Before undertaking business activity in Norway, it is necessary to choose which type of legal entity to form. The type of business form will influence all activity of the company, which includes financial and tax reporting, customs as well as currency control. Therefore, an investor should pay special attention when determining the appropriate corporate form since this will help to achieve goals that are set while meeting all legal requirements. Branch for foreign company is not recommended in many cases.
Most common legal entities in Norway are: sole proprietorship (ENK), foreign company`s branch in Norway (NUF) and limited liability company with shares and board (AS). When establishing business in Norway there is no need for a local partner.
Foreigners in Norway can act as sole proprietors. The sole ownership in Norway doesn’t require a minimum share capital. The founder is taking all the decisions necessary to the good function of the entity and can use the profits after submitting the personal tax income declaration to the tax authorities. Note that sole proprietor has a full financial risk.
Setting up business in Norway is easily done through the The Brønnøysund Register Centre. Altinn is the official website that provides all the information for establishing and running a business in Norway. You can find relevant information and guides about registering your business and operating in Norway.
As a standard, foreign companies that are established as a permanent entity and earn profits from Norway are liable to pay 23% Norwegian corporate tax on earnings. Both local and foreign companies are subject to the same Norwegian corporate tax rate.
Norwegian residents are tax liable to Norway for all global income. Norwegians and foreigners who have lived in Norway over 10 years are tax liable to Norway 3 years after moving abroad.
Standard VAT rate is 25%. Reduced rate for food and beverages is 15%. Export is without VAT. All businesses with vatable turnover are obliged to apply for registration in the Value Added Tax Register (VAT Register). Foreign businesses which have VAT liable turnover in Norway must register in the VAT Register in accordance with the same rules as Norwegian enterprises.
When do you have to register your company in Norway?
If the company turnover exceeds 50 000 NOK (about 5 000 EUR) it is necessary to have it registered at Norwegian Register of Business Enterprises and submit the VAT registration form. The registration process might be slow and some documents might be requested to send in paper.
Which company form to choose?
COMPARISON OF 2 MOST POPULAR COMPANIES:
AS, Limited liability with shares in Norway
-share capital 30 000 NOK -no share capital in Norway
-VAT report every 2 months
-full accounting needed
-salaries have to be reported in Norway
-risk limited in share capital in Norway
-employees pay tax in Norway
-highly trusted in Norway
NUF, Branch in Norway
-VAT report every 2 months
-full accounting needed
-salaries have to be reported in Norway
-risk could reach mother company in home country
-in some limited cases possibility to make under 6 months installation project, where company and employees pay tax to home country
-poorly trusted in Norway, difficult to find clients or partners for cooperation
Private limited liability and joint stock company (AS)
Limited liability company is the most common business form in Norway and is usually registered by small and medium businesses. With this type of legal entity, the minimum share capital is 30 000 NOK (approx. EUR 4,000).
Opening this kind of company is possible with one founder. General meeting and the shareholders are taking all the major decisions. It is possible to have several board members and Managing director. The capital of such a company is divided into shares and the decision to transfer these shares can be taken only by the majority of the votes of the board members. It should be noted that when establishing a limited liability company at least two directors needs to be appointed and one of them has to be a resident of Norway or resident in one of the member states of the European Economic Area.
Joint stock company is a business form mainly for bigger companies. The required capital that is divided into shares cannot be less than 1,000,000 NOK (approx. 125,000). The capital is divided into stocks and can be listed in the stock market. General decisions are made by the general meeting of the shareholders, whereas the daily decisions by the members of the management board.
Norwegian Branch of a foreign company (NUF)
NUF is a Norwegian branch of a foreign company which is subordinate to the foreign company. The foreign company is responsible of the Norwegian branch and they must follow Norwegian rules. The branch has to assign a contact person who has a Norwegian national ID or D number, there is no requirement that the person has to be a resident of Norway.
If you are planning to start a short-term project in Norway NUF might be a suitable choice. Whether NUF is liable to pay taxes to Norway must be assessed case by case. It is possible to pay taxes to home country only in certain conditions. If employee is working in Norway for at least 184 days, he is liable to pay taxes in Norway from the first working day.
Sole proprietorship (ENK)
Private person is able to register as an entrepreneur. The single-person business is the easiest and cheapest way to start a business in Norway. The profits of this form of business is that the entrepreneur can do as he/she wishes. However, the entrepreneur does not have same social benefits than the employee as he/she is not classed as employee. Sickness benefits are lower, and there are no unemployment benefits. Tax liability have to be paid in advance, 4 times a year. This could cause cash-flow problems in starting phase. The owner has full personal liability, including all debts. This form fits best for very small business, where the risks are low.
Standard VAT rate in Norway is 25%. Reduced VAT rates are also applied in Norway. On foodstuff and beverages VAT is 15%, certain cultural and sport activities; transport services are 12%, 11,11% on supply of raw fish. Art and education are VAT free. Norway is not part of the EU so any sale from a Norwegian business to a client in the EU is considered an export from Norway. Norwegian exports are exempt from VAT. All work in Norway is under Norwegian VAT regulation, and all companies doing work in Norway have to register Norwegian organization number and register at VAT register, when yearly turnover exceeds 50 000 NOK.
Norwegian corporate income tax is 23%. If the documents are submitted late or incorrectly the Norwegian tax authorities are charging high penalty fees.
