Consultation paper on tax-free cross-border merger of securities funds, reorganisation of savings banks, and realisation of merger and demerger receivables

by Morten Platou and Carina Raa


Sky in the evening.

The Norwegian Ministry of Finance has on 24 February 2023 distributed a consultation paper on making three types of transactions tax exempt by law. The three types of transactions are today tax exempt in practice but will under the proposal be statutory exempt, provided requirements set out in the Norwegian Tax Act are met. The due date for the public to make statements on the consultation paper is set to 24 May 2023. It is expected that the proposed amendments will be implemented into law, with effect from 1 January 2024.


In addition to general rules on tax exemptions for mergers and demergers, conversions and intra-group transfers, the Norwegian Ministry of Finance can grant consent to make capital gains tax exempt in specific cases within certain limited areas.

The Ministry of Finance has the possibility to grant such exemptions in accordance with section 11-22 of the Norwegian Tax Act. Under that section, the Ministry of Finance can give consent to tax exempt income earned from realisation of real estate, businesses, shares and certain partnership shares, or consent to taxation of such income at lower tax rates. A condition for consent is that the realisation is part of a reorganisation or restructuring of a business with the aim of making it more rational and efficient.

The Ministry of Finance states in the consultation paper that exemptions from the Tax Act's rules on taxation of capital should, to the greatest extent possible, be provided in the form of statutory or regulatory provisions and not as administrative decisions. The Ministry of Finance has furthermore experienced three types of transactions which are often applied for and granted tax exemption by the Ministry. In this regard, the Ministry has proposed to enter the tax exemptions into the tax legislation. It must be expected that the proposal will reduce the workload at the Ministry of Finance. Below, we briefly describe the proposed tax exemption for the three types of transactions.

Cross-border mergers of securities funds

The Ministry of Finance propose that certain tax-free cross-border mergers of UCITS funds are to be tax exempt, provided certain requirements are met.

Where the transferring fund is established in Norway, the Ministry proposes that the merger shall be carried out in accordance with the Securities Funds Act. Where the acquiring fund is established in Norway, the Ministry proposes that the merger shall be carried out in accordance with national legislation that implements the UCITS directive.

In addition, a condition of tax continuity must be met in cross-border mergers of funds. If assets etc. are taken out of the Norwegian taxation area during the merger, the Tax Act's rules on exit tax will apply.

Mergers and demergers of savings banks

The Ministry has furthermore proposed that mergers and demergers of savings banks, in cases where one or more saving bank foundation are established in connection with the reorganisation, shall be tax exempt provided certain requirements are met.

A prerequisite is that issued equity certificates are transferred to a savings bank foundation in line with the provisions of the Financial Institutions Act. The Ministry proposes that the tax input value of these equity certificates which are transferred to the savings bank foundation, shall be set equal to the face value of the equity certificates.

Taxation of receivables in triangular mergers and demergers

As of today, the Tax Act Section 11-7 second paragraph states that the taxable value of a receivable that is created in triangular mergers and demergers, shall be set equal to the taxable value of the equity being transferred in the triangular merger or demerger. Therefore, the taxable input value of the receivable is determined independently from the face value of the receivable. A subsequent realisation of the receivable, including conversion of the receivable into share capital in the subsidiary, will therefore often trigger tax liability for any realised gains in one of the entities in the merger or demerger, and corresponding tax deduction for losses in the other entity in the merger or demerger.

If the merger or demerger receivable is realised while the companies are in the same group, the gains and losses can normally be offset by way of group contributions, cf. the Tax Act Section 10-2 to 10-4. However, group contributions are not always possible or practical.

The Ministry of Finance therefore propose to amend the rules on taxation of receivables that are created in triangular mergers and demergers. This is proposed handled by setting the tax input value of such receivables equal to the face value of the receivables. This will normally result in no gain or loss for the creditor and debtor when the receivables are realised for tax purposes.

Our view

Schjødt is positive to the proposed amendments. The amendments are simplifications and will remove the need to apply the Ministry of Finance for tax exemption related to certain reorganisations, thus reducing the time base in reorganisations, as well for any subsequent transactions. Taxation of receivables that are created in triangular mergers and demergers have been a technical aspect of triangular mergers and demergers with potential of errors for taxpayers. Removing this risk for errors is also a positive outcome of the proposal.

Do you have any questions?