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Norway’s 2016 budget – lower corporate tax rate

in Norway

On October 7th, 2015 the Norwegian conservative government presented both the 2016 budget proposal and a white paper for a tax reform. The budget proposal as well as the white paper have taken into consideration the proposal from the Scheel Committee delivered to the Government on 2 December 2014.

Some basic points of the 2016 fiscal budget:
• Reduction of the corporate tax rate from 27% to 25%
• Tightening of the interest deduction limitation rule from 30% down to 25% on interest paid to associated companies calculated on interest, taxes, depreciation and amortizations
• Increasing tax deductions allowed for R&D
• The assessment of whether the participation exemption applies at the fund investment level is no longer based on whether the relevant fund qualifies as a bond investment fund and equity fund. Instead, the assessment of whether the participation exemption applies is based on the mix of investments carried out by the fund.

Some basic points of the white paper:
• Reduction of the corporate tax rate down to 22% BY 2018
• Introduction of withholding taxes on interest, royalties, and certain forms of asset leases (in particular bare boat charters)
• The government rejects the Scheel Committee’s proposal to eliminate withholding tax on dividends to shareholders in normally taxed jurisdictions
• An introduction of a statutory general anti-avoidance rule (GAAR) and narrowing the Norwegian concept of a company’s place of residency in line with the Scheel Committee’s proposal
• Possible lowering of the permanent establishment (PE) threshold under Norwegian domestic law
• Changes in CFC rules
• Introducing a withholding tax on outbound interest payments

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