The government will propose two temporary main amendments to the petroleum tax regime.

Writing off investment costs

The first main proposal is that companies that are subject to taxation under the petroleum tax regime may immediately write off their investment costs, including uplift (Norwegian: “friinntekt”), in the tax basis for the natural resource tax.

As a result of this amendment, the government will propose to reduce the uplift from 5.2 % annually the first four years, to 10 % the first year.

This will apply for investment costs incurred in 2020 and 2021, and for investments that are parts of plans (PUDs and PADs) that are submitted by the end of 2021, and that are approved by the end of 2022, and until the start of production.

The amendments will not apply for investment costs incurred after 2024.

Payment of tax value of losses

The second main proposal is that the tax value of losses in the income years 2020 and 2021 can be paid to the taxpayers.

These temporary amendments will, in practice, involve a postponement of tax payments. The government estimate that the amendments could boost the companies’ liquidity by up to NOK 100 billion in 2020 and 2021. The exact effect will depend upon the actual investments.

The proposal will be presented to the Norwegian parliament 12 May 2020, so it remains to be seen if the proposal will be supported.

The proposal will also be subject to an assessment of whether the amendments are compliant with the EEA-Agreement.

The proposal has already been criticized by the E&P industry, represented by the Norwegian Oil and Gas Association (a professional body and employer’s association for oil and supplier companies) who argues that the positive effects of the immediate deduction is reduced by the restrictive effects of the reduced uplift.

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