Norway International Update Q3 2024

1.1 Tightening of the exit tax rules

In March 2024 the Ministry of Finance proposed some major tightening of the exit tax rules, which we provided a detailed overview of in our Q1 newsletter. In the proposed fiscal budget for 2025, the government has decided to uphold the main principles from the proposal presented in March, but with some adjustments. The main features of the proposal are as follows:

According to the proposal, the taxpayer is given three alternative ways to pay the exit tax, which includes:

• paying the tax immediately,
• paying the tax in interest-free installments over 12 years, or
• paying the tax at the end of the 12-year deadline with added interest.

The threshold for the exit-tax rules to apply is increased from NOK 500,000 to NOK 3 million, and this amount becomes a basic deduction, which means a relief for the taxpayers covered by the rules.  The threshold is however NOK 100,000 when transferring shares etc. to a recipient that is a foreign tax resident

The deferral of payment lapses in whole or in part upon actual realization of assets, withdrawals from a share savings account, distributions, and transfer of shares to a recipient who is not a tax resident in Norway.

One of the key changes from the proposal made on March 20 is that the government now suggests that distributions (e.g. in the form of dividends) from a company can also trigger the maturity of the tax claim. Specifically, if a taxpayer receives distributions from an asset subject to exit tax, a portion of the exit tax will become payable. Previously, distributions did not lead to the maturity of the deferred claim for exit tax. Under the new proposal, when a taxpayer receives distributions from an asset that is subject to exit tax, a corresponding portion of this tax must be paid. The amount of the distribution will determine the payable portion of the exit tax. Consequently, the Ministry recommends that the distributed amount be reduced by a factor of 0.70. For instance, if a dividend of NOK 100 is received, NOK 70 of the exit tax would be payable.

In the state budget, the government acknowledges that requiring the exit tax to become payable upon the taxpayer’s death could have adverse effects. Consequently, it is proposed that immediate payment will no longer be necessary if the heirs are tax residents in Norway. Further, heir’s resident abroad may avoid immediate taxation on received assets to the extent they accept to continue the exit tax obligation of the deceased.

The proposed changes are set to apply to relocations and transfers occurring from March 20, 2024, onwards. However, the new proposal that distributions should trigger proportional maturity of the exit tax apply to relocations and transfers taking place on or after October 7, 2024.

1.2 Proposed taxation on income for aquaculture companies on the continental shelf

In line with the Ministry of Finance’s proposal, which was sent out for consultation on April 2, 2024 (previously mentioned in our newsletter for Q2), the government proposes to introduce tax liability for foreigners’ income and wealth from aquaculture and related activities and work, in the economic zone (200 nautical miles from the baseline) and on the Norwegian continental shelf. The changes are proposed to enter into force as of the income year 2025.

• Tax liability for non-resident entities active with exploration and production of aquatic organisms (aquaculture), (currently this only applies to aquaculture of fish for human consumption such as salmon, trout, and rainbow trout).
• Tax liability for various forms of service provision and auxiliary activities related to aquaculture in the 200-mile zones and on the Norwegian continental shelf.
• Tax liability for non-resident workers who have income related to mineral activities, exploitation of renewable energy resources (offshore wind), and carbon management on the continental shelf.
• Non-resident individuals’ wealth related to business activities carried out 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 net wealth tax to Norway in the same way as for other subjects with limited tax liabilities.

The right to tax foreigners’ activities and work may be limited in Norway’s tax treaties with the home state of foreign companies and individuals, provided that the tax treaty applies on the continental shelf and in the economic zone.

1.3 No proposal of special rules on tax on private consumption in companies (monster tax)

In May 2022, the Ministry of Finance proposed introducing special regulations for taxing private consumption within companies. This proposal, often dubbed the “monster tax,” aimed to curb the personal use of company assets by shareholders. The bill faced significant opposition and has been delayed multiple times. Last year, the government admitted the challenges in crafting a balanced regulation and decided not to advance the proposal at this time.

