Forms of organizing business in Norway
The main forms of organizing business in Norway are through:
- Limited Liability Companies – “Aksjeselskap” (“AS”)
- A Branch of foreign incorporated companies – “NUF” – Norsk registrert utenlandsk foretak
- Partnerships, or “ANS” or “KS”
Cross border businesses into Norway may either be organized by incorporating a Norwegian subsidiary of a foreign company, or by establishing a branch of a foreign entity in Norway.
The main difference between a Limited Liability Company and a Partnership is that for a Limited Liability Company the shareholders will not have any personal liability for the obligations of the company. The shareholders will only be liable for share capital paid into the company.
The partners of a Partnership, on the other hand, will have an unlimited liability, either together or separately for the obligations of the partnership.
Limited liability company – Aksjeselskap (“AS”)
A limited liability company may either be incorporated as a private limited company – aksjeselskap (AS) – or as a public limited company – allmennaksjeselskap (ASA).
There are no minimum or maximum shareholder requirements with respect to the Private Limited Company and the Public Limited Liability Company. Both types may accordingly be incorporated with one shareholder or a large number of shareholders.
The minimum share capital of an Aksjeselskap is NOK 30 000, while the minimum share capital of an Almennaksjeselskap is MNOK 1.
An AS must have a board of directors, consisting of at least one person. Only a physical person may be director of the board.
At least 50 % of the directors of the board must be resident within the EU, the European Economic Area (EEA), UK or Switzerland.
If the turnover of the company exceeds MNOK 50 per year, or the company has more than 30 employees, rules on gender balance of the board apply.
Public Limited Companies are governed by stricter rules regarding organization, minimum requirements of board members and restrictions on share classes.
In relation to transformation, emigration, activities that can be carried out, limitation of non-residents’ right to be members of the management, substance requirements, exchange of information under tax treaties and anti-abuse issues, there are no major differences.
Norwegian Branch – NUF
The branch of a foreign company is an integrated part of the foreign company, and not a separate entity in itself. The branch will be a part of the foreign company as such in relation to entering into contracts and the capacity to act as a party in court cases. However, the branch will represent a presence in Norway through registration and serve as a contact point for customers and Norwegian authorities.
No capital contribution is required for the establishment of a NUF. There are no specific requirements for the legal structure of the foreign business. Both businesses with limited and unlimited liability may register a NUF.
The foreign company is responsible for the business activities in Norway and is liable for all debts of the branch.
Taxation of a NUF in Norway
A branch of a foreign entity will be subject to tax in Norway if the branch carries on business within the extent of the Norwegian Tax Act. This includes activities where employees are placed at the disposal of others within Norway. If a foreign company’s business is taxable in Norway, the activities will normally be subject to the same tax principles and tax rates as Norwegian companies.
If the foreign entity is resident in a state with which Norway has a Double Taxation Treaty, the business in Norway must be carried out through a permanent establishment in Norway under article 5 of the respective Double Taxation Treaty, in order for the branch to be subject to taxation in Norway.
As a rule of thumb, business activities must be carried out for at least six months in order for it to be considered a permanent establishment. However, if business activities are related to the Norwegian continental shelf, it will be deemed a permanent establishment if activities are carried out for at least 30 days.
If the branch generates income taxable to Norway, the branch company is obliged to submit an annual tax return in Norway. The deadline is 31 May every year. Failure to submit an annual tax return, or a tax return providing incomplete and incorrect information, may result in additional tax and compulsory fines. Note that the enterprise is obliged to file a corporate tax return even though it may be tax exempt from tax to Norway in accordance with a tax treaty.
Employees in Norway
If an AS, ASA or NUF company has employees in Norway, the foreign company will, as employer, be obliged to deduct and pay advance tax to Norwegian tax authorities from the salaries of the employees. This will be based on information provided in the employee’s tax card.
VAT
Foreign and Norwegian companies that carry out business in Norway must comply with the Norwegian VAT rules. Companies are obliged to register in the VAT Register once the turnover covered by the VAT Act exceeds NOK 50 000 during a twelve-month period.
