Planning a move to Norway? Once you've sorted employment, registered with the authorities, and opened a bank account, the next crucial step is understanding Norway's tax system. Though often considered strict, Norway's tax framework is transparent and highly organized, with income tax deducted directly at source. This guide provides an overview of how the Norwegian tax system works, including tax rates, procedures, and key points for expats.
At-source tax deductions in Norway
In Norway, income tax is deducted directly from your salary at the source. This simplified tax management entails your employer withholding a portion of your income each month and transferring it to the tax authorities.
To ensure accurate deductions, you'll need a tax deduction card, or “skattekort”, specifying the tax rate applicable to your salary. Applying for a skattekort is one of the first administrative tasks for expats starting work in Norway. To apply, you'll need documents such as your ID card or passport, an employment contract, and a residence permit in the case of non-EEA citizens.
How to obtain a tax deduction card in Norway
Apply for a tax deduction card (skattekort) online via the Norwegian Tax Administration (Skatteetaten) website or in person at a tax office. First-time applicants, especially those new to Norway, are advised to apply in person to present the required documents, including the RF-1209 form. Once issued, the skattekort is sent directly to your employer digitally, enabling automatic tax deductions.
Norway's progressive tax system
Norway's tax system operates on a progressive scale, where tax rates increase with income. For 2024, the standard income tax rate was 22%, but additional step taxes, known as "trinnskatt," are applied based on income levels as follows:
- Below NOK 208,050: No step tax;
- NOK 208,051–292,850: 1.7%;
- NOK 292,851–670,000: 4%;
- NOK 670,001–937,900: 13.5%;
- NOK 937,901–1,350,000: 16.6%;
- Above NOK 1,350,001: 17.6%.
Examples of tax calculations:
- An employee earning NOK 400,000 annually will pay approximately 4% in taxes.
- An employee earning NOK 700,000 annually will pay approximately 13.5%.
- For an annual income of NOK 1,000,000, the total tax rate rises to approximately 17.6%.
Administrative procedures and tax declarations
Once the tax deduction card is received, online registration on Altinn – Norway's digital portal for administrative services – is required. This platform allows for real-time tracking of tax payments and authentication of tax information. You will have additional access to your annual tax return (skattemelding), typically available in April.
The skattemelding is pre-filled, but it's critical to review it for any inaccuracies or incomplete data and update it accordingly. For instance, you can manually add deductions for eligible expenses like medical costs or charitable donations.
Transparent taxes: a Norwegian specialty
Norway's tax system is uniquely transparent. Since 1882, tax records have been public, allowing citizens to view others' income and tax contributions. This openness aims to promote wage equality and discourage tax evasion.
While this may feel unsettling to foreigners, it's worth noting that privacy is safeguarded—any search for someone's income is logged, and individuals can see who has accessed their records, thus discouraging misuse.
Taxes for foreign workers in Norway
Temporary foreign workers in Norway may fall under the PAYE (Pay As You Earn) scheme, which applies a flat tax rate of 25% for foreigners, thereby simplifying the taxation process. Those whose annual income exceeds NOK 642,950, however, no longer qualify for PAYE but must transition to the progressive tax system. Additionally, some residents in Norway may qualify for exemptions from social security contributions, reducing their tax rate to 17.2%. Confirm eligibility through the Tax Administration.
Work visas for Norway
Other types of taxes in Norway
Beyond income tax, several other taxes apply in Norway, including:
Value-Added Tax (VAT)
Norway's standard VAT rate is 25%, with applicable reduced rates:
- 12%: Transport services, cinema tickets, room rentals, amusement parks, sports events, and activity centers.
- 15%: Food and beverages.
Wealth tax
Individuals with assets exceeding NOK 1,700,000 are subject to a wealth tax: 0.7% by the municipality and 0.3% by the state for assets up to NOK 20,000,000. An additional 0.4% applies for assets above NOK 20,000,000.
Capital gains tax
Capital gains from the sale of property or investments (excluding shares) are taxed at 22%.
Share sales and dividend gains are subject to a surcharge, bringing the effective tax rate to 37.84% (effective rate in 2023).
A "risk-free return" deduction can reduce the taxable amount on dividends and capital gains.
