised national budget for 2020.
Simplification of the reporting obligation – interest limitation
Simplifications in relation to the submission of form RF-1315
Companies, etc. which are part of the Norwegian part of a group in which the total net interest expenses do not exceed the threshold amount of NOK 25,000,000 (group threshold), do not have to submit RF-1315 for the tax year 2019 on the following conditions:
- That the top company in the Norwegian part of the group has submitted RF-1315 and completed the form’s part A, including the overview in item 24 of the entities which are part of the Norwegian part of the group. This overview shall include the total net interest expenses of the Norwegian part of the group as well as the net interest expenses of each of the companies in the Norwegian part.
- That the company’s net interest expenses included in the table in item 24 are NOK 5,000,000 or lower.
- That, in an appendix, the company states the name and organisation number of the company that has submitted RF-1315 with the above information on behalf of the other Norwegian companies in the group, and confirms that this information is accurate and complete.
- That the company has not carried forward interest from previous years.
Simplifications in relation to the submission of form RF-1509
For companies that apply the exemption rule at national level and that are required to submit RF-1509, some simplifications apply:
The top company in the Norwegian part of the group must submit a completed RF-1509, but the other companies that apply the exemption rule at national level are only required to report the following:
- Name and organisation number.
- In the text box in item 295, state that the company applies the exemption rule at national level, the name and organisation number of the company that has completed RF-1509, and that a copy of the completed form is attached to the tax return.
- The company and its auditor must sign the RF-1509 form and approve the contents of the enclosed copy of the form.
- In addition, a copy of the completed RF-1509 (cf. the first bullet point) must be included as an appendix.
If the exemption rule is applied at company level, the entire form must be filled in and signed by the company and the auditor.
Link to statement of principle by the Directorate of Taxes of 16 April 2019
Extended access to reside in Norway under the one-year rule
When working outside Norway for at least twelve months, a taxpayer may claim a tax deduction on labour income under the so-called one-year rule. The residence abroad must be consecutive. The rules stipulate that short-term stays in Norway do not to interrupt a consecutive residence abroad. Under the current rules, the taxpayer is entitled to stay in Norway for up to six days for every full month the person has worked abroad.
If the stay in Norway is due to circumstances which were unforeseeable when the work residence abroad commenced and which are beyond the control of both the taxpayer and the employer, the taxpayer may be entitled to stay in Norway for up to three additional days, i.e. up to nine days of residence in Norway for every full month the person has resided outside Norway.
Due to the coronavirus, many taxpayers who work abroad have returned to Norway. For other taxpayers, travel restrictions, closed borders, quarantine regulations, etc. have led them to not return to their place of employment abroad after staying in Norway. The Directorate of Taxes assumes that the outbreak of the coronavirus represents an unforeseeable circumstance, which may entitle to up to nine days of residence in Norway for every full month the taxpayer has worked outside Norway.
The taxpayer must substantiate that there is a causal connection between the stay in Norway and the outbreak of the coronavirus, such as e.g. travel restrictions, closed borders, serious illness, etc. However, the Norwegian Tax Administration will assume, without further substantiation, that there is a causal connection as long as the travel advice of the Ministry of Foreign Affairs because of the coronavirus applies to the place of employment abroad.
If the taxpayer works during the permitted days of residence in Norway, the income earned will be taxable to Norway and this income will not be included in the basis for tax reduction pursuant to the one-year rule.
Whether work in Norway may lead to the interruption of the residency abroad may also be an issue. The Norwegian Tax Administration will assume that work from home office during residence in Norway due to unforeseeable circumstances caused by the coronavirus will not interrupt the residency abroad, provided the conditions for the one-year rule are otherwise met.
Link to statement of principle by the Directorate of Taxes on 1 April 2020
Tax exemption for employees for necessary benefits in kind received as a result of the corona situation
The corona outbreak has resulted in an extraordinary situation, which requires the working day to be organised in a manner that prevents the spreading of the virus, while at the same time maintaining important functions to the greatest extent possible. This may be various technical home office solutions, electronic communication services and health care. In principle, employment benefits in the form of various benefits in kind are taxable for the employee and reportable for the employer.
In a statement of principle, the Directorate of Taxes has assumed that the outbreak of the coronavirus means that this type of employment organisation and benefits ought to be considered in a different manner. When the measure is based on the need to maintain operations and reduce the spread of the virus, it should now be assumed that the benefit is non-taxable if the measure is temporary and proportionate. Furthermore, it is assumed that the employer is the closest to consider whether the benefit will maintain operations and prevent the spread of the virus.
This means that home office solutions, electronic communication services and health care funded by the employer are now tax-free and should not be reported. The tax exemption assumes that the benefit is temporary, proportionate and based on the need to maintain operations and prevent the spread of the virus. The employee will not be tax liable for these benefits, nor will they be reportable and included in the employer’s contribution basis.
