Norway's tax system coordinates the taxation of companies and their shareholders. The current system, known as the shareholder model (aksjonærmodellen), was introduced in 2004 to replace the previous system established in 1992. This article provides an overview of the Norwegian taxation rules for dividends and capital gains, focusing primarily on individual shareholders.
Historical Context
Prior to 2004, Norway employed a system of single taxation of corporate profits. This system used imputation credits (godtgjørelsesregler) for dividends and RISK adjustments for capital gains to prevent double taxation. However, this system faced challenges, particularly in relation to cross-border situations and EU/EEA law.
The Shareholder Model
The shareholder model introduced in 2004 aims to achieve neutrality between:
The combined corporate and dividend tax
The taxation of high labor income
Under this model, dividends are taxable for shareholders, introducing a system of economic double taxation. To maintain neutrality with other capital income, personal shareholders can deduct a risk-free return (skjerming) before calculating the tax.
Scope of Application
The rules on taxation of dividends and capital gains apply to:
- Shareholders in (public) limited companies
- Participants in equivalent companies and associations
- Shareholders in foreign companies
- Non-residents with shares in Norwegian companies (subject to limited tax liability)
The rules also cover distributions from savings banks, mutual insurance companies, and certain cooperatives.
Dividend Taxation
Dividends are generally taxable income for shareholders. Key points include:
Applies to both domestic and foreign companies
Covers both legal and "masked" dividends
Applies even if the distribution violates company law rules
Taxable regardless of how the dividend is financed or whether it originates from taxable or tax-free income for the company
Capital Gains Taxation
Capital gains on shares are also taxable. The rules apply to:
- Shares in (public) limited companies and equivalent entities
- Shares in foreign companies
- Subscription rights and allocation certificates
Corporate Shareholders and the Exemption Method
To prevent chain taxation, the exemption method (fritaksmetoden) was introduced for corporate shareholders. Under this method, corporate shareholders are generally exempt from tax on dividends and capital gains from shares.
Special Considerations
- The rules do not apply to housing companies taxed under section 7-3 of the Tax Act
- Special rules apply to distributions from securities funds
- Specific rules exist for controlled foreign companies (NOKUS) in low-tax jurisdictions
Conclusion
The Norwegian system for taxing dividends and capital gains aims to achieve neutrality between different forms of income and investment structures. While complex, it represents an approach to address the challenges of corporate and shareholder taxation in both domestic and international contexts.
