Employer's social contribution tax ("arbeidsgiveravgift")
- The amount of arbeidsgiveravgift for second term payable 15 May is delayed until 15 August 2020.
- A temporary reduced rate of arbeidsgiveravgift from 14,1% to 10,1% for a period of two months. Due to technical challenges with earlier implementation, these two months are now indicated to be May and June 2020 (third term). Normal due date for third term would be 15 July, but an extended time limit is signaled.
- More details about arbeidsgiveravgift will be presented in the annual revised budget announced 12 May 2020.
Corporate income tax
- If a company incurs a loss in 2020, the company may carry back loss to the two preceding income years and hence receive cash back in the second half of 2021. This arrangement has been limited upward to a loss of NOK 30 mill (tax value NOK 6,6 mill).
- The time limit for payment of corporate income tax due on 15 April was extended to 1 September 2020.
- For individuals subject to business taxation the time limit for tax payment due 15 March was extended to 1 May. Second term has been extended from 15 May to 15 July 2020.
- The time limit for paying, but not for reporting, the first VAT instalment is extended from 14 April to 10 June 2020.
- The reduced rate of 12% for transport, travel and hotel business is further reduced to 7% between 1 April and 31 October 2020.
- Full relief from passenger tax and airport duty from 1 January to 31 October. Certain reliefs also granted with regard to the special financial tax payable by financial institutions/finance companies.
Background – the Norwegian system for tax and vat payments
Salary related taxes
a) Salary withholding tax
Amounts of salary withholding tax represent funds withheld from the employees' salaries and are hence not viewed as the employer's funds – the employer is "entrusted with a tax collector role". Such tax to be paid by the employee, and hence withheld by the employer, is personal income tax as well as employee social contribution tax (but not the employer's social contribution tax). The amount shall be paid into a separate bank account no later than one day after the salary is paid to the employee. The company is the formal account holder, but the account is restricted by the bank so that the funds can only be utilized to pay these taxes to the tax collector, ref. Tax Payment Act § 5-12 (3) and (4). The balance on this account shall be paid to the tax collector on the 15th of every second month, starting 15 January, ref. Tax Payment Act § 10-10 (1).
Some companies have established a bank guarantee arrangement for correct payment of the withholding tax, which is accepted under § 5-12 (2) provided it is a regulated financial institution.
b) Employer's social contribution tax ("arbeidsgiveravgift")
The "arbeidsgiveravgift" is paid on the same date as the salary tax withheld, but it is not kept in a separate bank account as this is an "ordinary" tax cost of the company. It is paid out of the company's ordinary bank accounts, like corporate income tax. We should also mention that both salary/salary tax withheld and calculated arbeidsgiveravgift is reported every month in the "A-melding", but that is different from the payment of these taxes.
For salary paid in March and April 2020, the "arbeidsgiveravgift" shall be paid 15 May 2020, now extended, ref. above.
Corporate income tax
Corporate income tax for 2019 for companies is paid in 2 instalments on 15 February and 15 April 2020. For individuals, business income tax for 2020 is payable in 4 instalments on 15 March, 15 May, 15 September and 15 November 2020. Extensions have been granted, ref. above.
VAT is reported bi-monthly in six terms, the first term covering January and February, and so on. The time limit for filing the return is 1 month and 10 days after the lapse of each of these two-month periods. So for example VAT for January and February must be reported no later than 10 April, ref. Tax Assessment Regulation § 8-3-1 and § 8-3-10. Any VAT due related to the relevant two-month period becomes payable on the same day that the VAT report is due, ref. Tax Payment Act § 10-30. As 10 April is Easter Friday the payment would be due on the following office day, which is 14 April.
The first VAT payment otherwise due on 14 April has been extended, ref. above.
Consequences of not paying
Tax amounts that are overdue will be subject to late interest calculated at 9.5%, ref. Tax Payment Act § 11-1. Non-payment of tax withheld from salary is a criminal offence, ref. Tax Payment Act § 18-1 (this does not apply for missed payments of "arbeidsgiveravgift".)
Tax claims generally constitute a basis for execution ("tvangsgrunnlag), ref. Tax Payment Act § 14-1. This means that the tax collector can enforce payment by way of execution lien ("utleggspant") and confiscation ("beslag"). Again, salary tax withheld is already kept on a separate bank account and will be released to the tax collector, or paid by the guarantor, so enforcement is more automatic.
Naturally, in cases of a changed assessment, the basis for the tax claim may always be disputed based on disagreement of the interpretation or application of the tax law. This will prevent any enforcement until the dispute is solved in legal proceedings.
With regard to timeline for enforcing payment of corporate income tax and VAT, the payments due for corporate income tax and VAT on respectively 15 and 14 April has now been extended, ref. above. If there are other payments overdue related to corporate income tax and VAT, it will normally take several months of payment reminders and notifications before enforcement is initiated. The timeline will probably vary with the work level at the office of the tax collector in question. Under the current unique situation we believe there is some uncertainty as to how such enforcement would be prioritized.
The same enforcement procedures apply for "arbeidsgiveravgift". The very regular reporting and payment obligation will reveal missing payments at an early stage. Again, the first coming due date of 15 May has been extended.
Application for extension/abandonment
The Tax Payment Act § 15-2 is a regulation about payment reduction based on application. § 15-2 is based on that in some cases it may benefit the tax authorities themselves to agree to a payment arrangement. The criteria are a.o. that the taxpayer makes a payment proposal, that the taxpayer is incapable of ordinary settlement of the tax claim, and that the payment offered must be assumed to provide the tax authorities with better coverage than an alternative enforcement:
"A tax claim may be deferred or reduced based on a payment offer presented by the debtor. It is a condition that the debtor is incapable of settling the claim on ordinary terms, and that the payment offered is assumed to provide improved coverage of the claim as compared to continued enforcement. The payment offered must be the best that can be offered by the debtor, and the decision must not be offensive or capable of weakening the general payment moral."
Traditionally such applications have historically only been accepted in when linked to concrete insolvency situations. It remains unclear if the Korona virus situation will open for a more lenient practice. As a starting point we assume that the practice will continue to be rather strict and that ease of payment obligations primarily will be done by way of amending general regulations applicable for all taxpayers (ref. Corona reliefs presented above).
It could be added that § 15-1 provides an alternative application-based extended deadline or abandonment for tax/VAT payment (except for salary tax withheld from salary paid), While the criteria in § 15-2 is based on that in some cases it may benefit the tax authorities themselves to agree to a payment arrangement, § 15-1 is linked to the taxpayer's situation. Historically, these applications have only been accepted in cases of such as severe personal disease causing a temporary delay of payment, with a final reduction of tax if no recovery is made. It is generally assumed that this regulation will only exceptionally apply for a company. However, the wording of the paragraph is somewhat wider:
"When someone is temporary incapable of paying tax and duty obligations, due to death, severe disease or similar circumstances, and continued collection would be disproportionately burdensome, a payment deferral may be granted. If the capacity to pay has been more permanently reduced, the amount due may be reduced or abandoned. A final decision to reduce or abandon a tax or duty claim can only be made after the tax or duty claim has been finally determined."