Audit is needed when yearly turnover exceeds 6 million NOK or average amount of employees reach 10.
In Norway, there is no general minimum wage. However, it is necessary to follow the trade union contracts.
Employment contract has to always be written. Temporary contracts are limited. More info you can find on: www.arbeidstilsynet.no. Employees have to apply for a tax deduction card, which shows how much your employer has to deduct before the salary is paid. If the employee does not have the tax card, tax deduction is 50% of the salary.
For AS registration Norwegian State charges 6797 NOK (5570 NOK for electronical registration). Electronical registration is possible if board members have Norwegian identification number. For NUF registration, the Norwegian State charges NOK 2832. Leinonen office charge fixed price 5000 NOK (+VAT) for the whole establishment process.
The regulation of employment in Norway is governed by the Working Environment Act. It regulates the relationship between employers and employees. Norway does not have a common minimum salary, but labor unions have contracts which have to be followed always when working and operating in Norway. The main duty of the Norwegian labor law is to protect the employees.
Expats are liable to pay Norwegian taxes and social charges always if they stay in the country at more that 183 days during 12 months long period. Your employer will typically arrange for the registration with the Norwegian tax office and secure the social security number. Self-employed workers will need to arrange their tax registration and Norwegian social security number by themselves. Norwegian tax deduction
is deducted from the gross salary by the employer.
Termination of the employment agreement at the probation period by the employee or employer may be carried out by providing two weeks’ written notice. After probation period it is difficult for employer to cut the agreement.
In Norway, there is no general minimum wage. Payroll is negotiated between employer and the employee However, it is often wise to follow the trade union contracts. Employment contract has to always be written. Temporary contracts are limited. More info you can find on: www.arbeidstilsynet.no. Employees have to apply for a tax deduction card, which shows how much your employer has to deduct before the salary is paid. If the employee does not have the tax card, tax deduction is 50% of the salary.
When is salary paid
Unless otherwise agreed, wages shall be paid at least twice a month. In Norway, it is common to pay wage payments once a month. The time of payment of wages shall be in the employment contract. When paying wages, the employer must provide you with a paycheck that describes salary, tax deductions and any other deductions. If you do not get this, you have to deal with your employer.
All employees are entitled to at least 25 business days of holiday each year. Weekdays including Saturdays are weekdays. Sundays and holidays are not considered working days. Normally, six business days will correspond to one week. The employee thus has a requirement of four weeks and one day of holiday each calendar year.
The tariff settlement 2000/2001 gave many workers a fifth holiday week. This extra holiday usually also increases the holiday pay rate from 10.2 percent to 12 percent. This was part of the wage settlement, and not part of the holiday law.
Employees who reach the age of 60 during the holiday year are entitled to one week extra holiday. You decide for yourself when you take this extra holiday, but you must notify the employer at least two weeks in advance.
Holiday pay is earned the year before you take out your holiday, and this is called the earning year. If you haven’t worked the year before, you have the right to take a holiday anyway. But then you are not entitled to holiday pay .
The holiday pay must be a minimum of 10.2 per cent of the holiday pay base. Employees over the age of 60 are entitled to a minimum of 12.5 per cent.
The holiday pay is calculated on the basis of what you have received as a work allowance (salary etc.) in the year of service. Not all payments are included in the calculation. For example, holiday pay shall not be calculated on payments relating to travel expenses, lodging, holiday pay paid during the earning year, or share of net dividends. Holiday pay from bonus and commission-based salary shall be calculated when this remuneration is a result of personal work effort.
The holiday pay basis must be stated in the salary and deduction statement for the year of service.
Every employee in Norway have an individual tax percentage, or a table witch the tax are calculated from. The percentage or table is depending on salary level. Lower income, lower tax, and thus higher income, higher tax.
Employers is demanded to deduct a deposit tax from Gross salary, and pay only net salary to the employer. The deposit tax, must each payroll be transferred to a special tax account and paid further to the tax authorities bi monthly.
On salary there is also social tax on 14,1% in general (some lower percentage in rural areas)
Social taxes is every employer required to pay bi monthly to the tax authorities
Pension must also be added to each employees salary. The minimum is 2%.
The A-report is a monthly report from the employer to NAV, Statistics Norway and the Tax Administration on employees’ salaries, working conditions and withholding tax, as well as employer’s national insurance contributions and financial tax for the company
Anyone who has employees, or pays wages, pensions or other benefits, must submit a notification. If you have employees, or pay out salaries, pensions or other benefits, you have a duty to provide information in the a-scheme and must submit a notification.
The A-message contains information on salaries and benefits, in addition to the status of all working conditions
Due date for A-report is the 5th in the month after the payroll.
BEING AN EXPAT
The citizens of the member states of the European Union and the European Economic Area have the right to work in Norway. However registration might be needed. Expats from outside the European Union wishing to work in Norway must check for the rules from www.udi.no.
Expats living or working in Norway are obliged to pay taxes and contributions to the Norwegian social security system. It entitles to certain Norwegian social welfare benefits, such as unemployment benefits, basic healthcare in Norway, maternity and child benefits, and a Norwegian pension.
Note that if foreigner works in Norway over 183 days during 365 days long period, or 270 days during 3 years long period, he/she will have tax obligation to Norway for the whole global income.