Companies that are registered and incorporated in Norway in accordance with Norwegian company law are, as a general rule, regarded as tax resident in Norway and taxable for their worldwide income. If effective management at the board/director level is carried out outside Norway, residency in Norway for tax purposes may cease, and the company may be subject to exit taxation. Note that several factors should be considered in order to determine whether tax residency has moved (e.g. other management functions and the overall connection to Norway).
Foreign corporations will be regarded as tax resident in Norway if the place of effective management is in Norway. The place of effective management will be deemed to be in Norway if, for example, the board of directors makes its decisions in Norway.
Permanent establishment (PE)
According to Norwegian domestic law, a foreign company is liable to tax in Norway when engaged in a business that is either conducted in or managed from Norway. The tax liability is limited to income that is derived from Norwegian sources. As a general rule, non-residents without a PE are not liable for tax on capital gains when selling Norwegian financial instruments. However, if the financial instrument is connected to a business that is conducted in or managed from Norway, the sale of the financial instrument can trigger taxation in Norway.
The legislation does not contain a reference to the treaty concepts of 'permanent establishment' or 'permanent representative'. The threshold for tax liability is normally lower under Norwegian domestic law than the taxing right afforded to source states under double tax treaties (DTTs).
With respect to DTTs, the Norwegian tax authorities will, to a large extent, follow the Organisation for Economic Co-operation and Development (OECD) Commentaries when interpreting the relevant DTT, if the wording is similar to the OECD Model Tax Convention.