A business registered in the VAT Register must calculate and collect VAT when it sells goods and services, unless the specific goods/service is exempt from VAT (zero rate). The general VAT rate is 25 %, but some sectors and areas have reduced VAT rates.
Businesses that are registered in the VAT Register are entitled to deductions for VAT paid on their own purchases (input VAT).
If a branch of a foreign company is not operated from a fixed business address in Norway and is covered by the provisions of the VAT Act, a representative must be registered. The VAT representative is obliged to verify that the VAT handling is correct and will be held responsible for filing the VAT return. The requirement for a VAT representative does not apply to companies from certain EU/EEA countries.
Foreign employees in Norway
Residence permits in Norway – EEA/EU citizens
EU/EEA citizens working in Norway must register with the police and document their working relation if their stay in Norway exceeds 90 days.
The employee must bring a valid identity card or passport and an employment certificate or employment contract for registration.
Reporting obligations to the tax authorities
All contracts and subcontracts awarded to a foreign company, resulting in an activity in Norway or on the Norwegian continental shelf, must be reported to the Tax Administration. The obligation does not apply if the value of the assignment is less than NOK 20 000.
The entity awarding the contract shall fill out the form RF-1199 to report its own contract with the contractor. The form must include information about the contracting parties, place of work, contract period, contractual amount etc. The form must be submitted as soon as possible after the contract has been entered into, and no later than two weeks after the work has commenced.
The foreign contractor is obliged to register the employees that work on the assignment in Norway using the form RF-1198. An official identification paper containing the employee’s name, date of birth, gender, picture and nationality must be filed with the form.
Information about the employees must be submitted within two weeks of the employee’s first day working on the assignment.
If the contractor has engaged a subcontractor resident abroad, the subcontract must be reported on the form RF-1199.
Both RF-1199 and RF-1198 may be submitted electronically via the portal for the Assignment and employee register or sent by post. Failure to comply with the obligation to submit information about the contract or the employees may result in sanctions like enforcement fines or penalty charges.
The Tax Administration will issue D-numbers and tax deduction cards in accordance with the information given in form RF-1198.
Taxation of foreign resident employees in Norway
Foreign employees will be subject to taxation in Norway of salaries for work carried out in Norway for a Norwegian company or a NUF.
However, if the employee is resident in a state with which Norway has a tax treaty, and the work is carried out for a foreign employer with no NUF in Norway, the employee will only be taxable for salaries if the employee stays in Norway for more than 183 days during a twelve-month period.
Tax residency in Norway
Foreign resident persons will be considered tax resident in Norway if they stay in Norway for more than 183 days during a twelve-month period. If so, tax residency in Norway will be counted as from day one.
An employee will also be tax resident in Norway if he / she stays in Norway for more than 270 days during a 36-month period. Tax residency will in that case be registered as from 1 January in the year in which the stay exceeded 270 days.
When it comes to countries which Norway has entered into tax treaty with, and a person is also resident in another state, the residency is to be decided based on the tie breaker rule in the tax treaties.
Pay as you earn (PAYE) for foreign workers
The PAYE scheme is a tax scheme for foreign workers who have short work stays in Norway and is valid for the first year the worker is a tax resident in Norway.
For an employer, the PAYE scheme means the employer must deduct tax according to a fixed rate and report both salary and deducted tax to the Tax Administration. The employer must calculate and deduct PAYE tax from all salaries and remunerations that are taxable for the employee.
For the employee, the tax is settled when the employer reports the salary and the deducted tax. In the PAYE scheme, the employees pay 25 % tax on their employment income. The tax rate also includes the mandatory payment to the national insurance contributions currently at 8.2 %.
The new PAYE scheme does not apply to the following employees:
- Employees with other taxable income that is not covered by the PAYE scheme, see PAYE and other income
- Foreign seamen and offshore workers
- Workers who have business income or income from letting property in Norway
Social Security membership in Norway
In Norway, membership in the Social Security System is based on either residence or employment. A person who is not a member of the National Insurance Scheme has no rights pursuant to the National Insurance Act. This also means that the person is not obliged to pay a national insurance contribution.
