Proposal to tax income from aquaculture companies on the continental shelf
The Ministry of Finance, led by Trygve Slagsvold Vedum, has today sent out a proposal for consultation to introduce tax liability to Norway for foreign companies and individuals who will have income from aquaculture and related business, in the 200-mile zones and on the Norwegian continental shelf. In this newsletter, we go through what the proposal entails, the background to the proposal and its consequences.
What the proposal entails
The Ministry of Finance, led by Trygve Slagsvold Vedum, has today sent out a proposal for consultation to introduce tax liability to Norway for foreign companies and individuals who will have income from aquaculture and related business, in the 200-mile zones and on the Norwegian continental shelf.
The proposal means that the exploration and production of aquatic organisms (aquaculture) are subject to tax liability (currently this applies to aquaculture of food fish of salmon, trout and rainbow trout). The proposal will thus include foreign fish farming companies with permission to operate such business. However, it is not a requirement that the foreign company itself holds permission to operate aquaculture – also business related to exploration and production is subject to tax liability. Furthermore, the proposal includes various forms of service provision and auxiliary business related to aquaculture in the 200-mile zones and on the Norwegian continental shelf.
In addition, the proposal implies tax liability for foreign employees who have income related to mineral operations, exploitation of renewable energy resources (offshore wind) and carbon management on the continental shelf. Tax liability for foreign companies’ business income related to such activities was introduced in the state budget for 2024, and it was simultaneously announced the introduction of tax liability for employment income related to such business, cf. Prop.1 LS (2023–2024) point 5.8.6 (see also further description about this in our newsletter from October 6, 2023, point 8 – only available in Norwegian).
Furthermore, the proposal implies that foreigners’ wealth related to business operations performed by self-employed individuals on the continental shelf and/or in the 200-mile zones and which are taxable under the new tax provisions, are subject to wealth tax to Norway in the same way as for other limited tax liable.
The right to tax foreigners’ business and work can be limited in tax treaties with foreign companies and individuals’ home state.
For foreign companies and individuals covered by the proposals, it is the rules of the Norwegian Tax Act on tax on general income that will apply (22 percent tax rate).
The background for the proposal
New technological solutions mean that it will be possible to operate aquaculture further out in open sea than what is common today. The Ministry of Finance highlights increased activity on the Norwegian continental shelf, and fair distribution of values created by foreign companies in Norwegian areas, as the background for the proposal:
“The emergence of new industries means that greater activity is expected on the Norwegian continental shelf in the future. We want to ensure that the community gets a rightful share of foreign companies’ value creation in Norwegian areas, and therefore make some necessary tax moves to ensure national control,” Minister of Finance Trygve Slagsvold Vedum (Sp) says.”
Together with the tax liability for mineral operations etc. that was introduced from 2024, the Ministry of Finance assumes that the proposal will secure Norway the right to tax income that comes from common natural resources.
Furthermore, with this proposal, the Ministry of Finance wants to achieve equal treatment of Norwegian and foreign actors who operate such business. The current rules are such that individuals and companies that are tax resident in Norway are already taxable for income from business covered by the proposal according to the global income principle (which implies tax liability in Norway regardless of where in the world the income is earned). Under current rules, however, there is no legal basis for taxing income earned by foreign companies and individuals who operate or participate in aquaculture business in the 200-mile zones and on the continental shelf, outside the Norwegian territorial border. The same applies to foreign employees who have income for mineral operations, exploitation of renewable energy resources (offshore wind) and carbon management.
Consequences of the proposal
The Ministry of Finance points out that little activity is expected in the relevant industries. At present, offshore fish farming is not particularly widespread, and it is primarily Norwegian companies that are in the process of establishing this business. It is therefore uncertain what actual consequences the proposal will have – at least in the short term.
We note that the proposal does not imply any proposal to introduce resource rent tax for any of the relevant industries. How such activity is taxed in the future remains to be seen (see further description in Newsletter of October 6, 2023, point 13 – only available in Norwegian).
The proposal’s entry into force
The changes will take effect from the income year 2025. The deadline for submitting comments to the consultation document is June 17, 2024.
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