Good to know:
The Norwegian tax system, while complex, is highly transparent and relatively easy to manage, thanks to user-friendly online tools like the Altinn portal. To stay informed, it's wise to regularly review updated information on the Norwegian Tax Administration's website or seek advice from a tax professional for any specific questions.
Tax deductions in Norway
Norwegian taxpayers can benefit from various tax deductions, lowering the total tax payable. Key deductions include:
Standard deduction (Minstefradrag)
Automatically applied to all taxpayers, this standard deduction (“minstefradrag”) covers most work-related expenses. In 2024, it amounts to 40% of your income, capped at NOK 109,950.
Travel expenses
If you commute long distances for work, you can claim a deduction for travel expenses for home-to-work commutes exceeding 22 kilometers daily. For 2024:
- NOK 1.70 per kilometer for up to 50,000 kilometers,
- NOK 0.90 per kilometer beyond 50,000 kilometers.
A minimum threshold of NOK 23,900 applies, meaning travel costs must exceed this amount to qualify for the deduction.
Childcare expenses
Parents can claim a deduction for childcare expenses up to a certain limit. For 2024, this amount is set at NOK 25,000 for the first child and an additional NOK 15,000 for each additional child.
Charitable donations
Donations to recognized charities are tax-deductible up to NOK 25,000 in 2024.
Student loans and interest
Interest payments on loans, including student loans and mortgages, are deductible at 22% of the total interest paid in Norway.
By leveraging these deductions, you can effectively reduce your overall tax burden—especially useful for expats adapting to the high cost of living in Norway.
Tax declaration for self-employed individuals and businesses in Norway
The Norwegian tax system isn't limited to salaried workers. If you're self-employed or run a business in Norway, your tax obligations differ slightly from those of employees. Self-employed individuals are required to pay taxes quarterly rather than monthly, with the amount calculated based on net profits.
Corporate tax
Norwegian businesses are subject to a standard corporate tax rate of 22%, applied to profits. In addition, self-employed individuals and small business owners must pay a social security contribution of 11.1%. Proper financial management for adequate bookkeeping is crucial for the self-employed, and using reliable accounting software is highly recommended for tracking income and expenses.
VAT and small businesses
Most goods and services in Norway are subject to a Value-Added Tax (VAT) of 25%. Businesses are required to register for VAT once their revenue exceeds NOK 50,000 within a 12-month period. Specific industries, such as transportation and cultural services, benefit from reduced VAT rates of 12% or 15%.
Filing taxes as a self-employed individual
Self-employed individuals are required to file a more detailed tax return known as “næringsoppgave”, which includes comprehensive information on income, business expenses, assets, and investments. Hiring a tax advisor or accountant is strongly recommended to ensure accuracy and compliance, as errors in your tax declaration can lead to severe penalties.
Double taxation and international tax treaties in Norway
Expats working in Norway may face concerns about double taxation, where the same income is taxed in two different countries. Fortunately, Norway has established double taxation agreements with numerous countries to address this issue. These treaties ensure that expats either pay taxes in only one country or receive tax credits for taxes paid abroad, thereby avoiding duplicate tax obligations.
Tax benefits for expats in Norway
Norway provides several expat-specific tax benefits designed to ease the financial burden on foreigners working in Norway for a limited time. They may qualify for a special scheme with reduced taxation, especially during the initial period of their relocation.
The 10% deduction scheme for foreigners
Foreign professionals in Norway may qualify for a 10% deduction on their taxable income during their first two years in the country. However, opting for this deduction excludes other potential tax benefits, such as claims for travel or housing expenses. This scheme is particularly advantageous for expats with minimal deductible expenses, offering a straightforward way to reduce their taxable income.
Tax credits for expat families
Expats moving to Norway with their families may be eligible for specific tax credits that help alleviate household expenses. These include deductions for childcare costs and educational support, which can significantly reduce the overall tax burden for families adapting to life in Norway.
Living in Norway: high costs offset by quality services
While living costs in Norway are high due to significant taxes and VAT, they fund exceptional public services for Norwegians to enjoy. Universal healthcare, free education, and an extensive public transport system are prime examples of how taxes benefit residents.
For expats in Norway, although the level of taxation may come as a surprise, the quality of life offered by these public services often makes the expense worthwhile. Norwegian cities are consistently ranked among the most livable globally, thanks in part to these well-funded services.
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