Norway is a constitutional monarchy, with a parliamentary democratic system of government. Powers are allocated among the executive, the legislature Storting and the court system. Many executive powers are granted to the “King in Council.” The unicameral parliament has legislative authority; it passes legislative acts, imposes taxes and adopts the fiscal budget. For administrative purposes, the country is divided into 19 counties, which are subdivided into 428 municipalities.
Although not an EU member state, Norway generally is fully integrated in the EU’s internal market and free travel area, through the European Economic Area (EEA) and Schengen agreements. Norway is a member of the European Free Trade Association (EFTA), along with Iceland and Liechtenstein. The EFTA has an agreement with the EU (Agreement on the European Economic Area) that provides for zero tariffs on most goods and that effectively implies that Norway has adopted most of the EU articles and directives (but not tax directives). Norwegians are known to be very patriotic and proud of their country. They almost certainly think that Norway carries a bigger importance on the world arena than it actually does.
Norway is one of the richest countries in the world, and at the same time one of the smallest. The population is just about to reach 5 million people. Norway is very independent and likes to control its own affairs, which is why it is still reluctant to join the EU.Norway’s economy is, to a large extent, based on international trade. Rich in natural resources, including petroleum and natural gas, the country exports raw materials and partially processed goods to trading partners that include other European countries, Japan and the US. The country has become increasingly services-oriented.
There are many good reasons for doing business in Norway, such as the high level of education, high productivity, and a longstanding culture of innovation. Norway has one of the world’s strongest economies. High priority is given to knowledge development, innovation, technology and maintaining a sustainable business sector.
Norway is a world leader in the oil and gas, energy, maritime and seafood sectors. Companies in other sectors are also making their mark. Medtech, FinTech, Edtech and other technology clusters are flourishing.
Norwegian technology clusters, and centres of expertise innovation can provide foreign companies with specialist knowledge, relevant networks and potential partners.
It is easy to set up a business in Norway. This was highlighted in the ‘Ease of doing business 2017’ survey, where Norway is ranked sixth. In other words, Norway a very interesting country both for established companies and for start-ups.
|Overall rank 2017:||rank 6th (change in rank: +2)|
|– Starting a business:||rank 21|
|– Dealing with construction permits:||rank 43|
|– Getting electricity:||rank 12|
|– Registering property:||rank 14|
|– Getting credit:||rank 75|
|– Protecting minority investors:||rank 9|
|– Paying taxes:||rank 26|
|– Trading across borders||rank 22|
|– Enforcing contract:||rank 4|
|– Resolving Insolvency:||rank 6|
New businesses registered in 2016: 25888
When you start a private limited company, you must choose a name, found the company and obtain share capital. The company must then be registered. If you are unsure whether a private limited company is the right form of incorporation for you, read about the other options under ‘choosing form of incorporation’.
If you are not a citizen of an EU/EEA country, and are planning to run a business in Norway, you need to have a residence permit that will allow you to work here. You can find information about the terms and requirements for resident permit on the Norwegian Directorate of Immigration’s (UDI) website.
The general meeting is the supreme authority in a private limited company. The general meeting elects the board. The board must consist of at least one member. The board is responsible for administering and managing the company. In turn, the board can opt to appoint a general manager who will be responsible for the day-to-day operation.
Even small private limited companies must hold general meetings and have a board. In private limited companies with only one shareholder, it is not uncommon for the same person to hold all the abovementioned roles.
‘Shareholders’ is the term used to refer to those who own a private limited company. Private limited companies must have at least one shareholder. There are no restrictions on the number of people who can own shares in a private limited company. Shares can be owned by private individuals, legal persons and jointly between many shareholders. The general rule is that all shares give equal rights in the company, but exceptions from this rule may be stipulated in the articles of association.
In a private limited company, the founders must pay in share capital. This amount must be at least NOK 30,000. Share capital can subsequently be altered through a capital increase or capital reduction. Share capital is an asset which can be in the form of cash or assets which can be sold and thereby converted to money. The share capital can also be a combination of money and assets. If the share capital consists of assets, this is called a non-cash contribution. The purpose of share capital is to provide collateral for the company’s creditors.
