Norway payroll and tax overview.

Norway is a European country at the northernmost tip of the Scandinavian peninsula, sharing portions of its eastern land border with Sweden, Finland, and Russia respectively and meeting the Norwegian Sea at its western coast. Modern Norway is one of the world’s most prosperous countries, boasting a stable political system, highly developed economy and, at an estimated $78,000 in 2019, the second-highest GDP per capita in Europe. Norway’s financial prosperity is founded on the historic strength of its oil industry, which accounts for around 20% of GDP, and over 40% of the country’s exports. Beyond oil and petroleum, important industries in Norway include hydroelectric energy, aluminium, telecommunications, and financial services and in 2019 the country's GDP stood at an estimated $418 billion with 1.2% growth. With access to the Atlantic Ocean, Europe and the Americas, Norway has strong global trade connections bolstered by a healthy merchant shipping fleet, a highly developed transport network, and 97 airports. Norway is a member of the UN, NATO, the WTO, and the OECD, and is part of the Schengen Area which allows its businesses to trade freely within the Eurozone. In 2019, the World Bank ranked Norway 9 on its Ease of Doing Business Survey.

Why Invest in Norway ?

There are numerous reasons for investors to target Norway, these include:

• Economic Strength: Norway’s economy is one of the strongest in the world and is the world’s second-wealthiest country by GDP-per-capita with a sovereign wealth fund valued at almost $900 billion.
• Standards of Living: Norway’s economic strength is reflected in the work and living standards enjoyed by its residents. Norwegians enjoy universal healthcare and a well developed social security system, along with high levels of personal wealth. In 2017, norway ranked ‘1’ on the World Happiness Report.
• Strategic Location: Norway’s location at the edge of Europe makes it a continental gateway - and trade links to the EU and the Americas offer access to markets with tens of millions of consumers. As part of the Schengen Area, businesses in Norway benefit from freedom of movement and labour across the EU.
• Business Environment: Norway ranks consistently within the top 10 on the World Bank’s Ease Of Doing Business Survey, and was ranked the 15th Best Country For Business by Forbes in 2017. Norway offers its businesses excellent utilities with standard broadband coverage at 90% (excluding some northern regions).
• Innovation & Talent: Norway draws from a skilled labour pool, with high levels of literacy and English language proficiency. Similarly, Norway values R&D business interests, with close coordination between industry and government, especially in the energy sector.

Foreign Direct Investment in Norway

The Government welcomes inward investment in Norway that will contribute to the economy. Various financial incentives exist to encourage investment within key industries, particularly those supported by Government Research and Development grants.

Registering a Company and Establishing an Entity in Norway

Every foreign company needs to have a Norwegian Organization Number with The Central Coordinating Register for Legal Entities (Brønnøysund) in order to operate and process a payroll in Norway. The application process can take around three to eight weeks for a NUF and less time for an AS.

In order to obtain an organization number for a NUF in Norway, the following is required:

• Application form
• Information about the Director or contact person, power of attorney if necessary
• Registration certificate from the home country

All employees working on a construction site or building site are required to have a Building ID Card.

The employer is obligated to report the contract as well as the employees working on a contract to the authorities by completing RF 1199/98 forms. Some exemption can apply on a case-by-case basis.

Business Banking in Norway

It is not mandatory to make salary payments from an in-country bank account in Norway. It is mandatory to pay the withholding tax from an in-country bank account and this account should be separate. Employers can provide a bank guarantee (if within the EU) instead of making payments from an in-country account.

Salary payments and third-party payments can be made on the client’s behalf. Bank transfers within the same bank in Norway will usually take place within the same day and for any other bank also in Norway will usually be within one day. International transfers can take between three to four working days.

What Are the Working Days and Working Hours in Norway?

The working week in Norway is Monday to Friday. The legal duration of work is 40 hours per week. The duration can be annualized to 1607 hours or 218 days. In that case, the time at work can be modulated depending on high or low seasons.

Along with the annual rules, employees are granted RTT (working time reduction days) and extra hours are paid or “Recovery Days” are granted. It depends on the collective agreement or a corporate agreement.

Basic Facts about Norway

General Information

Occupying the western side of the Scandinavian Peninsula, on the shores of the North Atlantic Ocean, Norway is one of continental Europe’s most northern territories. Civilisation has been present in Norway since the 10th century, and the country ruled an empire at the peak of its expansion from the 13th to the 14th centuries. Modern Norway is officially known as the Kingdom Of Norway, and is one of the most prosperous countries in the world, successfully exploiting abundant natural resources and reserves of oil. Norway’s coastline is rugged and stretches for over 25,000km - not including the hundreds of fjords and inlets which break up the landscape. Those fjords form a huge part of Norway’s tourist appeal, and visitors from across the world travel to the country each year to enjoy its spectacular mountains, lakes, rivers, and forests. Norway’s climate is mild along its coastline and southern regions, but the northern parts of the country do experience extreme winters and exceptionally cold, freezing winters.

Full Name: Kingdom of Norway

Population: 5.328 million (Statistics Norway, 2019)

Capital: Oslo

Primary Language: Norwegian

Monetary Unit: 1 Norwegian krone = 100 øre

Internet Domain: .no

International Dialing Code: +47

The tax year runs from 1st January to 31st December.

