Norway is one of the most innovative countries in the world, offering plenty of incentives and other support mechanisms, much needed to start a new business. The national taxation framework is fairly reasonably structured, which means that the tax rules are quite easy to follow. In Norway, cryptocurrencies are classified as assets for tax purposes, and therefore most of the crypto-related economic activities generally fall under the general tax regulations for assets. Every crypto business model is assessed on a case-by-case basis in order to tax a particular product or service accurately and fairly.
The Norwegian Tax Administration is responsible for the collection of national taxes, as well as the registration of taxpayers and the assurance that tax legislation is complied with. If needed, the responsible representatives may also carry out inspections and impose penalties. The authority closely cooperates with relevant international organisations and other tax agencies in order to raise and maintain taxation standards.
Norway is a member of the Organisation for Economic Cooperation and Development (OECD) and it’s obligated to integrate such OECD regulations as the recent international tax transparency framework, Crypto-Asset Reporting Framework (CARF), which has been recently introduced with the aim to improve crypto taxation and tax reporting standards. To comply with CARF, the Norwegian Tax Administration must automatically share crypto tax-related information with the tax authorities abroad.
Every crypto business must be able to verify reported information by providing relevant documentation. All transactions must be consistently recorded and those records must include sale and acquisition dates, type of activity (mining, trading, or other), market value, public keys, and other documentable details that might need to be shared with the tax authority upon request.
Advantages of the Norwegian Tax System
Norway has around 90 international agreements on the elimination of double taxation, which allow taxpayers with an international presence to protect their income from being taxed twice in two different countries. These agreements generally stipulate each country’s priority right to tax a natural or legal person under certain conditions. When it comes to specific tax rules, the national legislation of the taxing country applies. If you wish to have a particular bilateral agreement analysed, please reach out to our dedicated team here at Regulated United Europe (RUE).
The Norwegian government supports innovation through such tax incentive schemes for research and development (R&D) as the SkatteFUNN which is the most important national instrument designed to encourage R&D activities carried out by businesses. Through the SkatteFUNN eligible companies can obtain support as a 19% tax deduction for incurred R&D-related expenses. The limit of the cost base is 25 mill. NOK (approx. 2 mill. EUR). In a situation when there’s no taxable income for the tax year, the taxpayer is entitled to receive a cash refund for the year following the tax year with no taxable income. The main application requirement is for a company to design an R&D project aiming to develop an improved asset, service, or process regardless of the type of business.
Crypto companies may also be eligible for the following tax deductions:
- Startup expenses (e.g., costs related to the company formation – lawyers and financial accounting fees, drafting Articles of Association, and the registration with the Register of Business Enterprises)
- Interest expenses paid on the company’s loans during the income year (should be included in the tax return)
- Donations to charitable institutions when the donation is at least 500 NOK (approx. 43 EUR) per charity which is pre-approved by the Norwegian tax authority; the annual upper ceiling is 25,000 NOK (approx. 2,000 EUR)
Corporate Income Tax
In Norway, the standard Corporate Income Tax rate is 22%. Norwegian tax residents are subject to paying the tax on the income derived in Norway and abroad, and non-residents are obligated to pay tax on income sourced as a result of business carried out in or from Norway. Any company incorporated in accordance with Norwegian law is considered a tax resident. However, if such a company is considered a tax resident in another country, it’s not considered a tax resident in Norway. If the place of effective management of a foreign company is based in Norway, such a company is considered a tax resident in Norway.
The Corporate Income Tax is payable in advance in two instalments. The first payment is due on the 15th of February and the second payment is due on the 15th of April. The tax assessment is normally issued in October, and any final tax must be paid within three weeks following the issuance of the assessment. Any late payments or missed deadlines can result in enforcement fines.