Under the Companies Act, it is the collective board which represents the company externally. The general manager has the right to represent the company regarding matters which come under general management.
When a private limited company (parent company) has a controlling influence in another limited company (subsidiary), this constitutes a group. ‘Controlling influence’ means that the parent company has more than 50% of the votes in the other company.
The parent company in a group can opt not to have the annual accounts audited if the group overall fulfils the conditions for opting not to have an audit.
In addition to the company’s accounts, the parent company in a group must also prepare consolidated accounts. Consolidated accounts consist of the accounts of the parent company and the subsidiaries combined. The aim is to present the group as a single financial entity. Small enterprises are generally exempt from the obligation to prepare consolidated accounts.
In some cases, it may be appropriate to establish a private limited company which will establish and own one or more other companies. The first company, which is called the ‘holding company’, is only established in order to own shares in other private limited companies and manage the yields. The other company or companies is a normal operating company and it is this company that is responsible for the commercial activity.
There are two particular reasons for establishing a holding company:
Some private limited companies are converted to public limited companies. There are many similarities between the rules which apply to private limited companies and those which apply to public limited companies. However, some key differences are:
Most people who run their own business must keep accounts. Accounts form the basis for most statutory statements which you have to submit to the public authorities. It is therefore important to have good routines right from the start. Up-to-date accounts are also one of your most important management tools.
If you run a small sole proprietorship, you might be exempt from accounting obligations under certain circumstances. This mainly concerns those with an annual income of less than NOK 50,000 who are not registered in the VAT Register. If this applies to you, you must still document all your income and expenses and retain this documentation in accordance with the applicable bookkeeping rules.
You can prepare your accounts yourself, but if you are not familiar with the relevant regulations, you should consider asking an accounting to do it for you. Alternatively, you could ask an accountant to help you during your start-up phase.
In Norway, the accounting regulations are split into two. Businesses are subject either to the bookkeeping obligation only, or the bookkeeping obligation and the accounting obligation.
Most sole proprietorships are subject to the bookkeeping obligation only. All private limited companies are also subject to the accounting obligation. In simple terms, this means that enterprises that are subject to the accounting obligation must submit annual accounts to the Register of Company Accounts, as well as a tax return and an income statement to the Norwegian Tax Administration.
If you decide to keep your own accounts, you must first choose an accounting system. Accounting systems must be systematic and clear. For example, they must be constructed in a way which enables you to extract reports for submission to the public authorities.
For a few hundred kroner a month, you can now get access to good online accounting software with a lot of built-in help and automated guidance. Many systems consist of separate modules, so you only have to pay for what you need. For example, if you don’t have any employees, you will not need the payroll functions. Search online and contact a few suppliers before you decide.
If your business have fewer than 600 vouchers a year, you are permitted to use a spreadsheet for your bookkeeping. However, using a manual spreadsheet will mean you will need a greater knowledge of how your bookkeeping must be carried out and it will be easier to make mistakes. The Norwegian Accounting Standards Board has prepared a standard for the use of text processing and accounting programs for bookkeeping purposes (NBS 6). It can be a good idea to familiarise yourself with this standard before you decide to keep your accounts in a spreadsheet.
If you are registered for VAT, you must submit tax returns for VAT to the relevant authority every other month (per period).
When you have been VAT-registered for one year, you can apply to submit returns annually if your turnover is less than NOK 1 million. The due date for the application for annual VAT returns is 1 February.
All taxable businesses must submit a tax return. Sole proprietorships and partners in shared liability partnerships must submit form RF-1030 ‘Tax return for self-employed persons etc.’. Private limited companies, cooperatives and other non-personal taxpayers must submit form RF-1028 ‘Tax return for corporations’ (available in Norwegian only).
Do I need to have an auditor?
