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Payroll & Tax in Norway

Norway payroll & taxation

There are specific rules that apply to payroll and taxation in Norway. The country eased the process of paying taxes for companies, by reducing the corporate income tax rate for 2016.

Payroll in Norway can, however, be complicated. If you have employees stationed in Norway, you must run a payroll through a Norwegian registered entity. Regardless of the method you choose, you must report your employees’ income, tax deductions and national insurance contributions every month.

Typically, payroll includes:

  • “A-meldingen”: Regardless of the setup chosen, it is mandatory to report employees’ income, tax deductions and national insurance contributions every month;
  • National insurance contributions, both from the employee and employer, alternatively assistance with registering National Insurance Confirmations (NIC) from your home country if applicable;
  • Holiday pay deduction and annual holiday payment;
  • Pension deduction, administration and payments, when required to have a Norwegian pension;
  • Sick pay and parental pay, for employees covered by Norwegian National Insurance;
  • Payments of wages, or payment advice;
  • Insurances (including workers’ compensation) when required;
  • The deposit of tax deductions into a dedicated bank account, for those with tax liability in Norway;
  • Assistance with obtaining a liability waiver.

Your Payroll Options in Norway

Remote Payroll

A remote payroll system is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Norway. Under Norwegian law, there are two options available:

  • Register a subsidiary in Norway for employment purposes;
  • Enlist the services of an employment provider.

Local Payroll Administration

In some cases, a company will register their business in Norway under one of the forms available: companies limited by shares (AS or ASA); fully liable partnerships (ANS); limited partnerships (KS, DA); sole traders and branches.

However, it may prefer to have another company administering its payroll.  This can be accomplished through a payroll provider.

It is important to consider that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Norway may wish to run their own local payroll for all employees, foreign and local.  In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.

There will be a need for in country human resources personnel who have the background needed to manage a Norwegian payroll, and can fulfil all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations.  The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Norwegian employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Norway to a GEO, like Shield GEO. This is possible for both foreign workers and Norwegian nationals. This is the easiest, fastest and safest way to payroll staff in Norway.

Shield GEO manages all aspects of payroll for workers in Norway, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Norway

Information Explanation
Currency ?

The national currency is the Norwegian Krone (NOK), which is equal to USD 0.11.

Employee Information Required ?
When a new employee starts work with a new business, it is very important that the employer has all the correct information they require about the employee. The information required includes:
• Full Name
• Address
• Telephone number(s)
• Emergency Contact
• Personal ID number
• Tax Deduction Card
Tax Registration Requirements ?
For anyone coming to Norway and wishing to work and stay for more then 3 months, then they must visit their local tax office and apply for a tax deduction card. They must then pass the card onto their employer so that they can deduct the correct amount of tax from their salary each pay day.
Social Security Registration ?
When in Norway, as soon as an individual begins work and gives their employer their tax deduction card, then they will become a part of the social security system and be eligible for receiving benefits.
Documentation Required for New Employees ?
In Norway employers are legally required to provide their employees with an employment contract.
There are several items which must be included in the contents of the written contract.
These include the following-
• The duration of the employment
• Employee wage (including how often they will be paid and how payment is made)
• The probationary period (usually six months)
• Terms for giving notice (during and after probationary period)
• Working hours
• The job description (including the duties, job title and other information for the employee)
• Holiday leave
National Insurance ?
Anyone who is either a resident or employed by a Norwegian employer is automatically entitled to be covered under the National Insurance Scheme. There is also categorises of Norwegian nationals, that are working abroad, who are also covered by the scheme.
Each year, on the 1st May, many of the benefits provided by the National Insurance Scheme are calculated and set at a new basic amount.

Tax Figures

Information Explanation
Corporate Income Tax ?

Corporate Income Tax: 27%, calculated on taxable profit

Norway made paying taxes less costly for companies by reducing the corporate income tax rate.

Income Tax Rate ?
Grossed income Tax Rate (%)

Which income will be taxed in Norway?

In case you are an employee:

  • Live in Norway? (min. 183 consecutive days over 12 months) You must pay tax on your worldwide income there.
  • Lived in Norway less than 183 consecutive days? You are not considered tax resident and only pay tax on income earned in Norway.
  • Income from other EU countries? Check you never pay tax twice on the same income.

