NORWAY - Various VAT changes in Norway

June 2019

VAT exemption on electronic journals, books, and certain content

Under certain conditions, printed journals and books are currently VAT exempt in Norway, while electronic versions are subject to VAT at a rate of 25%.

The Norwegian government has proposed exempting from VAT (zero-rating) the sales of electronic journals and books effective 1 July 2019. The exemption will ensure equal treatment of printed and electronic journals and books and is aligned with the digital development in society today.

To allow the electronic publishing industry to flourish, the government also proposes extending the VAT exemption to certain kinds of electronic content and products. For example, sound and video will be exempt, as will audiobooks and streaming.

Foreign businesses selling such products to private individuals will have to be VAT registered in Norway.

Proposed legislation preventing tax evasion

The Norwegian government has proposed new legislation to clarify VAT regulations and prevent tax evasions. The Ministry of Finance has proposed a general circumvention rule. The provision will apply to taxes regulated under the Norwegian Tax Act. Through a reference in the VAT Act, the proposed circumvention rule will also apply to VAT.

Through jurisprudence and administrative practice, Norway has a non-statutory circumvention norm. The norm works to supplement general principles and statutory interpretation and basically draws a line between acceptable tax planning and unacceptable tax-evasion.

The purpose of the proposed law is to clarify things and increase the predictability for taxpayers.

The proposal will basically codify the non-statutory norm, except with respect to the following three areas:

Tax savings abroad will not be taken into consideration,
Objective criteria and the circumstances of the case will be used to determine a transaction’s purpose,
If a taxpayer is engaged in a particular method of circumventing that is not specifically mentioned in the rule it does not mean there’s a presumption that the taxpayer’s action is permitted.

The new legislation is proposed to have effect from 1 January 2020.

Committee of experts proposes simplifications of the Norwegian VAT rates

A committee of experts appointed by the Norwegian Ministry of Finance has proposed that the rates and exemptions in the Norwegian VAT Act should be removed and replaced with a single VAT rate.

The committee proposes that the restructuring of the rates take place in two steps over a maximum period of three years. Step one would feature introduction of a low VAT rate of 12% on goods and services that today are VAT exempt (zero-rated). In addition, today’s reduced rate of 15% on foodstuffs would be increased to the general rate of 25%. The second and final step would be to remove the low rate of 12% and introduce one common rate. The committee proposes setting aside 5 billion NOK for targeted support schemes and compensatory measures.

The committee estimates adoption of the proposals would create a net additional annual income of about NOK 25 billion. This additional revenue would provide flexibility for the government, which means that at a later date the government could make other changes, such as reducing the general rate from today’s 25% to 23%, or perhaps reducing other taxes and fees.

The proposal has already been met with a lot of opposition from Norwegian businesses. The Minister of Finance has said that she does not foresee removal of all low rates and VAT exemptions. The government has sought stakeholder comment on the proposal.

Knut Andreassen
knut.andreassen@bdo.no

Helene Hval
helene.hval@bdo.no