On 15 October 2025, the Norwegian Ministry of Finance published the National Budget for 2026 with a proposal to amend the VAT rules for cross-border trade and use of remotely deliverable services within so-called Multi Location Entities ("MLEs"), i.e., entities with establishments in two or more countries.
In short, the proposal implies extended VAT liability for remotely deliverable services acquired by an MLE outside Norway for use by the MLE in Norway, and extended right to deduct input VAT for remotely deliverable services acquired by an MLE in Norway for use by the MLE outside Norway. The VAT liability applies only to services acquired from third parties and not to any value add created within the MLE, but the latter does not exempt services acquired from third parties from the VAT liability if the services are used as input factors to produce services within the MLE.
The purpose of the proposal is mainly to secure that services are taxed in the country of consumption in accordance with the destination principle set out in OECD (2017) International VAT/GST Guidelines[1], and to avoid different VAT burden for MLEs and domestic businesses competing in the same market. Nevertheless, the proposed rules are different from the rules in, among others, the EU, and may thereby result in double taxation and increased administrative costs.
The rules are proposed to take effect from 1 July 2026. There is no reason to believe that the proposed rules will not be adopted. Businesses that may be affected should therefore start planning how to navigate the rules to adapt and be compliant, to avoid unnecessary negative impact.
Current rules
"Remotely deliverable services" are defined as services where the performance or delivery, due to the nature of the service, may not or hardly be linked to a specific physical location. Typically intangible services such as IT, consulting, advisory, accounting and administrative services.
Purchase of such services from abroad by a business or public enterprise resident in Norway is subject to VAT by reverse charge, unless the service as such is exempt from VAT. Moreover, purchase of remotely deliverable services by a business or public enterprise resident outside Norway is subject to VAT by reverse charge in Norway, if the service is purchased for use in Norway and is not subject to VAT abroad.
Production and utilization of services by an MLE cross-border between its establishments in Norway and outside Norway is not subject to VAT, as it takes place within the same legal entity. The same applies even if one of the establishments is part of a different taxable person due to VAT grouping. Only if a service is purchased from a third party, cross-border use of the service may be subject to VAT in Norway.
The current rules are causing two types of VAT disruptions:
1. A service purchased by an MLE resident outside Norway may be used by the MLE in Norway without the service being subject to Norwegian VAT as long as the service has been subject to VAT abroad, irrespective of whether VAT calculated abroad is recoverable or not. Combined with Article 169 c of the EU VAT Directive regarding the right to deduct VAT on services used to supply financial services to customers established outside the EU, this allows financial service providers to acquire VAT liable services abroad for use in Norway without incurring a VAT cost (no taxation).
2. A service purchased by an MLE resident in Norway is subject to VAT even if the service is fully for use by the MLE outside Norway. If the MLE's establishment outside Norway is also part of a VAT group, making it a different taxable person than the MLE's establishment in Norway, the MLE may incur VAT both in Norway and outside Norway on the same service (double taxation).
The objective of the proposal is to address these two types of VAT disruptions.
Part one of the new rules - VAT liability for services acquired by MLEs outside Norway for use in Norway
To avoid the risk of non-taxation of services acquired for use in Norway, the Ministry of Finance proposes to introduce a VAT liability on services purchased by MLEs outside Norway for use by the MLE in Norway.
The scope of the vat liability
The proposal entails that a remotely deliverable service purchased by an MLE resident outside Norway for use by the MLE in Norway, will be subject to VAT by reverse charge in Norway, provided that the service as such is not exempt from VAT in Norway.
The VAT liability will apply to services acquired by the MLE outside Norway from a service provider resident in the MLE's country of residence, the MLE's country of use or in a third country, and even if the service provider is part of the same VAT group as the MLE.
The VAT liability will apply to services that are acquired by the MLE to be either fully or partially used by the MLE in Norway.
The VAT liability will apply not only to services that are purchased by the MLE for direct use by the MLE in Norway, but also to services that are acquired for indirect use by the MLE in Norway. The latter comprises services that are acquired as input factors in the internal production of services for use within the MLE (e.g., IT software to be used as component in the creation of a tailored IT solution), and support functions for the MLE's business in general (e.g., HR, accounting etc.).
