Helen Brown is a tax director at Anderson Anderson & Brown (AAB), an independent firm of chartered accountants and business advisers. It has a specialist team that advises British and Norwegian companies looking to do business on either side of the North Sea. She highlights some of the main compliance points that any UK venture seeking a foothold in Norway must bear in mind
A FIERCE WATCHDOG
When operating in Norwegian territory (including offshore), a British business must fully understand and manage its corporate and personal income tax obligations to avoid any nasty surprises from the Norwegian Central Office for Foreign Tax Affairs (Cofta) – and the resulting reputational harm. Cofta will often pursue cases of non-compliance aggressively and impose stringent financial penalties on infractions such as late tax payments. If you want to appeal against a Cofta assessment that you feel is unreasonable, you must first pay the full amount demanded.
THE 30-DAY RULE
A British company will trigger a personal income tax liability 30 days after it starts trading on Norwegian soil. (If operating offshore in Norwegian waters, its personal income tax liability will apply from day one and its corporate tax liability will apply after 30 days.) But, even if a taxable presence is not created, there may still be a filing requirement with Cofta. Owing to the strict reporting requirements placed on contractors – Cofta has the power to obtain copies of a contractor’s commercial contracts – the tax authority will know about all subcontractors in any given contractor’s supply chain.
THE 12-MILE ZONE
Goods and services supplied by any UK company operating in waters outside Norway’s 12-nautical-mile offshore territorial limit are unlikely to be covered by Norwegian VAT law. But a British firm providing goods and services within Norwegian territory may find that it has a registration requirement in relation to activities that would be covered by the reverse charge in other jurisdictions, as Norway’s reverse-charge rules are more restrictive than the EU’s.
THE POST-BREXIT RELATIONSHIP
The movement of goods between the UK and Norway will continue to require customs declarations on export and import after the UK leaves the EU. But the rules and procedures concerning the preferential status of British goods may not apply from day one. Exactly what duty rates and processes will be necessary will largely be dictated by what kind of trade deal – if any – the UK strikes with the EU27.
The historically close relationship between the UK and Norway will continue to strengthen after Brexit, as both will face similar threats and opportunities. There is a lot to learn and gain from the Norwegian model and the European Free Trade Association. The UK will continue to work closely with Norway as the North Sea oil and gas industry moves into its next phase, regardless of the outcome of Brexit.
All of the above guidance is general. You should seek independent tax advice before signing any contract and starting to trade in Norway, as each case will be different.
With offices in Aberdeen, Edinburgh and London, AAB was ranked 39th in the this year’s Sunday Times Top 100 Best Companies To Work For list. It will be holding a workshop in Aberdeen on 27 February on the key tax considerations for British firms operating overseas. Email firstname.lastname@example.org for details
IoD members can also receive tax advice from the institute’s Information and Advisory Service