However, it is important to note that the Ministry reminds that private consumption in companies is still a priority control area for the tax authorities, and that such private consumption in companies must still be reported and taxed according to current rules.

1.4 Discontinuation of temporary increased payroll tax (“competence tax”)

With effect from January 1, 2023, the government introduced an additional payroll tax known as the “competence tax,” which imposes a 5% tax on salary incomes exceeding NOK 750,000. This measure was introduced in response to the unusually high expenses in the state budget for 2023 and was intended as a temporary solution. Starting January 1, 2024, the government began the gradual phase-out of this tax by raising the income threshold to NOK 850,000.

As announced in the revised national budget for 2024, the government now proposes to eliminate the extra payroll tax by January 1, 2025.

1.5 Top-up tax according to the “tax allocation rule”

The new “Top-up Tax Act” (Nw. Suppleringsskatteloven), which implements the OECD’s Pillar 2, became effective in January 2024. We provided a detailed overview of the Top-up Tax Act in our Q1 newsletter. The main rule for the calculation and imposition of the top-up tax under the OECD’s Pillar 2 Model Rules, referred to in Norway as the “tax inclusion rule” (Nw. Skatteinkluderingsregelen), was introduced through the Top-up Tax Act. The tax inclusion rule stipulates that under-taxed income is taxed at the level of the ultimate parent company in the corporate group, or at intermediate parent companies.

In developing the top-up tax rule, it was anticipated that the secondary rule in the OECD’s Pillar 2 Model Rules, referred to in Norway as the “tax allocation rule” (Nw. Skattefordelingsregelen), would also be implemented. The tax inclusion rule and the tax allocation rule are designed to work together to ensure a minimum taxation of 15 percent. The government is now proposing to introduce the tax allocation rule through amendments and additions to the Top-up Tax Act.

As a result of the introduction of global minimum taxation in Norway and several other countries, the government has also proposed certain clarifications in the tax law’s rules on the right to a credit deduction in Norwegian tax for top-up tax imposed by a foreign tax authority. Credit deductions for top-up tax will reduce the effectiveness of the regulations. Therefore, the government has proposed that credit deductions should not be granted for top-up tax imposed under a qualified tax inclusion rule or tax allocation rule. Similarly, no cost deduction for such top-up tax should be allowed.

These changes in the tax law are proposed to take immediate effect, applying from the income year 2024.

1.6 Expansion of the Stock Option Scheme for start-ups

To make the stock option tax scheme for start-ups relevant for more companies, the Norwegian Parliament adopted a resolution on June 17th this year, urging the government to propose an expansion of the conditions for using the scheme.

Under the current regulations, the stock option tax scheme for start-ups includes companies with up to 50 full-time equivalents, which have total operating revenues and a balance sheet total of up to NOK 80 million, and which are not older than ten years in the year options are granted. The Norwegian Parliament has requested the government to expand the conditions to include companies with up to 150 full-time equivalents, which have total operating revenues and a balance sheet total of up to NOK 200 million, and which are not older than twelve years in the year options are distributed.

The government is now proposing to change the conditions in line with the Parliaments request, through a regulatory amendment. Other conditions under the stock option tax scheme for start-ups are not proposed to be changed. The stock option tax scheme for start-ups will thus be relevant for more and larger companies than before. The scheme is very attractive, with deferred taxation until shares acquired under the scheme are realized, and then taxation as capital, not salary.

The expansion of the conditions must be notified to and approved by the EFTA Surveillance Authority (ESA) before coming into force. The implementation is planned for January 1, 2025, or as soon as possible after ESA has approved the expansions.

1.7 Digital Platforms to Report Third-Party Seller Information

The government has issued a consultation proposal to require digital platforms that facilitate the sale of goods to provide third-party information about the sellers using the platform to sell goods or provide services. Previously, digital platforms that mediate the rental of property and transportation means were already covered by the reporting obligation.

