A practical overview of Norwegian Value Added Tax (VAT)

INTRODUCTION

What foreign companies need to know about the Norwegian VAT system

Handling Value Added Tax (VAT) is a complex operation with strict rules and deadlines that must be adhered to. Additionally, the rules and obligations vary from country to country, making it even more challenging for companies engaged in international trade to stay compliant with local VAT requirements.

If you plan to do business in Norway, it's important to note that Norway is not part of the EU, and therefore may have different rules compared to EU member states and other regions.

In this page, we have collected and summarized key information about Norwegian VAT for foreign companies.

What is Value Added Tax (VAT)?

Value Added Tax (VAT) is a consumption tax charged on goods and services at each stage of production or distribution. Unlike traditional sales taxes, which are collected only at the point of sale to the final consumer. This means that businesses along the supply chain are responsible for collecting and remitting VAT on behalf of the government. While the end consumer ultimately bears the cost of VAT, businesses act as intermediaries in the collection process.

VAT rates and regulations vary between countries, and businesses must comply with the specific requirements of the jurisdictions in which they operate.

VAT on sales in or to Norway

The balance between doing business in Norway and business to Norway can be complicated. A company’s obligation to register and report VAT only apply if it does business in Norway. However, each case must be assessed separately as this is a case law area. Relevant circumstances to consider include:

Is there any physical presence in Norway?
To which extent does the supplier target the Norwegian market (are the marketing particularly directed towards Norwegian buyers)?
Which types of services are delivered?

At one end there are long-term business projects in Norway which involves supply of goods and services. This is clearly a VAT liable business in Norway. At the other end, we have export sales from abroad, where the business connection to Norway is more uncertain. In such cases it depends on the overall assessment if the business is selling in Norway or to Norway.

Also read: Import to Norway - VAT and customs

FAQ

Frequently Asked Questions about VAT

What are typical grey areas related to the obligations of registering for VAT?

Do I have to register for VAT if I hire personnel from abroad? According to Norwegian law, hiring personnel from abroad is classified as a remotely deliverable service because the hiring company doesn't control where the personnel work. Since the hiring isn't tied to a specific location, and the personnel are at the disposal of the hiring entity, the service is considered delivered upon personnel availability. Consequently, companies hiring personnel from abroad aren't required to register for VAT in Norway, even if the personnel will work in Norway. Instead, the recipient in Norway is responsible for calculating and paying the value-added tax, following the reverse mechanism, an exception to the standard VAT collection rule.

Do I have to register for VAT if I lease goods to Norway?

The classification of lease of goods as a location-bound or remotely deliverable service remains undecided by the court. While there are indications it could be considered remotely deliverable in the future, the Tax Administration has historically treated it as location-bound. Until a court decision contradicts this, the assumption is that lease of goods is indeed location-bound, and you must register for VAT.

However, this area within VAT is a bit more complicated. You can read more about that here.

Register your business in the VAT register

The VAT register, also known as the Value Added Tax register, is a government-maintained list or database of businesses that are registered for Value Added Tax (VAT). In many countries, businesses that reach a certain threshold of turnover are required to register for VAT, allowing them to collect VAT on sales of goods and services and remit it to the tax authorities. In Norway the threshold is turnover (or withdrawals) of at least NOK 50,000, over a 12-month period.

Being registered for VAT also enables businesses to reclaim VAT paid on purchases and expenses related to their business activities. The VAT register serves as a means for tax authorities to track VAT payments and ensure compliance with VAT regulations.

Also read: Should your business register for VAT in Norway?

How to register your business in the VAT register

You must register your business once the taxable turnover exceeds the threshold within a 12-month period, applicable to sales to both companies and consumers. Timely registration is crucial to avoid accruing interest for late registration.

Businesses that are registered in the VAT register must:

Collect VAT on behalf of the state.
Pay VAT on goods and services purchased for the business in Norway.
Calculate VAT owed on imported goods for the business.
Report VAT payments and collections to the Tax Agency.
Settle the difference between outgoing VAT collected on sales and input VAT paid for purchases.

As the law regarding VAT is complexed, there are of course several other considerations you need to consider.

