Norwegian Ministry of Finance has issued a discussion paper on 4th May 2017, that proposes changes to the earnings stripping rules which further extends the limitation to also include interest costs on unrelated party debt at 25% . The new proposed rules issue for one exception according to which the taxpayers are capable to document that the equity ratio of the company is not lower than the equity ratio reported in the integrated financial statements. The amendment would be effective from 1 January 2018, if passed.
The tax authorities released a “binding advance ruling” (BFU / 17, 4 May 2017) regarding application of a domestic exemption from dividends to an Irish holding company. The judgment provides that the dividends paid by the Norwegian company to the Irish holding company are exempt from Norwegian withholding tax under the domestic exemption from Norway. To be qualified for the withholding tax exemption, the dividend recipient must be practically identical to certain non-individual assessable person according to the Norwegian Tax Act.
The withholding tax exemption applies to EEA resident corporate shareholders, but the exemption does not apply for the lowly taxed recipient. The shareholder must also be engaged in genuine business activity through an establishment in an EEA country. In addition, the shareholder must be the final recipient of the dividends. Furthermore, the exemption applies to non- individual dividend recipients comparable to Norwegian stock venture funds, associations, estates in bankruptcy, municipal and state-owned companies, shared insurance agencies and Savings Banks and other self-owned finance companies.
The Finance Minister opened a public hearing regarding the corporate tax residency rules under section 2-2 of the Tax Law (Skatteloven) on 16 March 2017. There is no definition of residence is available now in the Norwegian tax legislation for legal entities. Generally the place of residence depends on the location of the central management and control of the company basically where the central business decisions of the company are made. However, a company is normally deemed to be a resident if it is incorporated under Norwegian law.
According to the hearing, section 2-2 of the Tax Law should be amended and the term “residence” would include companies established in Norway and companies having their effective management in Norway. The amendments will be effective from fiscal year 2018.
The Exchange of Information Agreement regarding tax matters (TIEA) between Norway and the United Arab Emirates that was signed in 2015 entered into force on 15th February 2017. This treaty generally applies from 15th February 2017 for criminal tax matters and from 1st January 2018 for other tax matters. The agreement was ratified by the United Arab Emirates on 15th January 2017.
Competent authority agreement on automatic exchange of information (TIEA) of 2016 between Norway and Singapore has been entered into force on 31st January 2017 regarding tax.
The agreement is intended to ensure that Norway and Singapore will be able to start the automatic exchange of financial account information as of 2018 according to the OECD Automatic Exchange of Information Agreement (MCAA) of 2014, based on the Council of Europe – OECD Convention on Mutual Administrative Assistance in Tax Matters (MAA) of 1988. This TIEA of 2014 has been amended by the 2010 protocol.
The tax administration published a report on the participation of the economy and suggested new rules for dealing with it on 19 January 2016. According to the proposed rules, there must be clearer rules on tax-exempt income and business; simplify the reporting requirement of rental income received from the leasing of real estate.
The tax exchange of information agreement (TIEA) between Norway and Switzerland has been entered into force on 1 January 2017 through an exchange of notes (EoN). It applies from the same date of its entry into force. The agreement was signed on 26 October 2016 by Switzerland and on 13 December 2016 by Norway. The agreement is projected to ensure that Norway and Switzerland will be able to start the automatic exchange of financial account information according to the OECD Automatic Exchange of Information Agreement of 2014, base on the Council of Europe – OECD Convention on Mutual Administrative Assistance in Tax Matters (MAA) of 1988. This exchange of information agreement (2014) has been amended by the 2010 protocol and approved by the Norway – Switzerland Joint Declaration on Automatic Exchange of Information of 2016.