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Norwegian withholding tax on interest and royalty

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The Norwegian Ministry of Finance has been working with a consultation paper on Norwegian withholding tax on interests and royalties for some time. There has been concerns with respect to the introduction of withholding tax, since withholding tax on interests and royalties can have a huge impact on various markets. The consultation paper was issued by the Ministry of Finance on 27 February 2020 and the new rules are proposed to be introduced from 1 January 2021.


The proposal is much more limited than feared. It is especially important that the Ministry of Finance does not propose to introduce withholding tax on interest payments to other creditors than related companies resident for tax purposes in a low tax country. This means that the Ministry of Finance does not propose to introduce withholding tax on interest payments to independent banks or other finance institutions or on bonds held by unrelated parties.

Withholding tax on interests payments

The Ministry of Finance propose to introduce a standard 15 % withholding tax on interest payments to related parties resident in low tax countries. The main features of the proposal is the following:

(i) The obligation to pay withholding tax will apply to interest payments from companies etc. which are subject to tax in Norway as resident and from transparent partnerships and similar entities. The withholding tax will also apply to non-resident companies which are subject to tax her on the basis of a permanent establishment (PE), provided the interests are borne by the PE in Norway.

(ii) A company is considered a related party if it owns or controls at least 50 % of the debtor paying the interests, or if the debtor paying the interests owns or controls at least 50 % of the recipient of the interests. Both direct and indirect ownership and control will fulfill the requirement. A company is considered a related party if the threshold for ownership or control is fulfilled at any point in time during the relevant fiscal year.

(iii) A company is considered resident in a "low tax country" if the general corporate income tax on the company's total net income is less than 2/3 of the tax that would have been imposed on the company had it been resident in Norway.

(iv) Interest payments to companies resident in a low tax country within the EU/EEA is comprised by the obligation to pay withholding tax. Companies genuinely established and performing genuine economic activities within the EU/EEA can opt to be tax on a net income basis (22% tax rate) instead of paying withholding tax on interest payments (15 % on gross interests).

Norway's right to impose withholding tax on interests can be limited by tax treaties concluded with the country of residence (for instance 5 % or 10 %).

Withholding tax on royalty and lease payments

The Ministry of Finance proposes to introduce a standard rate of 15 % on royalty payments to related parties. The main features of the proposal is the following:

(i) The obligation to pay withholding tax will apply to royalty payments from companies etc. which are subject to tax in Norway as residents and from transparent partnerships and similar entities. The withholding tax will also apply to non-resident companies which are subject to tax her on the basis of a permanent establishment (PE), provided the interests are borne by the PE in Norway.

(ii) Royalty is defined as payments for the use of or the right to use intangible assets. In addition the Ministry of Finance considers to impose the 15 % withholding tax on payments for the use of, or the right to use, ships, vessels, rigs etc. and airplanes and helicopters, for instance bareboat payments for ships and rigs.

(iii) A company is considered a related party if it owns or controls at least 50 % of the company paying the royalty etc., or if the company paying the royalty etc. owns or controls at least 50 % of the recipient of the royalty. Both direct and indirect ownership and control will fulfill the requirement. A company is considered a related party if the threshold for ownership or control is fulfilled at any point in time during the relevant fiscal year.

(iv) The obligation to pay withholding tax is not limited to royalty etc. paid to companies in low tax countries. Payments of royalty etc. to related parties will therefore be subject to withholding tax regardless of where the recipient is resident (provided the recipient in resident outside Norway).

(v) Payments of royalty etc. to companies resident within the EU/EEA is comprised by the obligation to pay withholding tax. Companies genuinely established and performing genuine economic activities within the EU/EEA can opt to be tax on a net income basis (22% tax rate) instead of paying withholding tax on royalty payments etc. (15 % on gross interests).

(vi) The Ministry of Finance proposes an exemption from withholding tax for payments for the use, or the right to use, ships and vessels which are received from companies subject to the Norwegian tonnage tax regime. This implies that Norwegian companies subject to the tonnage tax regime will not have to withhold tax on payments for the use or right to use ships etc.

Norway's right to impose withholding tax on royalty and payments for the use of, or right to use, ships etc. can be limited by tax treaties concluded with the country of residence (for instance 5 % or 10 %).

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