Implementation of Pillar II in Norway
The Ministry of Finance sent a proposal for amendments to the Tax Act and the Tax Administration Act, as well as the Ministry of Finance's regulations to the Tax Act and the Tax Administration Regulations, for consultation on 6 June 2023. These amendments introduce a supplementary tax (Pillar II) in Norwegian law, which will have both tax-related and administrative implications for large corporations subject to the regulations. The aim is for the changes to take effect from the 2024 income year.
Proposal for disclosure of tax arrangements is delayed
The report from the special committee to consider the implementation of reporting obligations for tax arrangements, corresponding closely to European Union (EU) Directive 2018/822/EU (DAC 6), was published on 27 June 2019. The consultation deadline was 2 December 2019. The original expectation was for a legislative decision in 2020 with effect from 2021. In light of the uncertainty surrounding the technical details of the legislation, the high implementation costs, and the recent EU reporting extension, the legislation is delayed.
Onshore wind power taxation
On 16 December 2022, the Norwegian government issued a consultation paper on the introduction of resource rent taxation of onshore wind power production.
Pursuant to the proposal, net income from the production of wind power will be taxable both at the ordinary 22% corporate income tax (CIT) rate and, in addition, at a 40% effective rate of resource rent tax, resulting in an effective marginal tax rate of 62%. The proposed income computation is based on the existing hydropower regime, with the gross resource rent, as a main rule, determined as spot prices per hour x actual production. Gross income will, however, recognise the actual prices obtained where the power is sold pursuant to either existing power purchasing agreements (PPAs) concluded before 28 September 2022 or fixed-price PPAs concluded after 28 September 2022, which satisfy certain conditions. In addition, the gross resource rent will include income from the sale of electricity certificates and guarantees of origin.
Deductions are granted, notably, for operating expenses, capital expenditure (with full and immediate deductions in the year of investment for future investments), real property taxes, and ordinary CIT calculated on the activity that is subject to resource rent tax. Financing costs are non-deductible in the resource rent.
The proposal also entails that wind power producers would be subject to natural resource tax. The natural resource tax would, however, be creditable against ordinary CIT (see Natural resource tax in the Other taxes section).
On 11 May 2023, the government announced that a formal proposal to Parliament will be presented in the Autumn of 2023, with a proposed effective date as of 1 January 2024.
Onshore wind power is already subject to certain excise duties. First, as of 1 January 2023, income from electricity sold at prices exceeding 0.70 Norwegian kroner (NOK) per kWh is subject to an excise duty of 23% (‘high-price contribution‘). The government has announced that the high-price contribution is intended to be temporary with a planned removal as of 1 January 2025. Second, onshore wind power is subject to a production fee of NOK 0.02 per kWh produced.
Resource rent tax on aquaculture
Resource rent tax on aquaculture was introduced from 1 January 2023 and was approved by Parliament on 31 May 2023. The effective tax rate of 25% is applicable for the production of salmon, trout, and rainbow trout.