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Coronavirus – changes to Norwegian tax regulations

The government has recently proposed several changes to the Norwegian tax regulation to reduce the financial repercussions of the coronavirus. Today, the Parliament has extended the arrangement to include Value Added Tax (VAT). Below you will find a current overview of the most important tax and duty measures for businesses. The government has also notified that further measures may be implemented on short notice.

Reversal of company debit balance

To begin with, each year’s income shall be settled itself. If the taxable entity has an overall debit balance, this can be temporarily brought forward and deducted in a following income year, cf. the Tax Act § 14-6.

As a tax measure, a reversal of the debit balance for 2020 against taxable income for the two previous years, 2018 and 2019, is implemented. The measure applies to all business sectors.

The ability to reverse the debit balance against income in 2018 and 2019 is limited to NOK 30 million per company. This means that the tax deduction will improve the liquidity with maximum NOK 6.6 million for the two years. Since the paid tax value will result in lower loss carry-forward in future years, the actual tax concession will consist of the interest gain in receiving the tax concession at an earlier date. If the company is part of a group (enterprise) in accordance with the Tax Act, a reversal of the debit balance in accordance with the proposed regulations will most likely be more favourable than to balance the debit through the group (enterprise) contribution.

The tax value of debit balance in 2020 will not be paid out until the tax statement in 2021. Therefore, the  proposal will not immediately ease the liquidity for many vulnerable businesses. The government is of the opinion that this arrangement may make it easier to obtain loans from the banks in the transition period. However, there is a prohibition on mortgaging or transferring the credit balance on tax according to the Tax Payment Act. It remains to be seen as to whether thisarrangement will influence the banks’ financial assessments.

Delayed payment of wealth tax

Individual tax payers and estates of deceased persons are liable to pay wealth tax of 0.85% of the base wealth tax, above the basic deduction of NOK 1 500 000.

Currently, there are preparations being made for the possibility to apply for one year delay of payment of the wealth tax for business owners with a deficit in the income year 2020. However, the delay of payment cannot be claimed until the 2021 tax statement, therefore the arrangement will not provide any immediate liquidity assistance for business owners.  A threshold amount is in place, which means that the wealth tax must be at least NOK 30 000 in the income year for the tax payer to claim delayed payment.

To receive a delay in the payment of the wealth tax on shares in parent company in a group (enterprise), the requirement is that group (enterprise) accounts have a deficit.

The tax payer must pay interest during the delay period,  but the government will not demand financial security for the claim.

Delayed payment of advance payment of tax for the self-employed

The first tax payment date for the advance tax payment is moved from March 15, 2020 to May 1, 2020. Moreover, the self-employed persons that can substantiate that the business will run a deficit in 2020, may claim exemption completely or partially for the rest of the advance payments for 2020, including instances where the advance tax payment is assumed to correspond with the expected declared tax. This means that the tax payer is exempted from payment of all or part of the advance tax payment for the second, third and fourth quarters, with deadlines on May15th, September 15th and November 15th..

Delayed payment of Employer’s National Insurance contributions

Businesses are allowed a delay in the payment of the Employer’s National Insurance contributions that is due on May 15, 2020.  However, a delay is not allowed if the Employer’s National Insurance contributions was due on March 15, 2020.

Value Added Tax (VAT)

The Parliament has approved the amendment to expand the measures to also include Value Added Tax (VAT). This provides a delay of tax payments that were due on April 15, 2020.  The reduction on the rate on VAT from 12 to 8 percent, including, but not limited to, the arts, passenger transport and hotel accomodations, has also been approved. . The measure will result in an immediate liquidity effect for some sectors. The change is effective from January 1, 2020.