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Norwegian Government Proposes New and Increased Resource Rent Taxes — Orbitax Tax News & Alerts

The Norwegian government announced a series of proposals on 28 September 2022 to better distribute profits from natural resources through the introduction of a resource rent tax on aquaculture and wind power, an increase in the resource rent tax on hydropower, and an extraordinary tax on wind and hydropower due to high electricity prices. The proposals are summarized as follows:

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These are the proposals:

Aquaculture:

Resource rent tax

  • Effective rate of 40 per cent.
  • Applies to the production of salmon, trout and rainbow trout.
  • A bottom limit of 4,000-5,000 tonnes ensures that only the largest players will pay the resource rent tax.
  • The effective date is 1 January 2023.
  • Tax revenues are estimated at NOK 3.65-3.8 billion annually.
  • The tax revenues are distributed equally between the central and local government sectors.
  • The proposal will be circulated for consultation today with a deadline of 3 January 2023.

Read more about the Government's proposal on resource rent tax on aquaculture

Consultation document (PDF) (in Norwegian only)

Hydropower:

Higher resource rent tax

  • Increase in effective rate from 37 to 45 per cent.
  • Effective from the 2022 financial year. Small hydropower stations do not pay resource rent tax and are therefore not affected by the proposals.
  • Tax revenues are estimated at NOK 11.2 billion annually.

Read more about the Government's proposal on increased resource rent tax on hydropower

Guarantees of origin

  • Revenue from the sale of guarantees of origin is included in the resource rent tax basis for hydropower from 2023.
  • Tax revenues are estimated at approximately NOK 1 billion annually.

Onshore wind power:

Resource rent tax

  • Effective rate of 40 per cent.
  • The effective date is 1 January 2023.
  • The resource rent tax obligation will apply to wind farms that are subject to licensing. That is, wind farms that have more than 5 turbines or installed capacity of 1 MW or more.
  • Tax revenues are estimated at approximately NOK 2.5 billion annually.
  • The tax revenues are distributed equally between the central and local government sectors.
  • The proposal will be sent out for consultation before the end of the year.

Read more about the Government's proposal on resource rent tax on onshore windpower

High-price contribution:

High-price contribution from wind and hydropower

  • 23 per cent of the part of the price that exceeds 70 ore per kWh.
  • Based on actual prices and applies to all production in the power plant.
  • Entry into force:
    • Today (28.09.2022) for hydropower that is subject to resource rent tax
    • 1 January 2023 for other hydropower and wind power
    • Tax revenues from the high-price contribution are estimated at approximately NOK 16 billion annually.

Read more about the Government's proposal on high-price contribution from wind and hydropower

Fixed price agreements on electricity – the contract exception in the resource rent tax:

  • The proposal means that the resource rent tax for electricity sold through fixed-price agreements is based on the actual income of the power producers, not the spot price.
  • It is assumed that electricity suppliers are able to offer standardised fixed-price agreements for periods of 3, 5 and 7 years, with a maximum mark-up on the fixed price the suppliers pay to the power producers.
  • Tax revenues are estimated, from a very uncertain basis, at approximately NOK 1.2 billion annually.

Read more about the Government's proposal on fixed price agreements on electricity (in Norwegian only)

Licence power:

Many local and county authorities now have high income from the sale of their licence power. The Government proposes a one-year deduction in the general grant, totalling NOK 3 billion in 2023, for local and county authorities with income from licence power that are located in the areas with the highest prices. In doing so, the Government intends to share some of the extraordinary income these authorities now derive from licence power with the community at large.

The market value of licence power in areas with high electricity prices (areas 1, 2 and 5) is estimated at about NOK 13 billion in 2022 and NOK 11 billion in 2023, up from NOK 4 billion in 2021.

Not all authorities sell their licence power at market price. They will therefore have until 1 December 2022 to report their use of the licence power. After this, the Government will make a final distribution of the reduction in the general grant, based on submitted information and on the basis of the volume of licence power each authority has. No local or county authorities shall face any deduction for income they cannot realise as a result of legally binding contracts entered into before this proposal was known.