What happens after you have registered your business in the VAT register

Once your business is registered in the VAT register, you need to invoice sales that pushed your turnover over the registration threshold for VAT. During the transition period while awaiting approval for VAT registration, decide how to handle invoicing. Since you can't include VAT on invoices while waiting, you'll need to post-invoice the VAT amount after approval. This applies to the entire invoice exceeding the NOK 50,000 limit and any subsequent invoices sent during the waiting period.

Two solutions exist: delay sending invoices until receiving VAT registration approval (then invoice with VAT included) or continue sending invoices while awaiting approval and invoice for VAT later. The former is the simpler option. Invoices below the threshold mustn't include VAT but must be reported in your VAT return. After registration, report VAT collected and paid on goods or services through VAT notices, based on company accounts.

What information is required on the invoice?

The required information that the invoice must contain is strict:

The documentation must always show the legitimacy of the recorded information for the seller and the buyer.
As a general rule, the invoice must be issued in Norwegian, Swedish, Danish or English. For bookkeeping entities with branches abroad, invoices can be issued in the local language but may require translation.
Invoices must be issued as soon as possible and no later than one month after the delivery of goods or services.

Deduction on input VAT

Deduction of input VAT refers to the process by which businesses can subtract the Value-Added Tax (VAT) they have paid on purchases (inputs) from the VAT they collect on sales (outputs). This mechanism is central to the VAT system, allowing businesses to reclaim the VAT they incur on business-related expenses, thereby ensuring that the tax is ultimately borne by the end consumer.

Also read: 6 tips for VAT refund in Norway

This is how the VAT deduction works:

Input VAT is the VAT that a business pays upon purchases of goods and services from suppliers.
Output VAT is the VAT that a business charges its customers when selling goods and services.
The deduction process is the process that happens at the end of a tax period when your business calculates the total VAT that you have collected from sales (output VAT) and the total VAT you have paid on your purchases (input VAT). Then you deduct the input VAT from the output VAT. The difference is the VAT your business must pay the tax authorities. If the input VAT exceeds the output VAT, you may claim a refund or carry forward the surplus to reduce future VAT obligations.

How to calculate VAT when importing goods

When importing goods to Norway you must, in mot cases, pay or report VAT on the imported goods. In this case, you must include the custom duty tax (link til blog om what is customs duty tax) in the calculation basis for VAT. This is usually calculated based on the value of the goods, however it can also be calculated based on rate per kilo, liter or unit price.

Also read: Import to Norway - VAT and customs

Example on VAT calculation:

The item`s price

+ any insurance

+ costs for packaging and the like

+ any fees, royalties, commission, and the like

+ shipping costs

= customs value.

VAT rules for temporary import of goods

If your business is importing goods to Norway for a temporary period, you may qualify for exemptions from customs duties and other taxes, such as VAT. However, certain conditions must be fulfilled to benefit from these exemptions.

The goods must be imported for a specific purpose.
The goods cannot undergo any alterations except for a decrease in value due to normal use.
The goods must be easily identifiable.

The goods must be exported from Norway within one year of importation. If you require an extension beyond this timeframe, you can request it through the customs office. Additionally, upon exportation, you must declare the goods. It's essential that the goods are exported in their entirety to ensure that the exportation aligns with the temporary importation arrangement.

You can also be exempt from VAT when temporarily importing goods using an ATA Carnet.

Excise duties

So far, we have covered your obligations to pay customs duty and VAT upon importation of goods. How you proceed with payment hinges on whether your business is registered in the VAT register or if it’s registered for excise duty.

Excise duty is a tax levied on the import, production, or sale of certain goods. This tax is paid by the manufacturer or the importer.

If you're not registered for the applicable excise duty, you'll settle all fees directly with the Norwegian Customs authority when crossing the border, through the individual facilitating the goods clearance, or by utilizing the company's customs credit. Customs credit provides businesses importing goods with a deferred payment deadline, allowing them to pay customs duty and excise duty together monthly. If you're registered for the relevant excise duty, payments are made to the Tax Agency, with reporting conducted through the tax return for excise duties.

