Norway’s Offshore Taxation Proposal

The 2024 National Budget from the Norwegian Government proposes to tax foreign companies participating in certain activities in the 200-nautic mile zone and on the Norwegian continental shelf.

In the 2024 National Budget (full text in Norwegian only here) published on 6 October 2023, the Government proposed to introduce a legal basis for taxation of foreign companies participating in certain activities in the 200-nautic mile zone or on the Norwegian continental shelf. Activities that would be covered by the proposed taxes are as follows:

“mineral activities” on the Norwegian continental shelf,
exploitation of “renewable energy resources” in the 200-nautic mile zone, and
“carbon management” in the 200-nautic mile zone and on the Norwegian continental shelf.

For all activities, the tax liability is also proposed to apply to “associated activities”. The wording “associated activities” covers cases where the foreign company does not itself hold the permit or concession for exploration, exploitation or extraction, but performs work associated with the activities as a contractor or subcontractor. In addition, “associated activities” will include various forms of ship transport, supply services and service activities associated with the activities, such as transport of personnel and catering activities, as well as activities in connection with the construction and maintenance of facilities etc. However, the department proposes that ship transport of minerals and CO₂, be exempt from tax liability.

As for the transfer of electrical energy or transport of CO₂ through a pipeline with a connection point abroad, the Government proposes that the tax liability should apply to the extent that Norway has the right to tax under international law or a special agreement with a foreign state.

For all activities, the Norwegian General Tax Act for tax on corporate income would apply. The proposal does not imply that it is proposed to introduce resource rent tax for any of the relevant industries.

Norway’s right to tax based on the proposed provisions may be limited in tax treaties with the foreign company’s home state.

The proposed rules will have effect from and including the income year 2024.

The Government proposes that the introduction of a legal basis for taxing the income of foreign workers associated with the above mentioned activities in the 200-nautic mile zone or on the Norwegian continental shelf is postponed until 2025.

This article was first published in IBFD