Even if the employee does not live in Norway, the employee has a compulsory membership in the National Insurance Scheme if working in Norway or on the Norwegian continental shelf.
Membership in the National Insurance scheme means that the employee has to pay a national insurance contribution if he / she has income from work. The current rate starts at 8.2 % of the employee’s salary, but depends on:
- Whether they pay tax to Norway and whether the Norwegian Tax Administration collects the national insurance contribution together with their taxes
- Whether their employer is required to pay the employer’s contribution to the National Insurance Scheme
- Which part of the National Insurance Scheme they are a member of if not a compulsory member
“A-Melding” – monthly employer report to tax authorities and social security authorities
Anyone who has employees or who pays salaries must submit an “a-melding”. The a-melding contains information on salaries and employments, withholding of tax deductions and the employee’s national insurance contributions.
The duty to report an a-melding is triggered when a person’s salary exceeds NOK 2 000 per year (from 2025). If this threshold is reached, the employer must provide information on both the employment and the associated salary payments in the a-melding. The employer must report information concerning employment every month up to and including the month in which the employment ends. Even in months where the employee has not received any salary, the employer must report information concerning the employment.
Please note that foreign employers with an obligation to submit the RF-1199 form concerning contractual and employment circumstances do not have to submit information regarding employment. However, foreign employers must submit an a-melding for salary payments and other benefits, deductions and allowances, payroll withholding tax and employer’s National Insurance contributions.
Labour Law – wages for foreign posted workers
Introduction
According to the regulation for posted workers most of the Norwegian Work Environment Act (Arbeidsmiljøloven), as well as the Holiday Act and the Gender Equality Act apply.
There is no general minimum wage in Norway. However, some industry sectors have collective wage agreements made universally applicable.
The Government as a client
Even if there is no generally applicable collective agreement in place, it is a requirement to have contractual pay and working conditions that are at minimum equal to the “applicable wage agreement”.
Overtime supplement
The provisions of the collective agreement concerning overtime are not generally applicable. The provisions of the Working Environment Act will apply unless a more favourable overtime supplement is agreed upon. Pursuant to the Working Environment Act, overtime supplement equal to 40% of the hourly rate must be paid.
The supplement regulated in the working agreement may, however, vary from 50 % to a 100%, depending on the agreement.
Working hours
According to the Working Environment Act, working hours are limited per 24-hour day and per week. Working hours may also be regulated by the employment contract and by collective agreements.
Normal working hours according to the Environment Act are:
- 9 hours per 24 hours
- 40 hours per 7 days
If the employee works shifts, nights or Sundays, normal working hours are 38 or 36 hours a week. The duration and disposition of daily and weekly working hours must be stated in the employment contract. The employer is obliged to keep an account of the employee’s working hours.
ID cards for Employees
All workers on construction sites must hold a valid HSE card (ID-card). The ID-card must be visible at work, seeking to create a clear picture of people working on site. Both employer and employee must meet specific requirements to be granted registration for an ID-card. The employer’s management is responsible for ordering the ID-cards.
When doing business in Norway, it is of utmost importance to start the process of obtaining ID-cards early, preferably as soon as the Norwegian contract is obtained. In order to do this, the foreign company must have obtained a Norwegian organisation number, contract information and employee information in addition to D-numbers. Before ordering the ID-cards, an “Orderer” (person who can order ID-cards) must be registered on the card issuer’s website. ID-cards may only be ordered after an “Orderer” is registered.
The employer needs to provide the following:
- Copy of the passport
- Scanned signature
- Photo (not older than 3 years, light background)
The ID-cards will be received approximately two weeks after ordering.
Dalan advokatfirma has experience with helping foreign businesses in Norway. Please do not hesitate to contact us should you have any queries. We may be reached via email, telephone or contact form.
Erik Landa
Partner