A political agreement on future tax amendments has been reached, and among the agreed measures are proposals for a reduction to the rate of corporate income tax to 23% by 2018 and changes to the earnings stripping rules.
Preliminary discussions on tax reform were finalised in Norway’s Parliament in early May 2016 when an agreement among six of the political parties was reached. The parties agreed to 17 “action points” for the direction of the future tax changes, with the tax agreement generally following recommendations of the Scheel-Committee report (December 2014).
Among the proposals in the agreement are measures for:
- A reduction of the corporate income tax rate to 23% by 2018
- The introduction of a new tax on financial services from 2017
- An extension of the earnings stripping rules, with application of the rules to all interest payments (and not just interest on related-party loans)
- Implementation of the proposed actions recommended by the OECD in the base erosion and profit shifting (BEPS) project
Corporate tax rate
The ordinary corporate income tax would be reduced to 23% by 2018. Further rate reductions would be assessed in light of international developments, and in particular developments in the Nordic countries. A reduction in the ordinary corporate tax rate would most likely entail a corresponding increase in the rate of the petroleum tax.
The political parties proposed to broaden the scope of the earnings stripping rules. Under current rules, the deductibility of interest on related-party loans is limited to 25% of tax EBITDA (earnings before interest, taxes, depreciation, and amortization). In the agreement, the political parties agreed to make these rules applicable to interest on third-party loans. The agreement specifies that any amendments would be designed in a way so that they would not affect ordinary commercial lending conditions.