To calculate your total tax bill:

1. Work out your taxable income by subtracting any applicable allowances or deductions for expenditure

2. Work out the rate that applies to it by combining these 3:

  • combined national and municipal income tax — 28%( 24.5% in Finnmark and Nord-Troms counties).
  • top tax — 0 — 12% ( depending on your income)
  • social security contribution (NIS) — 7.8%.

Before or on starting work in Norway, you must:

  • apply to your local tax office for a tax deduction card
  • give it to your employer — they will deduct the percentage stated on the card from your salary.

You must also file a tax return ( selvangivelse) by 30 April every year.

Which income will be taxed in Norway?

In case you are a self-employed:

  • Live in Norway? (min. 183 consecutive days over 12 months) You must pay tax on your worldwide income there.
  • Lived in Norway less than 183 consecutive days? You are not considered tax resident and only pay tax on income earned in Norway.
  • Income from other EU countries? Check you never pay tax twice on the same income.

To calculate your total tax bill:

1.     Work out your taxable income by subtracting any applicable allowances or deductions for expenditure

2.     Work out the rate that applies to it by combining these 3:

  • combined national and municipal income tax — 28%(24.5% in Finnmark and Nord-Troms counties).
  • top tax — 0 — 12% (depending on your income)
  • social security contribution (NIS) — 11%.

You must file a tax return for self-employed workers (form RF-1030) by 31 May every year.

Sales Tax ?

VAT: 25%

Withholding Tax ?

Dividends: 0% – 25%

Interest: 0%

Royalties: 0%

Income Tax (Personal Allowance) ?
In Norway many employee tax deductions are taken directly from the employee’s salary, before it is paid to them. These taxes include income tax, social security contributions and church taxes. In order for the tax authorities to calculate all individuals’ taxes correctly, all workers must provide them with their tax information.
This must be done in the form of a tax return. The tax return must include information such as income, assets and income deductions; the return must then be checked and submitted before the 30th April, each year.
Employers in Norway must deduct all employees taxes before they are sent to the employees, and they must calculate the employee’s taxes based on their rate, stated on each of their employee’s personal tax deduction cards.
At the end of the year, employers must complete a form called the Certificate of Pay and Tax Deductions (End of year Certificate), for each of their employees. The End of Year Certificate must state the employees total salary earned, any remuneration paid to the employee and the total of any taxes deducted.
Employee Social Security (EE SS)

Social Security Contributions: 7.8%, calculated on gross salary.

Employer Social Security (ER SS)

Social Security Contributions: 14.1%, calculated on gross salary.

Financial Year ?

The financial year in Norway runs from the 1st January- 31st December each year.

Payments

Information Explanation
Payment Mode ?
There are a range of ways in which Norwegian employers can choose to pay their employees salaries. These include Electronic payments, cash or cheque. In most large businesses, employers will use the system of electronic payment to settle the employee’s wages. Electronic payments are a fast and simple way of transferring money from one account to another. They ensure that the employees receive their money on the day they expect, and any amendments that are required are easily complete.
Frequency of Salary Payment ?
In Norway, employers can choose from a range of times in which to pay their employees. These times include daily, weekly, bi-weekly, monthly, quarterly, and annually. In general, most employers choose to pay their employees once a month, usually on the last working day.
Invoice / Payslips required ?
In Norway all employees are entitled to receive a pay slip at the same time as receiving their regular wage. The Pay Slip is designed to show the employee their gross wage for that time, the total deductions they have had removed from their income, and their total salary paid to date for that current year.
Minimum Wage ?
In Norway there is no National Minimum Wage. In order to calculate workers wages, individuals pay normally falls into a national scale which is negotiated by Labor, their employers and local governments.
Working Hours ?
In Norway, workers are only allowed to work a maximum of 9 hours a day, and 40 hours per 7 day week. As a rule, the rest period must be 11 hours in the course of 24 hours and 35 hours in the course of 7 days, and, as a rule, time off shall be taken on Sundays or public holidays. Employees are entitled to a break if their daily working hours exceed 5.5 hours, and breaks shall total 30 minutes if the daily working hours exceed 8 hours. Work in excess of normal working hours shall only occur if it is specifically required and is of a limited duration, and this work shall then be compensated with an overtime supplement of at least 40 per cent of normal hourly pay.

