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Are you planning to move abroad? Here are some important tax-related issues you should consider before leaving Norway.
Tax Residency: Where will you be tax resident?
Global tax liability
As a general rule, if you have lived in Norway for a period of time, you are regarded as tax resident in Norway. This means that you are subject to worldwide taxation in Norway, i.e., Norwegian tax liability on all income and assets regardless of where the income is earned or where the assets are located. To become tax emigrated from Norway, three conditions must be met:
1. You must take up permanent residence abroad. As such, your stay abroad must be intended to be permanent or long-term rather than temporary.
2 Neither you nor your close relatives may aave a dwelling available in Norway. "Close relatives" include: A spouse, a cohabiting partner, or minor children. Having a dwelling available means directly or indirectly owning, renting, or otherwise having the right to use residential property in Norway.
3. You must not spend more than 61 days in Norway per income year.
The conditions are cumulative, meaning that all three requirements must be fulfilled.
If you have been resident in Norway for more than ten years, you must satisfy these conditions for three consecutive income years before you can cease to be tax resident, at the earliest from year four.
Tax Treaties: Does Norway have a tax treaty with the country you are moving to?
If Norway has a tax treaty with your destination country, you may, depending on the circumstances, be able to claim tax residency in the other state under the treaty. The determination is initially based on where you have a permanent home available. In practice, however, the issue often comes down to where your centre of vital interests is located, as tax treaties typically describe it. This involves an assessment of whether your closest personal and economic ties are with Norway or with your new country of residence. The analysis must be conducted on the basis of the specific facts of each case.
Avoiding double taxation
How can you avoid being taxed twice on the same income—once in Norway and once in your new country of residence? The answer depends largely on the country to which you are moving. If you move to a country with which Norway has concluded a tax treaty, double taxation can often be avoided through the treaty. The methods used vary between treaties and according to the type of income involved. The two most common methods are the credit method and the alternative exemption method (alternative allocation method). The applicable method must be determined on a case-by-case basis and, where more than one method is available, consideration should also be given to which approach produces the most favorable tax result.
Norwegian domestic tax law also contains provisions intended to prevent double taxation. One particularly important rule is the so-called one-year ruleIn broad terms, this rule provides that a taxpayer may qualify for a reduction of Norwegian tax if he/she works abroad for at least one year, and he/she does not spend more than an average of six days per month in Norway (72 days per year).
In addition, Norwegian tax law contains foreign tax credit rules that may, depending on the circumstances, allow a credit against Norwegian tax for taxes paid abroad.
Social Security: Will you remain a member of the Norwegian national insurance scheme?
Many people assume that as long as they continue paying Norwegian social security contributions, they automatically remain members of the Norwegian national insurance scheme. This is not necessarily the case.
Membership generally ceases when a person moves abroad for more than one year, or accepts employment with a foreign employer. In such situations, individuals wishing to maintain coverage under the Norwegian national insurance scheme must apply for voluntary membership. Applications are submitted to NAV International.
Before applying, it is advisable to conduct a cost-benefit analysis comparing: Continued Norwegian social security coverage through voluntary membership; membership in the local social security system abroad; and private insurance alternatives. This is particularly important because social security contribution rates for voluntary membership are generally higher than those applicable to ordinary membership.
Exit tax: Do you own shares or equity interests with latent gains exceeding NOK 500,000?
If you own shares or equity interests whose combined latent (unrealized) gain exceeds NOK 500,000, Norway's exit tax rulesmay become relevant. The term "latent" or "unrealized gain" refers to the gain that would arise if the shares or interests were sold at the time of emigration. The threshold is NOK 500,000: If the unrealized gain is below this amount, the emigration is generally not regarded as tax-motivated, and the exit tax rules do not apply. If the unrealized gain exceeds NOK 500,000, the exit tax regime becomes applicable. The calculation must be performed based on the specific facts of each case.
In broad terms, the exit tax rules provide that Norwegian taxpayers who have accumulated but unrealized gains on shares or equivalent ownership interests become taxable on those gains when they emigrate. The rationale is that value appreciation accrued while the taxpayer was resident in Norway should remain taxable in Norway. Without these rules, Norway would often lose its ability to tax such gains because Norwegian domestic law generally does not tax non-residents on capital gains; and Tax treaties may prevent Norway from taxing gains realized after emigration.
It is possible to obtain a deferral of payment of the exit tax by providing adequate security for the tax liability. Where a taxpayer moves to another EEA country, a deferral may be granted without security if Norway has access to information exchange and tax collection assistance mechanisms with that country.
The obligation to pay exit tax lapses if the shares or interests are not sold within five years after emigration. The rationale is that after such a lengthy period, the presumption that the emigration was motivated by tax considerations is considered too weak to justify taxation.
Relocation notice
If you move to a country outside the Nordic region, you must notify the Norwegian Tax Administration. If you are moving to another Nordic country, you only need to register your move with the authorities in the country to which you are relocating.
If you move to another Nordic country (including Sweden, Iceland, Finland, Denmark, the Faroe Islands, or Greenland), and your registration is accepted by the authorities in your new country of residence, you will automatically be registered as having emigrated from Norway.
If you move to a country outside the Nordic region for a period exceeding six months, you must notify the Norwegian tax authorities of your departure. This is done by submitting a relocation notice to the tax office. A passport or other valid form of identification must be enclosed. The Norwegian Tax Administration will then determine whether you should be registered as having exited from the National Population Register. However, such registration is not decisive for tax purposes. Once your notification has been processed, you will receive a confirmation letter from the National Population Register. The letter will be sent to your new address abroad.
Tax deduction card
In some situations, it may be beneficial to apply for an amended or reduced tax deduction card. This is often relevant where you continue working for a Norwegian employer but your tax withholding should reflect your changed circumstances. For example, it may be appropriate to adjust withholding to account for anticipated tax relief under the one-year rule.
Tax return
As long as you remain tax resident in Norway under Norwegian domestic law, you are still required to file a Norwegian tax return. You will also remain subject to worldwide taxation in Norway. This means, among other things, that you cannot omit foreign-source income from your Norwegian tax return merely because that income is also taxable abroad. Any relief from double taxation must be obtained through the applicable tax treaty provisions or domestic relief rules described above—not by failing to report the income. In practice, issues relating to double taxation relief are generally addressed through the annual Norwegian tax return process.
Other article you may like: How to avoid double taxation
Other article you may like: How to become tax emigrated from Norway
Other article you may like: Exit tax on shares and equivalent interests
Other article you may like: States with which Norway has tax treaties
