Norwegian tax act for the implementation of global minimum taxation

On 24 November 2023, the Norwegian Government proposed a new bill for the implementation of global minimum taxation into the Norwegian tax framework based on the OECD Pillar Two Model Rules, commonly referred to as the GloBE rules. The proposal was adopted by the Norwegian Parliament on 20 December 2023, aligning with the consultation paper sent from the Norwegian Ministry of Finance on 6 June 2023. Please also see the newsletter published 28 June 2023 for an overview of the proposed rules in the consultation paper.

The newly introduced “Top-up Tax Act” (No. “Suppleringsskatteloven”) (“TTA”) implements both the Income Inclusion Rule (No. “Skatteinkluderingsregelen”) (“IIR”) and the Domestic Minimum Top-Up Tax (No. “Nasjonal suppleringsskatt”) (“DMTT”), ensuring a minimum tax rate of 15% for multinational enterprises, irrespective of their geographical operations. Similar to the consultation paper, the TTA does not include an Undertax Payment Rule (“UTPR”) as a secondary rule and backdrop to the IIR. The Ministry refers to the ongoing processes within the OECD and maintains that a proposal containing an implementation of UTPR will be presented at a later date.

Noteworthy differences from the consultation paper:

• The new rules shall be set out in a separate tax act supplemented by a relatively comprehensive regulation (No: “forskrift”), as opposed to implementing the rules into a new chapter in the existing Tax Act, as initially proposed. This is, among other things, due to the complexity of the new rules, as well as differences in the terminology, the interpretation and the legislative technique. A reference to the newly adopted act will be included in paragraph 3-3 of the Tax Act.

• The Ministry of Finance has provided additional details regarding both the IIR, which has been slightly expanded, and the DMTT, where it is clarified that the rules must align with the model rules in order to be considered qualified.
• The new legislation will include Safe Harbor rules in accordance with the OECD Model Rules, which will be implemented through the supplementary regulation.

The TTA will be applicable to both Norwegian and multinational enterprises with a revenue of at least EUR 750 million based on the consolidated accounts. Multinational enterprises must have fulfilled the global income requirements for at least two of the four preceding accounting years. Furthermore, the TTA will apply to large national groups without an international presence, ensuring equal treatment of cross-border and domestic scenarios in line with the EU directive.

Income derived from dividends and equity gains under the Norwegian participation exemption method will largely be exempt from the computation. It is, however, important to note that the definition of “exempt dividends” and “exempt equity gains” in the OECD Model Rules does not entirely align with the definition stipulated in the Tax Act. Consequently, for certain Norwegian group units, dividends and equity gains exempt under the participation exemption method may be included in the computation, and vice versa.

In accordance with the provisions delineated in Section 3-3, first paragraph of the bill, “international shipping income” and “qualified ancillary international shipping income” shall be excluded from the computation. It is currently unclear in which degree this delimitation corresponds to the tax exemption under the Norwegian tonnage tax regime for shipping income – the precise definition of the terms shall be more comprehensively regulated in the supplementary regulation.

The wording in the TTA largely corresponds with that of the OECD's model rules, likely intended to prevent misinterpretations or contradictions. Administrative guidance and comments related to the model rules will thus serve as important sources for interpreting the new Norwegian act. The TTA will come into effect for the income year 2024 and will be applicable for financial years commencing after 31 December 2023.