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07 May 2014
A non-resident company that participates in business carried out in, or managed from, Norway will be liable to pay tax in Norway. However, there are exemptions from this rule. This update outlines how the rule applies to shipping activities in particular.
Section 2-3(1)(b) of the Tax Act states that a taxpayer that is not tax resident in Norway may nevertheless be subject to tax in Norway if it carries out business in, or manages business from, Norway.
Within the shipping industry, it is accepted that commercial management performed by a Norwegian manager creates no taxable presence in Norway for a non-Norwegian shipowner. This practice is in line with the Ministry of Finance's so-called 'BONA statement'. However, there is a limit as to how much competence may be given to the manager. For example, the manager may not enter into financing agreements or make decisions regarding the sale, purchase or charter of vessels for an extended period.
In addition to this practice, Section 2-34 of the Tax Act provides a specific exemption to Section 2-3(1), which applies to both vessels in international traffic and international offshore activities. This exemption is granted for shipping income derived by non-Norwegian shipowners – even if the shipping business is managed from Norway – provided that certain conditions are met. The conditions include a requirement regarding a limitation of 34% Norwegian ownership share of the foreign investor owning the vessels. The exemption also applies to participation in Norwegian transparent entities.
The tax exemption is intended to encourage international investors' use of Norwegian management of vessels in international traffic. Where a vessel is operated solely between Norwegian ports, the exemption does not apply. Furthermore, the exemption does not encompass activities that are taxable under the Norwegian Petroleum Tax Act.
For further information on this topic please contact Are Zachariassen or Linda Åsli at Wikborg Rein by telephone (+47 22 82 75 00), fax (+47 22 82 75 01) or email (firstname.lastname@example.org or email@example.com). The Wikborg Rein website can be accessed at www.wr.no.
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