Whether or not you need an auditor will depend, among other things, on your form of incorporation and the size of the turnover. Sole proprietorships are normally only subject to the bookkeeping obligation and do not need to have an auditor. Private limited liability companies can choose not to have an auditor when the turnover is less than NOK 6 million. For other companies with an accounting obligation, it is generally mandatory to have an auditor when the turnover exceeds NOK 5 million.
Where can I report my move to Norway?
To report a move to Norway, you must go to one of 42 selected tax offices in person in order to submit a relocation notification and undergo an ID control. This also applies to Norwegian citizens who are returning to Norway.
The Directorate of Immigration submits notifications of relocation for single minors and resettlement refugees.
You must bring the following when you report a move to Norway:
|Overall rank 2016:||23th (66/100 points)|
|– Property rights:||90/100 points|
|– Freedom from taxes:||53/100 points|
|– Freedom of speech/religion:||100/100 points|
|– Limited government:||42/100 points|
|– Gun rights:||30/100 points|
|– Drug rights:||25/100 points|
|– Freedom from corruption:||87/100 points|
|– Freedom from inflation:||76/100 points|
|– Business freedom:||90/100 points|
|Taxable income:||Income tax liability is based on worldwide income, net of expenses (including interest paid) and foreign income taxes. Taxable income includes salaries; dividends, interest and royalties; income from real property and other capital; industrial, commercial and agricultural profits; and shares of partnership net income, whether or not withdrawn from the partnership.|
|VAT registration:||A foreign entity cannot register for VAT purposes only; the general tax registration is applicable for all taxes.|
|– VAT Rates:||The standard rate is 25%; a lower rate of 15% applies for food and a 10% rate applies for passenger transport, hotel accommodation and cinema tickets. Certain transactions are zero- rated or exempt.|
|Withholding tax||Dividends – No withholding tax is imposed on dividends paid by a Norwegian limited company to an EEA resident corporate shareholder, provided the shareholder conducts a real business activity in the relevant jurisdiction. Otherwise, the applicable tax treaty rate will apply. Distributions to shareholders resident outside the EEA are subject to a 25% withholding tax, unless the rate is reduced under a treaty.
Interest – Norway does not levy withholding tax on interest payments.
Royalties – Norway does not levy withholding tax on royalty payments.
Technical service fees – Norway does not levy withholding tax on technical service fees.
Branch remittance tax – No
|Transfer tax:||Transfer tax generally is not levied, although there are some exceptions (e.g. registration fees on cars).|
|Real property tax:||Municipal authorities levy “rates” on the occupation of real property. A property tax applies to the assessed value of real property, at rates ranging between 0.2% and 0.7%, depending on the location of the property. Some municipalities do not levy the tax.|
|Social security:||A person resident or working in Norway is a compulsory insured “member” under the Norwegian National Insurance Scheme (NI-scheme). The NI-scheme is financed by contributions from its members, employers of members and the Norwegian state. Parliament sets the contribution rates annually. The employee’s contribution is 8.2% of gross income derived from employment. The employer’s contribution is differentiated regionally and ranges between 0% and 14.1%. Specific rates (a maximum of 11.4 %) apply to income from self-employment and remuneration for
work performed by partners in partnerships. The contribution for other types of personal income (e.g. pensions) is 5.1%.
|– Transfer pricing||In principle, intercompany transactions are acceptable for tax purposes if they are based on the arm’s length principle. Documentation requirements apply.|
|– Thin capitalization rule||Interest on related party debt generally may be deducted to the extent the interest does not exceed 25% of adjusted EBITDA.|
|– Disclosure requirements||no|
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Incorporation services in Norway
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Novasigma has built in Norway team of lawyers, associates and legal advisers to assist our clients with a business and tax planning, overseas business operations, risk management and other legal matters. Primarily focused on business transactions, Novasigma Accounting & Law corporate attorneys are a great asset to a small and large businesses. With a background on corporate law, our corporate lawyers and legal advisers have an in depth knowledge on the transactions that may put your business at risk of litigation. These include contracts and negotiations, taxation laws, business structuring, buy/sell agreements, and intellectual property, among others.
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