The year-end process in Norway is required to be completed by 31st January. At the end of each tax year, a mandatory annual wage report must be completed and sent to each of the employees. The report is a summary of all figures reported in the a-message during the year. The report is the end of year certificate and confirmation to the subcontractor of earnings in Norway.

When an individual starts working in Norway, they receive a tax table or tax percentage card based on their annual salary, housing and family situation. The tax card can be downloaded here. If the employee is working onshore, the employee has to perform an ID check at the tax office prior to receiving a tax card. Employees working on vessels do not need to have an ID check.

If an individual receives a tax table card, they can calculate their tax using an online tax calculator.

Income Tax in Norway

All employees pay tax based on a tax card. Tax rates vary depending on income levels, level of debt/wealth, number and age of children and if their spouse works or not.

Income tax is 22% of net wages, but if the income exceeds NOK 180 800, there is progressively higher tax to pay depending on which bracket your salary is considered to be within.

Income between NOK 0 and 180 800 = no bracket tax

Step 1 - Income between NOK 180 800 – NOK 254 500 = 1,9% bracket tax

Step 2 – Income between NOK 254 500 – NOK 639 750 = 4,2 % bracket tax

Step 3 – Income between NOK 639 750 – NOK 999 550 = 13,2 % bracket tax

Step 4 – Income from NOK 999 550 = 16,2 % bracket tax

If there is no tax card available, 50% tax is withheld for the employee. Since 2019, a new and simplified tax scheme is available for foreign workers in Norway, the PAYE (Pay As You Earn) scheme. If the employee meets the criteria, they will be taxed under the PAYE scheme. If the employees prefer to be taxed under the general tax rules, employees can opt out of the PAYE scheme by changing their tax card at any time during the tax year.

Tax is withheld and reported every month but paid out to the authorities by the 15th of every second month (termin).

The typical penalty awarded for the late submission and payment of tax contributions is a percentage of the amount that is payable, depending on the number of days the payment is delayed for. A penalty will also be imposed for late submission of the monthly tax reporting (A-melding). The fee is NOK 115 per income recipient with errors per days. The fine will continue to accrue until the information has been submitted or the error has been corrected. The fine can be up to a maximum of 1000 x NOK 1,150 (one court fee) = 1,150,000.

Calculation Example

As an example, an employee with a tax table 7150 and a gross monthly salary of NOK 50,000 will be deducted NOK 13 807 in tax.

If an employee receives a percentage card or is being taxed under the PAYE scheme, it is a simple calculation.

As an example, if an employee has a percentage card of 36 per cent and a gross monthly salary of NOK 50,000 they would be deducted NOK 18,000 in tax.

As an example, if an employee is being taxed under the PAYE scheme and a gross monthly salary of NOK 50 000 they would be deducted NOK 12 500 in tax.

Social Security in Norway

Social security deductions are 8.2% of an employee’s salary, unless an exemption is granted according to a relevant social security agreement. This 8.2% is already included in the tax withheld for the employee. The employer’s contributions are 14.1% (Zone 1).

As with the tax deduction, social security contributions are withheld every month but paid out every second month to the authorities. The payment dates are the same as mentioned above for tax.

The typical penalty awarded for the late submission and payment of social security contributions is a percentage of the amount that is payable, depending on the number of days the payment is delayed for.

Reporting Tax in Norway

Monthly

A-melding Reporting (A02)

• Every month
• This represents the gross salary inclusive benefits in kind
• It needs to be submitted by the 5th of the following month
• This is filed electronically on Altinn

Bi-Monthly

A-melding Payment (A03)

• Every second month
• This represents the amount of NI and tax payable
• It needs to be submitted by the 15th of the month following the end of the term in (Jan/Feb due 16th March)

New Employees in Norway

The employees need to register with the Population Register if moving to Norway and intend to stay for more than six months.

Each employee has to apply for a tax card. In order to apply for a tax card the employee has to go to the tax office in person with the required documents (a valid passport and employment contract or a written confirmation of work assignment(s) in Norway) and perform an ID check. At the ID check, the employee needs to submit an application for a tax deduction card (form RF-1209).

All employees working offshore are exempted from the ID check and will be issued a tax card when they are reported by completing the RF1198 form.

To set up a new starter for payroll, the employer will need to complete a new hire form and provide this along with a copy of their tax card and an A1 form (if necessary).

Leavers in Norway

The timescale regarding an employee’s final payment is dependent on the employee’s contract.

When an employee leaves the company, the RF 1199 Contract Form and the RF 1198 Employee Activity Form needs to be completed and the employee should be removed from the AA register at NAV. The leaver forms should be submitted via the new online portal for reporting information about assignments, contractors and employees.

It is legally acceptable in Norway to provide employees with online payslips. A company is required to have a legal entity established in order to process a payroll, however only a registered number is required.

The implementation of a payroll is dependent on several factors, for example, the number of employees, the pay structure, complexity of the payroll etc. It is advisable to upload files to transfer data as this accelerates the implementation process.

Payroll reports must be kept for at least 10 years.

Foreign employers operating in Norway, or those with an employee population in Norway, should take steps to ensure compliance with the country’s tax legislation when administering payroll. It may be worthwhile for expat businesses to engage a global payroll provider to handle their payroll solution for Norway - at least until they are familiar with the country’s tax and social security requirements.