Norway Fiscal Budget for 2016 was presented to the parliament on 7 October 2015. A reduction of the corporate income tax rate from 27% to 25% has been proposed in the budget.
The application of the participation exemption with regards to dividends received by a Norwegian company will no longer apply to the extent that the distribution has been tax deductible at the level of the distributing entity. The assessment of whether the participation exemption applies at the fund investment level is no longer based on whether the relevant fund qualifies as a bond investment fund and equity fund. Instead, the assessment of whether the participation exemption applies is based on the mix of investments carried out by the fund.
The current limit of NOK15 million increases to NOK20 million for in-house research and development (R&D), while the cap for procured R&D increases from NOK33 million to NOK40 million under the Norwegian tax incentive scheme for R&D. For companies taxed under the special petroleum tax regime and the hydro power regime, the reduction in corporate tax rate will be balanced by a corresponding increase in the special tax rates for these regimes.
Under the current domestic law, a company is considered to be a tax resident in Norway based on an overall assessment, but the key element has been whether the company is effectively managed from Norway or not. The government has proposed that all companies incorporated in Norway must always be considered to be a tax resident in Norway for domestic law purposes.
