Norway – Budget Measures Undergo Minor Amendments in Final Legislation

Norway – Budget Measures Undergo Minor Amendments

This GMS Flash Alert reports on Norway’s budget measures – e.g., personal tax rates and the step tax, single parents deduction, and net wealth tax – that were amended prior to legislation being enacted.

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Amended budget measures were enacted in legislation that was published on 17 December 2015 in Norsk Lovtidend, Norway’s official gazette.1  The key measures include reformed personal tax rates and bands as the current surtax is effectively replaced with a so-called “step tax,” an increase in the standard deduction for single parents, and revisions to the scope of the net wealth tax regime.

For prior coverage, see GMS Flash Alert 2015-132, 4 November 2015.

WHY THIS MATTERS

In spite of the amendments to the budget that we describe in this newsletter, international assignment-related costs could still diminish slightly, as employees on assignment subject to tax in Norway may see a slight reduction in their marginal tax rates.  Also, the higher exemption under the net wealth tax regime should help keep some individuals from being caught in the wealth tax net. The overall impact of the tax changes in the approved budget as enacted, however, will depend on each person’s particular circumstances.

Where appropriate, adjustments by payroll administrators to withholdings should be made, if they haven’t done so already.

Income Tax on Employment Income and Single Parents’ Standard Deduction: Slight Changes in Newly Introduced "Step Tax" (Trinnskatt)

The newly introduced four-bracket tax system replacing the current surtax system has been modified slightly – and is now called the “trinskatt” – and was approved in such form by Parliament.

For 2016, the following brackets are applicable.

Tax Rate Income Brackets
25% Ordinary income (uncapped)
0.0% Up to NOK 159,800
0.44% Over NOK 159,800 to NOK 224 900
1.7% Over 224,900 to NOK 565,400
10.7% Over 565,400 to NOK 909,500
13.7% Over NOK 909,500

Source: KPMG, Norway 

[NOK 1 = EUR 0.104 | NOK 1 = GBP 0.080 | NOK 1 = USD 0.114 | NOK 1 = SEK 0.97]

KPMG NOTE

Due to the new tax rate brackets, the overall marginal tax rate will be lowered from 47.2 percent to 46.9 percent (38.7 percent tax plus 8.2 percent employee social security charges), though higher than indicated in the original budget, due to the decision to amend the budget and impose a .1-percentage point increase to the rates (for prior coverage, see GMS Flash Alert 2015-135, 10 November 2015). 

STANDARD DEDUCTION FOR SINGLE PARENTS

The government decided on increasing the standard deduction for single parents from NOK 48,804 (2015) to NOK 51,804 (2016), slightly more than originally proposed in the budget. 

Net Wealth Tax

The government held steady the net wealth tax rate at 0.85 percent.  Although, as enacted, there is an increase to the basic allowance for wealth tax from NOK 1.2 million to NOK 1.4 million (NOK 2.8 million for married couples). 

The approved final budget measure stipulated that the taxable value of second dwellings (sekundærbolig) and commercial property will be left unchanged from the current 70 percent (it had been proposed in the original budget to raise it to 80 percent) of estimated market value.  However, the taxable value for an additional second home, in 2016, will be set at 80 percent of the market value. 

FOOTNOTES

1  For the published legislation (in Norwegian), see Norsk Lovtidend

For additional information or assistance, please contact your usual KPMG GMS or People Services professional or one of the following professional with the KPMG International member firm in Norway:

 

Roger Hoffmann 

Tel. +47 4063 9478

Roger.Hoffmann@kpmg.no

The information contained in this newsletter was submitted by the KPMG International member firm in Norway.

© 2016 KPMG AS and KPMG Law Advokatfirma AS, Norwegian limited liability companies and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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