The proposal involves implementing the OECD’s international standard for the automatic exchange of information on income earned through digital platforms, known as the “Model Reporting Rules for Digital Platforms.”

Only platforms that act as intermediaries by connecting sellers or service providers with potential buyers for the sale of goods or delivery of service are subject to this reporting obligation. The reporting obligation will apply to both Norwegian and foreign companies that facilitate the sale of goods to Norway.

For a digital platform to be subject to this reporting obligation, it is a condition that the platforms are aware of, or should have been aware of, the payments made for the goods and services. A platform that advertises relevant activities on its website and provides contact information for the seller, but where the buyer must contact the seller directly and both the agreement and payment occur without the platform’s involvement, is not subject to disclosure obligations. This applies even if a price is specified in the advertisement. It is the flow of payments that is of interest for tax purposes. A platform that facilitates both the agreement and the payment is a subject to the obligation. This also applies if the platform uses a third party to facilitate the payment.

Services covered include all types of time- or task-based work performed at the request of a user, such as handyman services, tutoring, data processing, legal services, and accounting services. Both services performed with physical presence and online are included.

The proposal stipulates that digital platforms subject to the reporting obligation must provide information about sellers using the platform to sell goods or provide services, hereby what the facilitation concerns and what has been paid.

Activity under the Norwegian National Security Act

On 14 June 2024, the Cabinet Meeting approved the partial enforcement of the amendments to the Norwegian National Security Act. More specifically, it was decided – and has now come into effect – that violations of decisions made under section 2-5 or 10-3 can be penalized with a fine or imprisonment. The purpose of the amendment is to ensure that the authorities can more effectively enforce non-compliance and reduce the risk of damage occurring before necessary measures are implemented.

The latest changes are however only a partial enforcement of the announced changes to the National Security Act. The remaining changes set out in Enactment 116 (2022–2023), which notably involve inter alia reporting requirements for acquisitions of companies that supply goods or services related to classified procurements under chapter 9 and holds a facility security clearance, lowered thresholds for triggering notification obligations, extended scope of the parties required to report, stand-still for reportable acquisitions, and prohibitions on information sharing concerning the acquisition of a subjected company, have not yet come into effect. However, in connection with the Cabinet Meeting mentioned above, the Ministry of Justice and Public Security stated that it “[…] will propose a royal resolution on the enforcement of the remainder of the amendment law when necessary regulatory changes can be implemented.” Although the Ministry did not provide any further details as to when these changes might occur, Wiersholm are closely monitoring the situation.

In addition to legislative activity, the government has also recently utilized its executive powers under the National Security Act to stop activities considered a threat to security. On July 1^st this year, the government decided to halt the sale of Søre Fagerfjord, which representers the last significant privately-owned area in Svalbard. This decision, pursuant to section 2-5 of the Security Act, mandates that the property’s owner must obtain written consent to conduct negotiations for or acquisition of the property, or ownership changes in the company that owns the property. The sellers are also required to report all offers received. Furthermore, on September 6, the Ministry of Trade and Fisheries sent a letter to Kirkenes Port stating that it would initiate necessary processes to map the port’s significance for national security interests. Kirkenes Port KF is subject to the Security Act, and the Ministry further indicated in the letter that it would consider whether other companies associated with the port should also be subject to the Security Act pursuant to section 1-3. These cases illustrate the intricate security-, geopolitical- and economic considerations that Norwegian authorities must undertake in their national security efforts.

The new Act on Sustainable Products and Value Chains has entered into force

On 1 July 2024, the Norwegian act pertaining to sustainable products and value chains (nw: lov om bærekraftige produkter og verdikjeder) entered into force. The new Act enables a new and strengthened framework for sustainable products. This framework is currently being developed in the EU, under the Circular Economy Action Plan published in 2020, which is one of the main building blocks of the European Green Deal.

