Norway’s government has proposed amendments to the exit tax regulations in the National Budget 2025, which was announced on 7 October 2024.

In practice, the current exit tax rules function as a tax loophole. The Government wants to close this loophole and proposes, in the National Budget for 2025, to amend the exit tax rules to make them more effective and fairer.

“In practice, the current exit tax rules do not work. It is unfair that someone can leave the country with gains accrued in Norway without paying tax on them, whilst business owners who remain in Norway pay their tax as usual. Therefore, we are now closing this tax loophole,” said Minister of Finance, Trygve Slagsvold Vedum.

“Reshaping the exit tax rules is fair and important to maintain trust in the tax system and in society. When everyone contributes, tax rates can be kept low for everyone who earns income, creates jobs and pays tax in Norway. Tax revenue contributes to safeguarding basic welfare services, such as schools, health and care,” he added..

The basic model proposed in the consultation is maintained. However, some key amendments have been made based on input from the consultation bodies. The Government proposes three relieving measures:

• A basic allowance of MNOK 3 in net capital gains upon emigration instead of a NOK 500,000 threshold. This means that if the net gains amount to MNOK 3.5, exit tax will only be calculated on half a million. Consequently, exit tax will only be assessed for those who exit Norway with the highest capital wealth.
• The tax will not necessarily be collected if the emigrant dies. If the heirs are resident in Norway, the tax will be waived. If they reside abroad, the heirs assume the option to defer payment, and the tax will be waived if they move back to Norway within the 12-year time limit.
• The taxpayer can use the shares as collateral for the tax claim. This will also suffice if the value of the shares drops. That is, the taxpayer does not risk having to pay the tax immediately if the shares no longer provide sufficient security.

In addition, the round of consultations has highlighted an additional weakness in the current rules. This allows taxpayers to asset strip a company through distributing dividends whilst living outside Norway, and afterwards move home again and sell the shares at a lower value. In this way, it is possible to avoid paying tax on the gains accrued here. Several consultation bodies have pointed out this loophole.

The Government therefore proposes a further adjustment of the rules:

• The exit tax is to be paid in tandem with the distribution of dividends. This is a tightening in relation to the consultation paper. Therefore, it will only apply to exits and transfers on and after 7 October when the National Budget is presented.

Most of the new rules will apply to exits and transfers made on 20 March and later. It is emphasised that the proposed rule on payment being due at the time of distribution will apply to exits and transfers that take place from today, 7 October. The rule on exit tax on the inheritance of heirs resident abroad will apply from 1 January 2025.

The final proposal for amendment of the exit tax rules will now be handled by the Parliament (Storting).