By partner/lawyer Preben Kløvfjell and associate Julia Michelet Chivers, Advokatfirmaet Tveter og Kløvfjell AS
The main rule regarding the sale of services in Norway is that these are VAT-liable, cf. the Norwegian VAT-Act § 3-1. All turnover of sales and goods which is not explicitly exempted by law activates a duty to calculate and pay VAT. If no exemptions apply, the duty is an objective duty.
Foreign business conducting assignments in Norway are obliged to comply with the Norwegian VAT regulations at the same level as Norwegian businesses. This necessitates that any assignment resulting in turnover exceeding 50 000 NOK during a 12-month period must register in the Norwegian VAT-registry. The business shall register regardless of the length of the assignment. The same applies to a Norwegian business selling their services to a foreign company, if the services supplied are performed in Norway and not considered capable of delivery from a remote location.
Foreign companies conducting business in Norway are to register in the Register of Business Enterprises. “Conducting business” means the activity is of a certain size and duration and can accumulate revenue[1].
This differs from the common EU-system of reverse charge. Unlike what is practiced in most of Europe, foreign suppliers are obliged to register in the VAT-register og charge VAT on their services (unless the services are non-tangible, see below). As a result, many foreign suppliers of services are unaware of their VAT-obligations. If they do not comply with the VAT-regulations they risk fees, surtax, recalculation of taxes and interest fees.
Supplying services in Norway
There is a difference between supplying services “to” and “in” Norway. If the services are supplied in Norway, they are VAT-liable. The assessment of whether they are supplied “to” or “in” Norway can be complex. The tax authorities assess this on a case-to-case basis, and the assessment relies on case-law.
Relevant questions are if the services are performed in Norway (e.g. physical presence), if they are similar to Norwegian services (in language, form etc.), how they are marketed, and the type of services supplied.
VAT-deduction and VAT-refunds
According to the VAT-Act § 8-6 a VAT-registered business is entitled to deduct the input VAT against output VAT in their VAT return scheme if the services or goods are bought 3 years prior to the VAT-registration (reversed VAT-report scheme). This does not apply to services or goods which were sold prior to the registration. Deduction claims must be submitted within 3 years after registration.
If a business is to apply for a refund, they may not have had a VAT-liable turnover in Norway during the last 12 months, cf. the VAT-Act § 10-1.
Who is the subject of the tax liability?
According to the VAT-Act § 2-1 litra A, a business or person subject to VAT-liability is to register in the VAT-registry when their turnover exceeds 50 000 over a 12-month period. The Tax Administration Act § 8-3 (1) stipulates that the person/business liable to VAT is the same business/person that is subject to VAT-registration.
The business/person subject to VAT-liability shall calculate and charge VAT on their revenue, import and export of goods, cf. The Tax Administration Act §§ 9-1, 9-2.
Reverse charge: Non-tangible services
As most countries with VAT-regulations, Norway has introduced a system of reverse charge of VAT. When the VAT-charge is reversed the duty to calculate and charge VAT lies with the recipient of a service, rather than the provider. This system only applies if the service is non-tangible, meaning the service is capable of delivery from a remote location. Such services are typically services which can be delivered by post or e-mail, such a legal advice which does not require involvement in the Courts.
Non-compliance: the risks
The duty to charge VAT lies with the supplier. The Tax Administration Act stipulates under § 8-1 that the person(s) due to report tax shall provide correct and complete information and act under due care and loyalty, ensuring that the duty to pay and report taxes on time is apparent and fulfilled. Further, the taxpayer is obliged to inform the authorities of potential defects.
For a supplier non-compliance entails risks which may be extensively economically burdening. The Tax Administration can impose fees according the Tax Administration Act § 14-1, establish and calculate VAT at their discretion according to the same law §§ 12-1 and 12-2, impose surtax according to § 14-3 and claim interest fees.
If you need legal assistance regarding VAT questions, please contact partner/lawyer Preben Kløvfjell at Email pk@klovfjell-gammel.local or by phone +47 900 85 188.
[1] Typically activities resulting in a turnover exceeding 50 000 NOK over a 12-month period, and lasting at least 90 days.
