Norway

Foreign tax credit

Norwegian limited companies that have paid taxes on foreign-source income may, under certain conditions, offset the Norwegian tax paid against the foreign tax paid. A tax credit cannot be claimed if the income has been recognised by a PE of the Norwegian company and the tax treaty between Norway and the state of the PE prescribes avoidance of double taxation by exemption. 

The tax credit is limited to the lower of the Norwegian tax paid on the same type of foreign income and the foreign tax actually paid. It is possible to carry forward unused foreign taxes for up to a maximum of five years. It is not possible to claim a tax credit for foreign tax paid in addition to claiming deductions in the taxable income in Norway for the same foreign tax paid. The tax credit rules are very technical, and it should be noted that there are two different 'baskets' of income, one basket for income subject to ‘ordinary’ taxation abroad and one basket for income that has been taxed in low-tax jurisdictions.

Roll-over regulations

Under the roll-over relief rules, assets and liabilities can be transferred without triggering any immediate gain or loss calculation for tax purposes. The roll-over relief rules apply for transfer of assets and liabilities between Norwegian group companies (more than 90% ownership and voting rights), partnerships (with mainly the same owners), and from a PE in Norway to a Norwegian company within the group or to another Norwegian PE within the same group. The transfer will not trigger any taxation at the time of the transfer, but all tax positions, including the tax basis of the transferred assets, will be transferred to the acquiring company. The transaction must be at arm’s-length terms. The receiving company must provide collateral for tax that may be levied on gains upon subsequent realisation of the assets. The requirement for collateral and its duration is determined by the tax office in each individual case.

In the event a transfer of assets and liabilities has been made under the roll-over relief rules and the acquiring entity ceases to be within the same group as the seller, any latent gain or loss on the assets will be recognised at the hands of the seller.

The Ministry of Finance, upon application, also has the authority to grant tax relief on the realisation of property, business, shares, etc. during a reorganisation. The reorganisation must improve the efficiency of the business to qualify for tax relief, and, accordingly, administrative effects would not be sufficient. The tax relief must also help companies to carry out the reorganisation. In addition, the tax relief must not reduce the Norwegian tax base; the tax positions would be transferred to the new taxpayer.

The Norwegian government has enacted tax exemptions for specific transactions, effective from the income year 2023. These exemptions pertain to tax-free cross-border mergers for UCITS funds and the tax-free merging and splitting of savings banks, including the establishment of savings bank foundations. Additionally, the legislation adjusts tax rules for merger and demerger schemes related to triangular mergers and demergers, setting the tax input value equal to the receivables nominal value, typically resulting in no gain or loss during conversion.

SkatteFUNN research and development (R&D) tax incentive scheme

The SkatteFUNN R&D tax incentive scheme is a government program that is designed to stimulate R&D in Norwegian trade and industry. Businesses and enterprises that are subject to taxation in Norway are eligible to apply for tax relief.

All Norwegian companies and branches with R&D projects can apply for a deduction of 19% of incurred costs, limited up to a cost base of NOK 25 million annually. If the company does not have taxable income for the income year in question, the company will receive a cash refund for the year following the income year.

The main criterion for applying for SkatteFUNN is that the company has an R&D project with the aim of developing a new or improved asset, service, or production process. There are no requirements regarding type of business. A distinction is made against ordinary product development without developing new knowledge, functions, etc., the ordinary day-to-day business operations, etc.

The application for SkatteFUNN must be approved by Norges Forskningsråd (The Research Council of Norway) and is awarded for a period of a maximum of three years. If the application is approved, there is a requirement to submit a form attested by the company's auditor, together with the ordinary tax return, in order to obtain the tax incentive.