Examples of goods you must pay excise duty tax on:

Non-alcoholic beverages
Alcoholic beverages
Beverage packaging
One-off tax (cars and vehicles)
Hydrofluorocarbons (HFC’s) and Perfluorocarbons (PFK’s)
Mineral products (including fuel)
Nox, chocolate and sugar products
Lubricating oils
Sugar
Technical ethanol
Tobacco
Trichloroethene (TRI) and Tetrachloroethene (PER)

VAT on e-commerce (VOEC)

VAT on e-commerce (VOEC) is a simplified registration and reporting scheme designed for businesses. The VOEC system becomes relevant when businesses, not based in Norway, engage in sales to Norwegian consumers through online platforms, encompassing remotely deliverable services, including electronic communication services, and low-value goods. Specifically, VOEC is triggered when the total value of goods sold to Norwegian consumers surpasses the VOEC threshold within a calendar year. This threshold, determined by the Norwegian Tax authorities, may vary annually. Upon exceeding the threshold, your business is obligated to register for VAT in Norway and levy Norwegian VAT on sales to Norwegian consumers.

VOEC is an alternative to ordinary registration in the VAT system and the goods within the VOEC scheme are exempt from custom duty and excise duty.

How to report VAT

Most of those businesses subject to submitting VAT, return VAT every two months (bimonthly returns). The VAT return must be submitted, and the VAT owed must be paid, no later than one month and ten days after the end of each term.

Example second term (march and April), the deadline for submitting and paying VAT is due May 10th.

However, for some businesses it is possible to submit a VAT return once a year (annual return).

The requirements you need to fulfil to be subject for annual return are:

Your turnover is below one million NOK in the past 12 months.
You have been registered in the VAT register for at least one year.
You must have submitted the VAT return accurately and on time bimonthly for at least one year.

In these cases, the deadline is the 10th of March in the year following the income year.

How to pay VAT

The main rule is that the payment deadline coincides with the deadline for submitting the VAT return. However, you can apply for deferred payment, installments, or a combination of both. It is important to note that while payment deadlines can be postponed, the deadline for submitting the VAT return itself cannot be extended.

To qualify for a payment postponement, you must meet the following criteria:

You are unable to make the payment by the due date.
You must propose the best possible payment offer you can provide.
Your offer must ensure a faster repayment than the Tax Administration could achieve through enforced collection.

When do you need a VAT representative?

If you represent a foreign company operating in Norway that is liable for VAT but does not have a fixed place of business in Norway, you must register through a Norwegian-based VAT representative. The VAT representative will act on behalf of your business to fulfill your VAT obligations, including registration, filing returns, and making payments.

However, enterprises from the following EU/EEA countries are exempt and can register without a representative:

Belgium, Bulgaria, Denmark, Croatia, Czech Republic, Cyprus, Estonia, Faroe Island, Finland, France, Germany, Greece, Greenland, Hungary, Iceland, Italy, Latvia, Lithuania, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United Kingdom.

Key responsibilies of a VAT representative

VAT Registration: Ensuring that the foreign business is properly registered for VAT in the relevant country.
Filing VAT Returns: Preparing and submitting periodic VAT returns on behalf of the foreign business.
Payment of VAT: Handling the payment of VAT due to the tax authorities.
Record Keeping: Maintaining accurate records of transactions subject to VAT.
Communication: Liaising with the tax authorities on behalf of the foreign business, including responding to inquiries and audits.

MAGNUS LEGAL BUSINESS LAW FIRM

How can we help you with your Norwegian VAT obligations

As a foreign company operating in Norway, dealing with the complexities of VAT can be overwhelming. If you feel uncertain about who to proceed and execute your VAT obligations, we recommend that you seek help from professional consultants. The costs and consequences if you fail to do it accurately are high and can easily be avoided.

Magnus Legal is qualified to act as a VAT representative for foreign companies seeking to do business in Norway. We have a core team with experienced professionals within VAT matter who are dedicated and focused on providing you with first class VAT service.

Also see: Our expertise in VAT matters

A PRACTICAL OVERVIEW OF VALUE ADDED TAX IN NORWAY

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