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.
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.
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.
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]
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).
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.
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.
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:
Tel. +47 4063 9478
The information contained in this newsletter was submitted by the KPMG International member firm in Norway.
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