Worked in Norway recently? Does a nasty tax surprise await?

Business in Norway is booming and many UK companies are securing lucrative contracts in the Norwegian sector. However, long after the work is completed, many unsuspecting companies receive a lengthy letter from the Norwegian tax authorities, advising them that the authorities are aware of the work they undertook but that the company failed to deal with their tax responsibilities from both an employer and corporate perspective.

Norwegian payroll requirements

Few employers realise that UK residents are liable to Norwegian income tax from the first day of work offshore on the Norwegian continental shelf (NCS) and there is a compulsory requirement to advise the Norwegian tax authorities that the company, their employees and any subcontractors are working there. The Norwegian tax authorities will impose fines on the employer unless they account for Norwegian ‘PAYE’ from employees’ salaries and report income and tax on a Norwegian ‘P60’ equivalent each calendar year. Employers must also ensure that their subcontractors do likewise otherwise they will be held responsible. It makes no difference who the employer is or where it is based, each step of the reporting must be done regardless. National Insurance (the hidden tax) should not be forgotten. UK residents are, in principle, liable to Norwegian National Insurance when working in Norway, unless an exemption certificate is secured in which case UK National Insurance may continue instead. Normally this is not too problematic for employers provided the correct paperwork is completed on time and sent to HMRC, however it can be a real headache, and an additional unexpected cost, for subcontractors.

Corporate tax requirements

From a corporate tax perspective, if a UK company carries on “offshore activities” on the NCS in excess of 30-days in any 12-month period, it will trigger a Norwegian corporate tax liability on its Norwegian profits. A similar liability can arise where work is performed onshore, however, this is dependent on the nature and duration of the work. In addition, there is often a requirement to prepare Norwegian accounts and have a Norwegian audit performed when turnover exceeds a certain limit. Failure to comply with all the corporate filing requirements can also result in substantial penalties. The annual filing deadline for paper corporate tax returns for 2013 is 31 March 2014. This deadline is fast approaching but it is not too late to take action.

Help is at hand

Our international tax and payroll consulting specialists have a depth of expertise and experience in all aspects of Norwegian payroll and corporate taxes. Proof comes in the fact that, earlier this month, INTSOK (a Norwegian oil and gas industry body) and Scottish Development International (SDI) invited Kevin Mann, our international tax partner, to give a presentation on international tax issues to around 60 Norwegian and UK companies, at a joint Scotland – Norway network meeting in Stavanger.

If you have worked in Norway, don’t bury your head in the sand. Call the experts, get peace of mind, and avoid that nasty letter from Norway! For more information, contact Alyson Sutcliffe, Tax Senior Manager.