For many years, employees in Norway have received a higher net salary in December. This is due to tax regulations that allow employers to withhold only half of the usual advance tax for that month. Since 2016, the Norwegian Tax Administration has permitted this rule to be applied in November instead of December.
It is, however, a misconception to view the reduced tax as a gift from the state. The tax is not waived, only deferred. In Norway, income tax is calculated on the total income earned during the tax year, including December earnings. The final settlement takes place after submitting the annual tax return the following year. Therefore, whether the employer withholds half the advance tax in November or December, the total annual tax remains the same. For the remaining months, slightly higher deductions are made.
The “half tax” arrangement applies to employees on fixed salary, hourly wages, piecework or commission. It covers regular salary, permanent allowances and payments in kind. However, variable payments such as bonuses and overtime are taxed in full. Employees taxed under the 25% flat withholding tax scheme PAYE (“kildeskatt”) are not covered by this arrangement – for them, the normal withholding applies every month.
If you are concerned about paying too little tax during the year, you can ask your employer to withhold the full tax advance in December. This way, you avoid the risk of underpayment when the final tax assessment is made.
You can find more information here.
