Norway’s Ministry of Finance initiated a public consultation regarding the proposed implementation of the tax distribution rule (Undertaxed Profits Rule – UTPR) under Pillar Two of the OECD Base Erosion and Profit Shifting (BEPS) project on 19 June, 2024.
The deadline for submitting consultation responses is 2 September, 2024.
The tax distribution rule is a safeguard mechanism that will make this law more complete. The rules should discourage the transfer of profits and ensure that large groups pay at least 15%.
The Supplementary Tax Act was adopted in January this year and implements an international model set of rules for global minimum taxation of large groups (Pillar Two). The rules, which have been developed in an extended OECD collaboration with over 140 countries, aim to protect the tax base against profit shifting and to counteract harmful tax competition internationally.
The proposal outlines several measures, such as implementing the tax distribution rule for the undertaxed profit rule in the supplementary Tax Act, starting from the 2025 income year. The Supplementary Tax Act has been adopted to introduce internationally agreed rules on global minimum taxation.
Furthermore, the proposal provides a temporary safe harbour for qualifying group companies under the ultimate parent company’s jurisdiction. It clarifies that credits and deductions are not allowed for supplementary taxation by other countries.
The tax distribution rule is proposed to take effect beginning with the 2025 income year.
