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Norway's Budget Targets 'Simpler, Growth-Inducing Tax Regime'

by Ulrika Lomas,, Brussels

12 October 2015

On October 7, 2015, Norway's Ministry of Finance delivered its 2016 National Budget, including proposals to revise the thin capitalization regime and cut the corporate tax rate, among other things.

The thin capitalization regime is proposed to be revised to limit interest deductions for interest paid to related parties to 25 percent (currently 30 percent) of earnings before interest, taxes, depreciation, and amortization. To counteract tax planning and simplify the regulatory framework, the Budget also proposes that loans to personal shareholders shall for tax purposes be treated as dividends on the part of the shareholder.

The Budget proposes to reduce the corporate tax rate to 25 percent (currently 27 percent) in 2016 in a bid to promote investment and facilitate higher employment, with a further reduction to 22 percent in 2018.

The Government is also considering tax reductions worth NOK9.1bn (USD 1.12bn) in 2016 for enterprises and individuals. This will include an overhaul of the structure of the personal income tax regime, through which the tax rate on ordinary income for individuals from 27 to 25 percent.

The Budget includes proposals to reduce the net wealth tax burden; the tax rate will be lowered, while the basic allowance and taxable values will be increased.

Norway's eight percent rate of value-added tax will be lifted to 10 percent.

Last, the Budget proposes improvements to the taxation of benefits from occupational vehicles, as well as abolition of the deductibility of minor expenses and the right to tax-exempted compensation for such expenses. The Budget will also exclude gains from the sale of agricultural properties from the personal income base, while at the same time abolishing the special tax exemption for gains from intra-family agricultural property sales.

In a document released alongside the 2016 Budget, the Government stated: "The changes to the tax system will have a favorable effect on the Norwegian economy, make a robust contribution to expanding the capacity for growth, and result in improved protection of the Norwegian tax base. The Government will therefore promote a business-friendly regulatory framework, with a simpler and more growth-inducing tax system."

TAGS: individuals | Finance | tax | investment | business | value added tax (VAT) | tax avoidance | tax incentives | interest | corporation tax | Norway | tax thresholds | ministry of finance | agreements | multinationals | legislation | tax planning | transfer pricing | tax rates | dividends | tax reform | legislation amendments | individual income tax | BEPS

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