Various crypto-related economic activities are taxed in accordance with general Corporate Income Tax rules. Cryptocurrency trading and various crypto-related products and services are generally considered taxable income and therefore must be included in annual tax returns. However, crypto mining is taxable once it requires investments in mining rigs and regular administrative activities. The value of the cryptocurrencies received through mining must be recognised as income at market value in Norwegian kroner at the time it’s received. On the other hand, if the mining rig doesn’t require a consistent administrative follow-up, often it’s not classified as an economic activity.
In Norway, the standard Withholding Tax rate is 15%. The tax aims to reduce and prevent profit-shifting to low or no-tax jurisdictions, and seeks to enforce more equitable taxation in Norway. The rate may be reduced under the tax-exemption rules or in accordance with an applicable double-taxation agreement. The exemption is available to recipients of the dividends who are corporate investors residing in the EEA and can fulfil additional requirements.
Withholding Tax is generally levied on interest, royalties, and lease payments that are paid by a Norwegian company or branch to foreign companies in low-tax jurisdictions. The paying Norwegian company or branch is obligated to withhold, report, and remit the Withholding Tax to the Norwegian tax authority. It may face penalties if the deducted amount is insufficient to cover the tax liability.
Capital Gains Tax
In Norway, the standard Capital Gains Tax is 22% and is levied on any gains or income sourced from cryptocurrency transactions. This means that such activities as cryptocurrency sale, exchange, crypto mining, purchasing products or services, and even NFT trading are taxable in Norway. To comply with tax legislation and avoid penalties, it’s mandatory for every individual to report every crypto transaction to the national tax authorities.
Capital gains realised through crypto-related economic activities carried out by companies are also regarded as taxable income. Losses incurred by the realisation of a capital asset are deductible under section 6-2 of the Norwegian Taxation Act. To calculate capital gains, it’s necessary to determine and record acquisition and sale prices consistently and transparently. Expenses related to the acquisition of cryptocurrencies, including any relevant fees, are regarded as acquisition costs.
In Norway, the Wealth Tax rate is 0.3% and is calculated for assets that exceed a net capital tax basis of 1,7 mill. NOK (approx. 150,000 EUR) for unmarried individuals and 3,4 mill. NOK (approx. 300,000 EUR) for married couples. If the taxpayer owns cryptocurrencies, they must be declared in the tax returns for Wealth Tax purposes. Therefore, it’s necessary to keep track of the value of each sporadic crypto transaction and regular trading activity.
In Norway, the standard VAT rate is 25%. It must be calculated, collected from consumers, and paid to the tax authority by every business selling products and services in Norway. Companies must register at the Value Added Tax Register prior to triggering the first taxable event. The annual VAT returns are to be submitted and paid by the 10th of March of the year following the income year, even if no sales have been completed during that taxable period.
While most crypto-related products and services are subject to VAT, the exchange of cryptocurrencies is exempt from VAT as per sections 3-6 of the VAT Act concerning financial services. This is in line with the decision of the Court of Justice of the European Union (CJEU) which ruled out that exchanging cryptocurrencies into fiat money is considered a financial service and therefore is VAT-exempt along with legal tender (banknotes and coins).
Importantly, some crypto activities must be assessed on a case-by-case basis for VAT purposes due to vast variations of the same product or service type. For instance, Initial Coin Offerings (ICOs) can have completely unique and varying characteristics which would trigger different taxable events.
If you’re determined to develop your crypto business in one of the most innovative and prosperous countries in the world, our team of dedicated and quality-focused legal consultants here at Regulated United Europe (RUE) will be delighted to provide you with tailored, value-added support in optimising your taxes in accordance with applicable legislation. Moreover, we also offer comprehensive Norwegian crypto company formation, crypto licensing, and financial accounting services. Contact us now to schedule a personalised consultation and set the stage for long-lasting success.
At the moment, the main services of our company are legal and compliance solutions for FinTech projects. Our offices are located in Tallinn, Vilnius, Prague, and Warsaw. The legal team can assist with legal analysis, project structuring, and legal regulation.