Norway has one of the highest tax rates in the world, with a progressive tax system that is administered by the Norwegian Tax Administration. In this article, we will explain how the taxation system works in Norway and what expats need to know about taxes in the country.
Double Taxation Agreements
Norway has signed double taxation agreements with many countries, including the United States, the United Kingdom, and Canada. These agreements aim to avoid double taxation on income earned in both Norway and the other country. They also provide relief from withholding taxes on dividends, interest, and royalties.
Main Taxes for Expats
Income Tax
Expats who are considered tax residents of Norway are subject to income tax on their worldwide income. The income tax rates for resident individuals are progressive, ranging from 0% to 22%.
Non-resident individuals are only taxed on their income earned in Norway. The income tax rate for non-resident individuals is a flat rate of 25%.
Value Added Tax
Value Added Tax (VAT) is a tax on the sale of goods and services in Norway. The current standard rate of VAT is 25%, but there are reduced rates of 15% and 10% for certain goods and services.
Special Tax Breaks for Expats
Foreign Earned Income Exclusion
Expats who are tax residents of Norway may be eligible for a foreign earned income exclusion. This exclusion allows them to exclude a certain amount of their foreign earned income from their taxable income in Norway. The exclusion amount varies each year and is adjusted for inflation.
Deduction for Relocation Expenses
Expats who are moving to Norway for work may be able to deduct certain relocation expenses from their taxable income. These expenses may include the cost of moving household goods and the cost of temporary housing in Norway.
Filing a Tax Return in Norway
Expats who are tax residents of Norway are required to file a tax return each year. The tax year in Norway runs from 1 January to 31 December of the same year.
Expats can file their tax returns online using the Norwegian Tax Administration’s online portal. To do so, they need to obtain a tax identification number, which is a unique identification number used by the Norwegian Tax Administration to track taxpayers.
When filing a tax return, expats need to provide details of their income, deductions, and credits for the relevant tax year. If they have any foreign income or assets, they may also need to declare them on their tax return.
Tax Exit Procedures
Expats who are leaving Norway to move abroad need to follow certain tax exit procedures. Firstly, they need to notify the Norwegian Tax Administration of their departure and provide details of their new address abroad. They should also settle any outstanding tax liabilities before leaving Norway.
Expats who have paid tax in Norway may be entitled to claim a refund of some of the tax they have paid. To do so, they need to file a tax return for the relevant tax year and claim the refund through the normal tax refund process.
The taxation system in Norway is complex and has high tax rates, but there are some special tax breaks available for expats. Expats in Norway need to be aware of the main taxes that apply to them, as well as any special tax breaks that may be available. They also need to ensure they file their tax returns on time and follow the tax exit procedures if they are leaving Norway to move abroad. By understanding the Norwegian tax system, expats can ensure they are complying with their tax obligations and maximizing any tax benefits available to them.