Whether, and to what extent, a service is purchased for direct or indirect use by the MLE in Norway, shall be determined at the time the service is acquired, i.e., based on the MLE's intended use of the service.
The proposal states that the Ministry of Finance will issue regulations with safe harbour allocation rules to be applied in situations where the intended use of a service is only partially in Norway.
The proposal includes two important exemptions:
1. The VAT liability will not apply in cases where the service is purchased for use by the MLE exclusively for purposes that entitle the MLE to fully deduct the input VAT. This exemption will not apply if the intended use only entitles the MLE to partially deduct the input VAT.
2. The VAT liability will not apply if the MLE can document that the MLE has incurred VAT on the service outside Norway and prove that it is more likely than not that such VAT is non‑deductible for VAT purposes for the MLE abroad.
The tax basis and timing of the vat liability
As a main rule, the basis for calculation of VAT will be the consideration paid by the MLE to the third party service provider, and only a share of this consideration if the service is purchased to be used by the MLE only partially in Norway. Any value added through internal amendments or processing of the service by and within the MLE, is excluded from the tax basis.
In cases where the service is purchased by the MLE to be used by the MLE only partially in Norway, the allocation of the consideration paid between the taxable and non-taxable use shall be based on the MLE's best estimate of the extent to which the service will be used by the MLE in Norway and any data already available to the MLE for other purposes (e.g., accounting and income‑tax records) that can substantiate the allocation.
If the service is acquired as input factor in the internal production of services for use within the MLE, the MLE may choose to use the transfer price for CIT purposes as basis for calculation of VAT, but only if the transfer price is higher than the basis for calculation of VAT pursuant to the main rule. This exception may be beneficial in cases where the value added to the service internally by the MLE is so limited that the cost of identifying the tax basis pursuant to the main rule will be higher than the additional VAT cost of paying VAT on the higher transfer price for CIT purposes.
The proposal states that the Ministry of Finance will issue regulations with rules on when and how the VAT shall be reported. The regulations will provide for VAT reporting based on budgeted amounts with an obligation for the MLE to make subsequent corrections to the VAT reporting as soon as the basis for the calculation of VAT has been determined, but no later than the filing deadline for the annual accounts for the accounting year in which the original VAT reporting was made.
Part two of the new rules - Right to deduct input VAT on remotely deliverable services purchased for use outside Norway
To avoid the risk of double taxation of services acquired by an MLE in Norway for use by the MLE outside Norway, the Ministry of Finance proposes a right for MLEs to deduct or claim a refund of Norwegian VAT incurred on remotely deliverable services acquired by the MLE in Norway for use by the MLE within its business outside Norway.
The proposal will relieve both MLEs registered for VAT and MLEs not registered for VAT from the burden under the current rules of having to pay Norwegian VAT on services acquired in Norway for use outside of Norway. The relief will be contingent on the MLE using the services within its business outside Norway. Any use outside the MLE's business or by others will not allow the MLE to deduct or claim a refund of the VAT. The relief will however not be contingent on the services being subject to VAT outside Norway.
How to navigate and adapt to the new vat rules
All MLEs engaged in business activities in Norway should analyse the VAT consequences of the new rules and the need for action to avoid double taxation, and start preparing internal processes to be compliant when the new rules come into effect on 1 July 2026.
Please do not hesitate to contact us if you have questions or would like to discuss the new rules, how they may affect your business, and how you can adapt to avoid negative impact.
[1] The destination principle entails that right to tax goods and services lies with the country where the goods or services are used. The principle is implemented by imposing VAT in Norway on the import of taxable goods and services into Norway, and by exempting the export of goods and services from Norway from Norwegian VAT. Implementation of the destination principle provides equal treatment for suppliers competing in a given market, regardless of the country in which the suppliers are established. This contributes to tax neutrality in international trade and to the tax revenue accruing to the country where final consumption of the goods or services takes place.