Link to statement of principle from the Directorate of Taxes of 31 March 2020
Reversal of loss
Companies experiencing a decline in earnings and liquidity challenges have been granted a temporary right to reverse the 2020 loss against taxed profits in the years 2018 and 2019.
Which companies that are included in the scheme are based on the enumeration in the Taxation Act section 2-2 first subsection. Companies may have 2020 losses reversed against taxed profits in the two preceding years. The measure provides the businesses with a cash contribution equal to the tax value of the reversed loss. The tax value will not be paid until the 2021 tax settlement, but this definite reimbursement is expected to make the banks more willing to grant short-term loans to improve the companies’ ongoing liquidity needs, as well as making it easier for companies to implement necessary measures.
The measure is linked to the Government’s measure to reduce the countercyclical capital buffer from 2.5 to 1 per cent. The reduced capital requirement for banks may result in an increased willingness to lend to a crisis-hit business sector.
Reduced employer’s contribution
The Norwegian Parliament has decided to reduce the employer’s contribution by four percentage points for the time being. This is an efficient measure in a liquidity-challenging time for large parts of the business sector. The measure is a real tax relief not just a deferral, which characterises the majority of the other tax measures.
The closing date for payment of employer’s contribution for the second period has been extended from 15 May to 17 August 2020.
The closing date for payment of the payroll portion (increased employer’s contribution) of the financial activity tax for the second period has also been extended from 15 May to 17 August 2020.
Deferred payment of wealth tax
An additional measure concerns deferred payment of wealth tax. The measure entails deferred tax on business assets for individual taxpayers who own businesses required to keep accounts that has a negative net income in 2020. The scheme entails that the taxpayer may apply for one year’s deferred payment when the wealth tax for the tax year 2020 falls due in 2021. Companies that prepare consolidated accounts must have a negative consolidated net income to be allowed to defer payment of wealth tax on shares in the parent company.
Taxpayers who can substantiate that the business will operate at a loss in 2020 may also apply for exemption from withholding tax and advance tax. Such a measure may help strengthen the liquidity situation since companies do not have to pay dividends in order for the owners to be able to pay the wealth tax. As a result, the measure may lead to greater scope for owners to support the operation of the business during the period of crisis.
In our opinion, deferred payment of wealth tax is not sufficient. Since the turn of the year, Oslo Stock Exchange has fallen by more than 30 per cent. A number of companies will have a negative operating income and no dividend capacity. When the 2019 tax return is due this spring, the Government ought not to collect wealth tax for non-existent paper assets.
Dividends may be changed
For many companies with solid operations and finances at the turn of year, the situation is now uncertain. Previously adopted dividends may be reversed in the period between the general meeting’s resolution and payment.
On 31 March, the Directorate of Taxes issued a statement on taxation of adopted dividends for shareholders. According to the statement, if a resolution on distribution of dividends is reversed, dividends for 2020 will not be taxed. It is a prerequisite that the decision to reverse is made before payment takes place and at the latest by the end of the year, and that the reversal is due to measures introduced to secure proper equity and liquidity as a result of the corona situation.
Furthermore, it is a prerequisite that the decision to reverse the dividend resolution is made by a competent body and that the reversal is valid in terms of company law.
Reduced VAT
As a temporary measure, the VAT rate for some vulnerable industries has been reduced from 12 to 6 per cent. This includes, among others, cultural life, passenger transport and hotels. The reduction is time limited and applies from 1 April 2020 up to and including 31 October 2020.
The measure has been criticised for not being very accurate, posing administrative challenges for the businesses, and having marginal effect during a period when the challenge is closed businesses and not high prices.
Extended closing date for payment of value-added tax
The closing date for payment of VAT related to the first VAT period (January-February) with an original closing date of 10 April 2020 (14 April this year due to Easter) is extended until 10 June. This is the same closing date as for the VAT for the second period (March-April). It is currently unclear whether the closing dates will be further extended and/or whether payments for other periods will be extended. The extensions are limited to the payment of VAT. The closing date for submission of VAT tax returns has not been changed.
The changes do not apply to businesses with deviating taxation periods, which means that the extended closing dates only apply to businesses with general taxation periods (every two months).
Enforcement fine suspended
For the time being, the Norwegian Tax Administration has suspended the imposing of enforcement fines for late submission of reports and returns. This principally applies to the following:
- The 2019 tax return for business owners and companies with a closing date of 31 May.
- VAT tax returns with closing dates from March to 10 June, i.e. no enforcement fine will be imposed for late submission of the VAT tax return for the first period (extended closing date of 10 June) and the second period (original closing date of 10 June).
- VAT tax returns that are submitted annually (closing date of 10 March) and the annual statement for primary industries (closing date 14 April).
- Employer’s notification to the tax authorities (A-melding) with closing dates of 5 March and 6 April.
Link to the Norwegian Tax Administration’s updated overview of the package of measures.