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Norway

24 June 2013

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Public consultation on bill introducing limitations on deductibility of interest expenses between related parties

On 11 April 2013, the Ministry of Finance launched a public consultation on a bill (13/1689 SL BBE/KR) introducing limitations on the deductibility of interest expenses between related parties. Details of thebill are summarized as follows:

-   Parties are considered related if one party directly or indirectly owns or controls the other party by at least 50% of the capital or voting power. Related parties may be resident in Norway or abroad. Hence, the limitation also applies to the deductibility of interest expenses between two Norwegian companies.
-   Qualifying interest expenses in excess of 25% of the taxable income of an entity, subject to certain adjustments, are not deductible for tax purposes.
-   Irrespective of whether or not the interest has been deductible for the payer, the recipient of the interest income is taxed according to the normal rules.
-   The limitation is calculated separately for each entity in a group situation.
-   Disallowed interest deductions may be carried forward for 5 years.
-   The limitation applies to limited liability companies and other companies and entities that are non-transparent for tax purposes. In addition, it covers partnerships and CFC ("NOKUS") companies, as well as foreign entities that have a taxable presence in Norway (e.g. a PE). Financialinstitutions are excludedfromitsscope.
-   The new rules are proposed to be effective from 2014 but would also apply for interest expenses on loan agreements concluded before 2014.

The public consultation ends on 24 June 2013.

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