Contractors who have won contracts that require them to work in Norway for more than a few weeks or months may find that an established employment solutions provider is the most cost-effective and tax-efficient solution.
“The tax treaties between Norway and the UK are both very dated and highly complex,” explains CXC Global’s Norwegian expert Charles Daw, “and starting a limited company is expensive and time consuming.
“Contractors with temporary contracts requiring them to be based in Norway for more than a few months may find that using an established professional employment services company offers them the most effective trading option.”
Do contractors need visas to work in Norway?
“Contractors who are nationals of a country within the European Economic Area (EEA) do not require visas to work in Norway,” continues Daw. “However, contractors who are nationals from other countries outside of the EEA usually do require a visa.
“If the contractor is using the services of a professional employment company, then that business will have an established visa sponsorship framework. With this framework in place, contractors from countries such as South Africa, Australia, New Zealand and India should have no problem securing a visa, although there are legal costs associated. It usually takes 4-6 weeks.”
Can contractors trade in Norway using their UK-based limited company?
According to Daw, it is possible to work in Norway on short assignments using a UK-based limited company, but both UK residence rules and Norway’s tax legislation prevents this arrangement becoming drawn out for more than anything longer than about two months.
“The Norwegian tax authorities are very hot on ensuring individuals and companies pay the correct amount of tax, and like companies and workers to be registered from day one,” warns Daw.
“If the Norwegian Tax Administration believes that an individual is working without having completed the correct formalities, they will investigate, asking ‘should this person be paying taxes’?
“If they conclude the contractor has not been paying the correct taxes, they could be fined for trading illegally and will also have to pay back taxes. If the contractor is also paying tax via their UK company, they could end up paying tax twice.”
Starting a Norwegian company is expensive and time consuming
It is possible to start a Norwegian company, or open a branch of a UK-based company under the Norwegian-registered foreign enterprises (NUF) scheme.
However, starting a company costs between 5,666 (online) and 6,797 (paper) Norwegian Krone (approximately £477 and £572), requires a contractor to invest 30,000 Norwegian Krone (approximately £2,500), and an auditor’s confirmation that this sum has been invested.
The company will also require an accountant and the level of statutory registrations and reporting is much greater than in the UK. “There are also not the same tax advantages to using a company in Norway as there are in the UK,” adds Daw.
Starting a branch of a foreign company requires a fixed address for Norwegian VAT registration, which adds further costs and complexities for a contractor seeking to trade in Norway.
What to do when starting a Norway-based contract
“All non-Norwegian workers must register with the Norwegian authorities within three months,” highlights Daw. “This typically requires a pre-application online and then the contractor must visit their local police station in person within the three-month deadline.”
A local employment solutions provider will usually assist with this process, but the contractor must still make the visit themselves – they can’t send a representative. This can sometimes be tricky for oil and gas contractors working offshore, but Daw says this can usually be achieved during shore leave.
The worker is then issued with a tax deduction card by the Norwegian Tax Administration that tells the contractor’s employer what taxes should be deducted. If the worker does not register and receive a card, the employer is required to deduct emergency tax at 50%.
“The local employment solutions provider will be a legitimate fully registered and compliant Norwegian business and would typically employ the contractor, whilst having a contract with the contractor’s client. The arrangement is very similar to using an umbrella company in the UK.”
How contractors are taxed in Norway
As the contractor becomes a regular employee of the employment solutions provider, their taxes will be deducted at source via their service provider’s payroll. Taxes are similar in structure to the UK, but the rates are different.
Daw explains: “Municipal and state taxes combined are 28%, which is the Norwegian equivalent of Pay As You Earn (PAYE) income tax. There are additional social security taxes – their version of National Insurance Contributions (NICs) of 7.8%. There are higher rates of tax for high earners.
“In return, contractors receive the same benefits as any Norwegian employee. These include 16 days of sick pay each year and holiday pay, plus additional paid public holidays. Unlike in the UK, Norwegian employees must work 12 months to build up their holiday entitlement.”
The employment services provider will also ensure that all the statutory insurances are included, so the contractor does not have to take out their own business insurance.
What expenses can contractors employed in Norway claim?
Contractors using an employment solution to work in Norway can claim expenses, but they don’t claim them in the same way as when working for a UK umbrella company.
“Contractors have an expense allowance of 10% of gross earnings up to a maximum of 40,000 Norwegian Krone (approximately £3376), notes Daw. “These expenses can be claimed tax free for the first two years and are processed on a month by month basis.”
After the two-year period, there are still some expenses that can be claimed, but they must be accounted for at the end of the tax year via a Norwegian tax return. The allowance does become reset, though, if the contractor returns to the UK.
Daw concludes: “When leaving Norway, it is also very important for the contractor to tell the tax authorities that they have actually left and stopped working. Otherwise, Norway’s taxman assumes that the contractor is still working and owes them tax.”