Brexit – key Norwegian tax implications

The United Kingdom left the EU and the EEA on 1 February 2020, for a transitional period until 31 December 2020, the United Kingdom will be treated as a member of the EU and the EEA, also in the tax area and all EEA-relevant tax rules will be continued. After the transition period, cross-border activities between Norway and the United Kingdom will in principle be treated in the same way as cross-border activities between Norway and countries that are not parties to the EEA Agreement.

There are several Norwegian tax rules that have EEA status as a condition. The European Court of Justice's case law on the four freedoms in the tax area will also not be relevant after the transition period for cross-border activities between Norway and the United Kingdom. Below are some of the key tax implications of Brexit.

Corporate taxation

A number of tax provisions applicable to corporations provide tax benefits if the investments are within the EEA or the company is resident within the EEA. Until the end of the transition period, companies are entitled to such tax benefits for border crossing transactions between Norway and the UK.

These tax benefits will no longer be applicable for investments between Norway and the UK when the transition period ends. This will primarily have effect for the income year 2021, for which the tax assessment will happen in 2022.

VAT

Norwegian companies will experience changes in customs obligations and VAT reporting. Upon withdrawal from the customs union, sales of goods between the United Kingdom and the EU will have to be treated differently than today, both in terms of VAT and border crossing procedures. Due to the extensive flow of goods between the EU and the UK, this can lead to practical challenges during a transitional period.

It is a temporary agreement between Norway, Iceland and the United Kingdom that currently extends current tariff preferences, including zero tariffs on industrial goods for the contracting parties. The duty-free quotas for trade in seafood and agricultural products are continued, which is important for Norwegian business and industry.

The temporary agreement must be replaced by a permanent free trade agreement between Norway and the UK. It is not a given that the permanent agreement will provide a similar duty exemption as the temporary agreement. Developments in the negotiations on a free trade agreement between the UK and the EU will obviously also have a major impact on the design of the final free trade agreement between the UK and Norway.

UK nationals

With effect from 1st January 2021 UK nationals will no longer be considered as EU/EEA nationals.

Going forward there will be two different sets of rules for UK nationals in Norway;

• the ordinary rules for 3rd country nationals and
• the new special rules for UK nationals (not yet published).

Which set of rules will apply will depend on what time the individual moved to/arrived in Norway and the basis for her/his stay in Norway.

The authorities have recently indicated that UK service providers working in Norway are not allowed to continue their work after 1 January 2021 unless they have been granted an ordinary residence permit for work. Below is an overview of different categories of workers and which rules they are comprised by.

UK citizens travelling to Norway after 1st of January 2021

1. Stay less than 90 days

The visa waiver agreement between the UK and Norway allows UK citizens to travel to Norway without a visa.

They can stay in Norway for up to 90 days in any 180 days period but cannot work. However, UK citizens may participate in meetings, seminars etc.

2. Stay exceeding 90 days

UK citizens who intend to stay in Norway for more than 90 days, must apply for a residence permit. 

Family members of UK citizens who lived in Norway prior to 31st of December 2020 can make use of the new special regulations provided the reference person can use this regulation and the family tie was established prior to 31st of December 2020.

UK citizens who are staying/living in Norway as of 31st of December 2020

The right to continue stay/work in Norway from 1st of January 2021 depends on the basis on which the person has had a right of residence according to the EU regulations.

• Employees and border workers (Norwegian work contract and salary paid from Norwegian company) will automatically retains the right to stay/work. However, must apply for the special UK permit.

• Service provider/posted worker from UK company (UK work contract and salary received from UK company) does not retain the right to stay/work. He/she can apply for the special UK permit if he/she fulfills the conditions for own funds or employee. He/she can apply for residence permit according to ordinary regulations.

• Service provider/posted worker from other EU/EEA company, i.e. not UK (EU/EEA work contract and salary received from EU/EEA company) will take part in the residence card scheme for 3rd country citizens employed in the EEA and have the right to stay/work up to 3 months. If work exceeds 3 months, he/she need to apply for residence card.

• If you have employees that cannot use the new special permit for UK nationals, we advise you to submit an application for residence permit according to the ordinary rules as soon as possible allowing them to continue to work in Norway from 1st January.