The Act provides a legal basis for requiring businesses to utilize resources more efficiently at every stage of production and consumption of products. The aim is to make the lifecycle of products more sustainable and to design products to fit into a more circular economy, so that products last longer, are easier to repair, can be recycled, are designed for reuse, reduce emissions of greenhouse gases and other pollutants, and generate less waste.

The industry must adjust to the fact that higher standards for production and products will become the new norm in the future. Until now, the main objective of environmental legislation has been to reduce health and environmental hazards associated with societal activities and products. This legislation will continue to apply but is now supplemented by a new Act that focuses on promoting positive sustainability attributes of products.

The Act supplements existing legislation such as the Pollution Control Act, the Product Control Act and the Nature Diversity Act.

Sanctions

On 15 July, the EU imposed sanctions on an additional five individuals and three organizations under the European Union’s Global Human Rights Sanctions Regime. The listed individual and entities are considered responsible for serious and systematic human rights violations abuses against Palestinians in the West Bank, including abuse of the right of everyone to enjoy the highest attainable standard of physical and mental integrity, the right to property, the right to private and family life, to freedom of religion or belief and the right to education. Norway has joined these sanctions, which include freezing the financial assets of the individuals and organizations, as well as imposing travel bans on the individuals to both the EU and Norway.

Furthermore, Israel has imposed sanctions on Norway by revoking the diplomatic status of several Norwegian diplomats stationed at Norway’s Representative Office in the West Bank. In addition, Israel has withdrawn from the agreement under which Norway acted as an intermediary for Palestinian tax revenues collected by Israel. Norway’s Foreign Minister, Barth Eide, has stated that he believes Israel’s sanctions against Norway are due to Norway’s support for the International Criminal Court’s right to investigate Israeli political leaders.

PRIIPs has been in force in the EU since January 2018. The Regulation requires those producing investment products to retail investors to draw up a key information document (“KID“) before making the investment product available to retail investors. The KID shall consist of no more than three A4 pages and include specific sections detailing the product, risks, potential returns, costs etc. PRIIPs also includes specific requirements for updating the KID. A person advising on, or selling, the product shall provide retail investors with the KID in good time before any transaction is concluded. The Norwegian PRIIPs act will enter into force on 1 October 2024.

CBDF was adopted in the EU with a view to reduce the regulatory barriers for distributing investment funds (AIFs and UCITS) across the EU/EEA. New provisions in the AIF Act and Securities Funds Act implementing the requirements of the CBDF Directive and Regulation will enter into force in Norway on 1 October 2024. The new rules will, among other things, clarify conditions for pre-marketing of AIFs in Norway. The rules will also harmonize the deregistration process for AIFs and UCITS.

The Norwegian Lending Regulation sets out requirements on the banks’ and other financial institutions’ credit standards and includes requirements on the debt-to-income ratio, loan-to-value (“LTV“) ratio, the customer’s debt-serving ability and principal payments for consumer loans and mortgages with high LTV ratios. The NFSA’s proposal for new Lending Regulations recommend to largely continue the current requirements. However, the Regulation is proposed to be adopted without a date of repeal, with evaluation periods every three years. The deadline for the public consultation is set to 4 October 2024.

The Norwegian Act on Beneficial Owners (“UBO Act“) requires all legal entities, units and other associations (with certain exceptions) registered or conducting business in Norway to identify ultimate beneficial owners and register information on these in a registry at the Norwegian Register of Business Enterprises (Nw: Brønnøysundregistrene). The registry opens for voluntary registration from 1 October. The requirement to register information will apply from 31 July 2025.

4.1 Wiersholm contributes to what is likely to be the world’s first biogas carbon removal project

Inherit Carbon Solution AS, a long-standing client of Wiersholm, is currently working to establish a supply chain for the removal of carbon from the atmosphere and the sale of carbon removal certificates (“CDR-credits”) – documenting that the buyer has financed the removal of CO2 from the atmosphere for permanent storage. Wiersholm has entered into an agreement with the company to contribute to the establishment and purchase of carbon removal certificates.