Employee Entitlements

Information Explanation
Working on Sundays ?
According to the Norwegian Working Environment Act, working on a Sunday of any other public holiday is not permitted, however there are several exceptions that have been made.
Anyone within the allowances, who chooses to work on a Sunday, must in return be given the following Sunday as a day off, the worker must also be given extra pay for any hours worked on a Sunday or public holiday.
Time Off Work ?
Employees in Norway are entitled to receive paid annual leave from their work, each year. Annual leave allows individuals to take time off away from work, yet still get still receive a wage. In Norway workers from both the public and private sector are entitled to 4 weeks and 1 day of leave. In certain areas of work, it has been agreed that workers are entitled to an extra 4 days of holiday. Employees who are over the age of 60 years old are entitled to receive an extra week of annual leave.
All workers in Norway are entitled to annual leave, yet in order to be eligible for payment while using their leave, employees must carry out a certain amount of work. If an employee has been with a business for a whole qualifying, working year (Calendar Year), then they will be entitled to receive their full working wage. However if the employee has only been with the business for a short while then they will only receive a wage equivalent to how long they has worked of the company.
Medical Leave ?
If an employee feels that they are too sick to come into work then they are entitled to self certified sickness absence. An employee is allowed to inform their employer that they are too sick to attend work for 3 days before requiring a doctor’s certificate, to declare it.
If the employee feels that they are still too ill to attend the workplace after eh 3 days period has ended then they must contact their doctor, who will then carry out an assessment of the patient and decide whether they are eligible for more time off work and a doctor’s certificate.
Employees may only have 4 self certified sickness absences in each 12 month period of time. The employee may also only be eligible for self certified leave once they have been working at the business for a total of 2 months.
Maternity, Paternity and Parental Leave ?
Parents in Norway are entitled to take 56 weeks of parental leave between them, when they have a new child. 3 weeks of the leave must be taken by the mother of the child in the 3 weeks leading up to the birth, with another 6 weeks being taken immediately after. The father of the child must take 12 weeks leave, taken as paternity leave and deducted from the overall figure of 56 weeks. The remainder of the parental leave can then be taken by either the mother or the father of the child as they wish.
All of the 56 weeks leave which are used by either the mother or the father, are fully paid. In order for the parents to gain the right to be able to be paid for their time off, the mother must have worked for at least 6 of the last 10 months before giving birth. When all the time has been used, both the mother and the father can take an additional 1 year of leave, however they will not be paid for this time.

Employment Termination

Information Explanation
Termination of Employment ?
In Norway an employee can choose to end their employment contract at any time, however they must give notice and work for the full amount required by there employer. If the employee does not work the full notice period or chooses to not carry out their duties properly, then they will not be entitled to any wages earned during their notice. All employers have different notice periods in which they ask their employees to work, once their employment contract has been terminated. By law the notice period will not begin until the start of the following month of the termination; therefore if an employee chooses to end their contract on the 3rd of the month then they will have to complete the rest of the month before their notice period will begin, on the 1st of the next month.
Before an employee’s contract has been officially terminated, they will be expected to attend a meeting with their employer in order to discuss the termination. If the employee is leaving through the choice of the business then the employer will take the meeting as an opportunity to explain to them exactly why they are being removed from the company. If the employee is a member of a union then they can choose to have a union representative attend the meeting with them.
By law, a business can choose to end their employee’s contract for a range of reasons, such as cut backs within the company, or the employee failing to for fill their job roll. However it is illegal for an employer for end a contract due to a dislike of the employee. Any notice of termination must be put into written form with information on the employee’s right and deadline for filing a lawsuit against the company.
Pensions ?
In Norway there are 3 different categories for pensions, these are State Pensions, Occupational Pensions and Personal Pensions.
According to the Norwegian National Insurance Act, all citizens of Norway are entitled to a State pension, when they reach the age of 67. All citizens who have liven in Norway for a minimum of 40 years, starting from after the age of 16, will receive their State Pension in full. Any citizen who has not been a resident for the set amount of time will be handed their pension in lesser amounts; this is called a Minimal State Pension. The State Pension is calculated according to what the individual has previously earned from ages 16 to 67. The calculation is made by The Norwegian Labour and Welfare Administration.
Occupational pensions were first introduced into Norway in 2006 as a mandatory scheme. Occupational pensions are work based and it is the duty of the employer to decide how they will set them up for their employees. Employers can choose two ways in which they feel is best for giving their employee a pension, the options are a contribution scheme or system in which the employees can have a small amount of their wages taken from their salary and put into a pension pot, for when they reach retirement age.
Personal Pensions
For an individual to make contributions under an arrangement they themselves make with a provider (such as an insurance company). Contributions are typically invested during an individual’s working life, and then used to purchase a pension at or following retirement.
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