Below we will highlight the most important tax changes in the state budget that was announced today. We will break it down in corporate tax, VAT and income tax. Note that these are proposals and not yet final.
Employer’s Social Contribution:
- The extra 5% employer’s contribution for incomes over 750,000 kroner will be phased out. The threshold will rise to 850,000 kroner in 2024.
- The exemption in employer’s contribution will increase from 500,000 to 850,000 kroner, dependent on EU’s de minimis aid ruling.
Operating Assets and Electric Vans:
- Limit for direct expensing on operating assets raised from 15,000 to 30,000 kroner.
- The special 30% depreciation rate for electric vans will be discontinued in 2024.
Interest Limitation Rules:
- Changes in the EBITDA rule are proposed for strengthening against unwanted adjustments, effective 2024.
Tax Exemption Practice:
- New legislation will cover tax-free reorganizations including mergers, demergers, and intra-group transfers from 2023.
Taxation of Private Consumption:
- Plans for special rules have been postponed to 2025.
Global Minimum Taxation:
- A proposal is underway to tax large corporations at a minimum of 15%, to be enforced by 2024.
Wind Power Tax:
- A new tax for onshore wind power is proposed for 2024 with a reduced effective tax rate of 35%.
Hydroelectric and Wind Power:
- High-price contributions will likely be eliminated from October 1, 2023.
- Extended exemptions for spot pricing agreements from 7 years down to 3, starting 2024.
Production Tax Increase:
- Wind power production tax will rise from 2 øre/kWh to 2.3 øre/kWh.
- No immediate plans for a resource rent tax. Future decisions are still open-ended.
Foreign Company Taxation:
- From 2024, foreign companies in certain industries within the 200-mile zone and the Norwegian continental shelf will be taxable.
Tonnage Tax Scheme:
- No proposed changes for split activities within the scheme for 2024.
- General Overview: Minimal changes are proposed for personal income tax in 2024 with a few minor adjustments highlighted.
- Basic Allowance: There is a proposal to increase the personal allowance from 79,600 kroner in 2023 to 88,250 kroner in 2024.
- Standard Deduction: No proposed changes for the upper limits from 2023 (104,450 kroner for wages/social security and 86,250 kroner for pension). Deduction rates remain at 46% for wages/social security and 40% for pension.
- Employer’s Social Security Contribution: There is a move to phase out the additional employer’s social security contribution introduced in 2023. The proposal suggests increasing the income limit from 750,000 kroner to 850,000 kroner.
- Social Security Contribution: A proposal exists to reduce the rates on wages/pensions and business income by 0.1 percentage point, which means rates of 7.8% and 11.0% respectively.
- Wealth Tax: No proposed changes. Basic allowance remains at 1.7 million kroner (3.4 million for married couples), threshold at 20 million for step 2, and amount limit at 10 million for primary residence valuation.
- Net Wealth Tax Base for Commercial Property: The government proposes a 1 percentage point increase in the discount rate for commercial properties outside major cities (Oslo, Bergen, Trondheim, Stavanger). This is in response to regional differences and is equivalent to a 10% reduction in estimated rental value.
- Advice for Property Owners: Due to the increased discount rate and the 2023 interest rate hike, property-owning shareholders might see a significant wealth value reduction. They should consider making adjustments before year’s end.
- Hydrogen-based Electric Vehicles: The government plans to remove the VAT zero-rating for these vehicles from 1 January 2024 due to limited market demand.
- Newspaper VAT Zero-rating: There’s a proposed change allowing electronic newspapers to contain more live images and sound. Previously, they had to “mainly” contain text or still images (around 80%), but the proposal changes this to “a predominant share of text and still images” (over 50%). The primary function of the newspaper remains unchanged: to produce news and current affairs content in text or image form.