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There must be a legal basis for taxation
For the Norwegian tax authorities to be entitled to tax any income you earn, there must first be a legal basis in Norwegian domestic law for taxing that particular type of income. The same applies to wealth and assets. Second, under Norwegian domestic law, you must be regarded as tax resident in Norway.
The rules on tax residency
To be considered tax resident in Norway under Norwegian domestic law (i.e., upon immigration to Norway), you must have stayed in Norway for more than 183 days during any twelve-month period, or for more than 270 days during any thirty-six-month period, whether in one continuous stay or several separate periods. Tax residency in Norway arises in the income year in which your stay exceeds the relevant threshold.
This means that most Norwegian citizens are considered tax resident in Norway. The same applies to foreign nationals who meet these criteria.
The question addressed in this article, however, is how Norwegian tax residency comes to an end. In other words: What is required to be regarded as having emigrated from Norway for tax purposes?
Tax emigration: How Norwegian tax residency ends
The answer is found in Section 2-1, third paragraph, letter (a), of the Norwegian Tax Act, which provides:
“For a person who takes up permanent residence abroad, tax residency in Norway ceases in the income year in which it is demonstrated that the person has not stayed in Norway for one or more periods exceeding 61 days during the income year and that neither the person nor his or her related parties have had a dwelling available for use in Norway. Tax residency shall in any event not cease before the person or his or her related parties no longer have a dwelling available for use in Norway.”
Three conditions must be met
According to the wording of the provision, three conditions must be met before a person's tax residency in Norway is considered terminated.
1. The person must have taken permanent residence abroad
This requirement means that the stay abroad cannot be intended to be temporary. Tax assessment practice has established that the individual must intend to remain abroad for at least five years and that any stays in Norway must be limited to short vacations or similar temporary visits.
2. The person must not have stayed in Norway for more than 61 days during the income year
It is important to note that, unlike the rules governing tax immigration to Norway, this requirement is assessed by reference to the calendar year rather than any rolling twelve-month period. As with tax immigration, however, the stay does not have to be continuous. A person may therefore spend 30 days in Norway during the first half of the income year and 32 days during the second half and still be considered tax resident in Norway for that year. The reason for the stay is irrelevant.
3. Neither the person nor their related parties may have a dwelling available for use in Norway
The term "related parties" includes: A spouse, a cohabiting partner, and minor children.
When is a person considered to have a dwelling available in Norway?
If the taxpayer or a related party directly or indirectly owns, rents, or otherwise has the right to use a dwelling in Norway, the dwelling is considered to be available for use. As a general rule, this applies even if the property is rented out to third parties. However, this principle is modified by Section 2-1, sixth paragraph, second sentence, which excludes certain residential units acquired at least five years before the income year in which the person moves abroad, provided that neither the taxpayer nor any related party has used the property as a residence during that period.
What constitutes a dwelling?
A "dwelling" means a residential unit equipped with year-round water and sewage connections, unless zoning regulations, municipal planning provisions, or other public-law restrictions prevent the property from being used as a residence at the time of emigration.
This definition excludes holiday homes and vacation properties. Accordingly, a taxpayer may own a holiday home in Norway without automatically being regarded as having a dwelling available in Norway. However, if the holiday home is actually used as a residence, it will be treated as a dwelling for purposes of the provision.
As noted above, an exception applies to residential units acquired at least five years before the year in which the taxpayer takes up residence abroad, provided the property has not been used as a residence by the taxpayer or related parties during that period. The rationale is that taxpayers should be able to invest in Norwegian real estate and still qualify as emigrated for tax purposes where a substantial period has passed and the property has not been used by the taxpayer or family members.
The conditions are cumulative, that is to say all three have to be met
All three conditions must be satisfied before Norwegian tax residency is deemed to have ceased. Once all requirements have been met, the individual is no longer considered tax resident in Norway. This applies regardless of whether the various conditions are fulfilled in different income years. There is one exception: where the 61-day requirement is the last condition to be fulfilled, tax residency is deemed to cease from 1 January of the year in which that requirement is satisfied.
Once tax residency has ceased, the ordinary tax immigration rules described above determine whether the individual subsequently becomes tax resident in Norway again.
A longer exit period applies to persons who have been tax resident in Norway for more than ten years
The emigration rules in Section 2-1, third paragraph, letter (a), are modified by letter (b) of the same provision. The substantive conditions for emigration are the same under both provisions. However, where an individual has been resident in Norway for at least ten years, the effect of satisfying those conditions—namely the cessation of tax residency—occurs at a later date. This rule naturally affects many Norwegian citizens.
For a person who has been resident in Norway for at least ten years before the income year in which he or she takes up permanent residence abroad, tax residency in Norway does not cease until the end of the third income year following the year of departure. This applies only if, for each of those three income years, it can be demonstrated that: The person has not stayed in Norway for one or more periods exceeding 61 days during the income year; and neither the person nor any related party has had a dwelling available for use in Norway. Accordingly, individuals who have been tax resident in Norway for ten years or more must generally satisfy the emigration requirements continuously for a three-year period before Norwegian tax residency formally comes to an end.
