Norway: New Flat Tax Rate for Foreign Workers Proposed

The global solution for human resource professionals, combines custom research, strategic white papers, country primers, webinars and OnDemand educational programs, and the expert guidance...

By Marcus Hoy

Norway is proposing a new tax rate aimed specifically at foreign workers on short-term contracts, the Finance Ministry said May 15. Intended to simplify tax rules for both employers and employees, the legal proposal (86 LS) offers nonresident workers the opportunity to be taxed at a flat income tax rate of 25 percent with no permitted deductions.

The proposal was presented May 15 as part of the government’s 2018 Spring Budget Plan and is due to be effective with the 2019 tax year.

Simpler System

According to the Finance Ministry, the existing rules governing the taxation of nonresident employees from both EU and non-EU nations are complicated and the collection of back taxes following their departure difficult and time-consuming.

Under the new proposal, nonresident employees could choose to be taxed at a fixed rate of 25 percent with no permitted deductions rather than at the progressive general income tax rate, which has a base of around 38.5 percent before deductions. Taxpayers who choose to be taxed under the 25 percent rate will not be required to file tax returns.

“Taxation of foreign workers gives rise to many mistakes and is time-consuming both for taxpayers and the Tax Authority,” the Finance Ministry said in a May 15 statement.

According to information provided to Bloomberg Law by the ministry May 16, there will be little difference between the actual tax paid by most nonresident employees regardless of their preferred model, but the new rate will be far simpler to apply. If chosen, the new bracket will continue to apply as long as the employee retains nonresident status.

Parliamentary approval of the measure in the spring budget is certain.

To contact the reporter on this story: Marcus Hoy in Copenhagen at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bloomberglaw.com

For More Information

Proposal 86 LS is available here, the Finance Ministry statement here, both in Norwegian.

For more information on Norwegian HR law and regulation, see the Norway primer.

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International HR Decision Support Network