An employee working in Norway must pay tax in Norway on income and taxable benefits received for this work.
The employees liability to pay tax in Norway on other income than income earned from working in Norway or received from Norwegian sources, will depend on whether the employee is considered a tax resident here.
The obligation to pay tax on income from work in Norway arises when
the employees stay in Norway for one or more periods does not exceed
- 183 days during a 12-month period, or
- 270 days in total during a period of 36 months
Exemption from the obligation to pay tax
This obligation to pay tax in Norway may be limited by a tax treaty between Norway and the employee’s home country. This is may be the situation if the work is performed on behalf of a foreign employer who does not have a PE in Norway. The foreign employer will however still be obligated to report the income to Norwegian authorities even though tax is not payable.
The obligation to pay tax not only on income earned in Norway but also on other income and capital
irrespective of origin and sources being outside of Norway arises when the employee’s stay exceeds 183 days during a 12-month period or exceeds 270 days during a 36-month period.
The employee is then considered a tax resident in Norway in the calendar year the stay exceeds 183 or 270 days.
When the employee is considered a tax resident in Norway the employee is liable to pay tax in Norway on all your capital and income pursuant to Norwegian tax rules.
Tax liability in Norway and the employee’s home country
When the employee’s stay in Norway is meant to last for a limited period of time it is not uncommon that the employee’s income earned while working in Norway is taxable also in the home country. And typically this is the situation if the salary is paid out by the foreign employer in the home country.
When the foreign employee is a tax resident due to the duration of the stay as mentioned above a double taxation situation will (also) arise for other income such as capital income.
If Norway has entered into an double tax treaty with the home country an interpretation of the double tax treaty and also the home country’s understanding of the tax residency position in the home country will give guidance as to which country will have the right to tax the different types of income and capital and which country will have to take into consideration the tax already paid in the other country.
If the employee is a tax resident in Norway pursuant to both Norwegian tax rules and a double tax treaty, the employee will pay tax in Norway on all capital and income and also wealth.
If the employee is a tax resident in Norway pursuant to the Norwegian tax rules, but ‘tax resident’ in his/her home country pursuant to the tax treaty, the employee will be liable to pay tax in Norway on income from work performed in Norway and income from Norwegian sources.
Information about whether there is a tax treaty between Norway and your home country and its significance to your liability to pay tax in Norway is available from the tax office and you may contact our office for interpretation of the consequences.
READ MORE ABOUT TAX AND LEGAL ISSUES IN NORWAY ON www.malmlaw.no