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9 October 2015

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Norway Presents 2016 Budget including Income Tax Cuts

On 7 October 2015, The Norwegian government presented the 2016 Budget tax proposals to parliament, which includes measures to shift the tax burden from taxes on corporate and individual income to taxes on consumption and property, as well as measures to counter profit shifting. The main proposed measures include:

  • Reducing the corporate tax rate from 27% to 25% in 2016, with a further planned reduction to 22% in 2018;
  • Reducing the ordinary individual income tax rate from 27% to 25%, and replacing the current surtax with a new progressive tax with four brackets;
    • up to NOK 158,800 - 0%
    • over 158,800 up to 224,900 - 0.8%
    • over 224,900 up to 565,400 - 1.6%
    • over 565,400 up to 909,500 - 10.6%
    • over 909,500 - 13.6%
  • Reducing the net wealth tax from 0.85% to 0.80%, while increasing the taxable value of commercial property from 70% of estimated market value to 80%;
  • Increasing the 8% reduced VAT rate to 10%;
  • Increasing the maximum deduction cap for the Skattefunn R&D incentive scheme from NOK 15 million to 20 million for internal R&D costs, and from NOK 33 million to 40 million for costs incurred for R&D work outsourced to approved research institutions;
  • Reducing the interest deduction limitation for related party debt from 30% of EBITDA to 25%; and
  • Introducing a restriction on the participation exemption for dividends if deductible for the distributing company (hybrid situations).

A consultation will also be launched on a proposal for implementing country-by-country reporting requirements.

The measures must be approved by parliament, and are intended to apply from 1 January 2016.

Click the following link for the 2016 Budget Press Release, which includes links for additional information.

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