Proposed amendments to the Norwegian tax rules for securities funds and capital insurance policies

The key proposed changes are:

• Amending the rules on taxation of interest income in securities funds: The consultation proposal lists two solutions: The recommended solution is based on exempting the fund from tax on interest income, so that all taxation of interest income occurs at the unitholder level upon distribution. The alternative solution is based on the fund receiving a deduction in its income both for distributions to unitholders and when unitholders redeem units with a gain. The MoF encourages consultation participants to address which of the two solutions they prefer. In our opinion, the first alternative seems the better to solve for the current issue with taxation of interest.
   
• Tax exemption: As of today, securities funds are exempt from tax on gains from the realisation of shares in companies domiciled in non-EEA jurisdictions. Loss deductions are disallowed in the same way. The scope of this exemption is extended to also include (i) dividends from companies domiciled in non-EEA jurisdictions and (ii) financial instruments with shares as the underlying object. 
   
• Tax exemption II: As of today, securities funds are exempt from tax on gains from the realisation of shares in companies domiciled in low tax jurisdictions, outside the EEA. In the consultation paper, it is proposed to limit the exemption, so that it will no longer apply to gains on shares etc. in companies in low-tax jurisdictions outside the EEA.
   
• Amending the definition of a securities fund: It is proposed that the provisions regulating the tax liability of the fund itself shall apply to UCITS-funds, Norwegian national funds, and equivalent funds established in other EEA-jurisdictions. The provisions on the taxation of unit holders shall have the same scope but shall also apply to non-EEA domiciled funds that are equivalent to Norwegian national funds.
   
• Lastly, the MoF proposes that the exemption method shall not apply when companies invest through capital insurance policies (CI policies). A CI policy is a unit linked product where the death of the insured person(s) constitutes the insurance event. By investing through CI policies, companies (as policyholders) have been able to make use of the tax exemption method also for investments in non-EEA shares since 2019. It is proposed that this change shall have effect from 30 January 2025, and hence retroactive effect for latent gains on shares held in a CI policy. The change will only affect companies, and not private individuals that holds investment through a CI policy. 
   

As outlined in the consultation paper, it is expected that the proposed amendments will be implemented with effect from 1 January 2026, except that the change in the exemption method in relation to CI policies Is proposed to have effect from 30 January 2025, also with respect to latent capital gains.

The deadline for replying to the consultation paper is 30 April 2025.