– For some time now, we’ve been thinking about how we as a company can help to compensate for our emissions. There are several measures available on the market, but it has been important for us to ensure that we focus on measures we believe in, and not least that really make a difference. In September, we finally signed an agreement with Inherit Carbon Solutions, a long-standing client of ours, which is working to establish a supply chain for the removal of carbon from the atmosphere and the sale of carbon removal certificates. This is a very exciting project, which I have great faith in! The project is so far the first of its kind, and we will provide legal assistance in a new landscape of contracts, rules and regulations, as well as buying carbon removal certificates to compensate for emissions we have in connection with air and train travel, says Stephan L. Jervall, Managing Partner in Wiersholm.

4.2 Attendance at IBA

A Wiersholm team consisting of Stephan L. Jervell, Jarle Kvam & Anne Lise Gryte attended the 2024 International Bar Association’s Annual Conference in Mexico City in September.

Thank you to old and new friends for taking the time to make this a week packed of good conversations and interactions.

Looking back at the week, the Wiersholm team feel inspired from exchanging thoughts on;

• the legal markets, new legislation, artificial intelligence, green transition and other legal trends
• ethics, talent recruitment and retainment, diversity and law firm leadership
• client offerings, innovations and development
• life, motivation and excellence

…and from experiencing Mexico City: a truly fascinating city.

We look forward to catching up in Toronto in 2025!

4.3 Rankings and acknowledgement

We are proud to announce that Wiersholm continues to deliver robust results in international rankings. It shows the weight and breadth of what we do. We have always placed great emphasis on professional strength and development at Wiersholm, and we are pleased that this is also reflected in the rankings.

In the third quarter of 2024, it was announced that Wiersholm once again was top ranked in all practice areas covered by IFLR1000 (Banking & Finance, Capital Markets: Debt, Capital Markets: Equity, M&A and Project development), who ranks the world’s leading financial and corporate law firms and lawyers. In addition, 21 of our lawyers achieve individual recognition in the 2024 edition of the guide.

International Tax Review (ITR) has named Wiersholm the Norwegian Tax Litigation Firm of the Year at the annual Tax Awards for Europe, Middle East & Africa (EMEA). The award follows the company’s solid performance in the ITR World Tax Firm Rankings 2025 – an annual ranking of tax lawyers, where it was announced that Wiersholm once again is top ranked in the categories General Corporate Tax, Tax Controversy, Transactional Tax and Transfer pricing. In addition, seven of our skilled tax lawyers also received individual recognition in the ranking.

4.4 Save the date – upcoming events

Nordic Buy Out Forum 2024

On December 5, 2024, Wiersholm is hosting the 14^th edition of the Nordic Buy Out Forum – the largest and most important conference for M&A practitioners in the Nordics.

The conference serves as a premier platform for networking and knowledge exchange among key players in the venture capital, private equity, and transaction markets across Norway and the Nordic region.

The overarching topic of the 2024-conference is “Driving Growth: Leveraging Technology and Market Dynamics”.

We have a number of prominent speakers who have accepted to share their knowledge at the conference this year. Representatives from Norwegian Venture Capital & Private Equity Association (NVCA), Boston Consulting Group (BCG), The Visionary Company, Board & VC, Investinor, FSN Capital Partners, Danske Bank, TRK Group, Kverva AS, Schibsted, Clarksons Securities, Microsoft, J.P. Morgan and Newcode.ai will be joining us on stage.

Register here.

We hope to see you in Oslo in December.

Pre-event: Norwegian Arbitration Day 2025

For the second consecutive year, we have the pleasure of inviting you to the Wiersholm pre-event, organised alongside the 2025 Norwegian Arbitration Day in Oslo – with the main theme:

“The rule of t(h)ree: Use of decision trees as a research-based tool for better decisions in commercial arbitration”

Ensure your participation by registering today and keep an eye out for further information as the event date draws closer. Register here.

We look forward to seeing you on 26 February 2025 (you may of course also register for this event even if you are not planning to participate on NAD 2025).