Worldwide transfer pricing reference guide 2014

Norway
Taxing authority and tax law
Taxing authority: The Norwegian Tax Authority (NTA) is responsible for ensuring that taxpayers meet the requirements of the law.
Tax law: The arm’s length principle is stated in the Taxation Act (1999) §13–1, and the transfer pricing filing and documentation
requirements are stated in the Tax Administration Act (1980) §4–12.
Relevant regulations and rulings
In June 2007, the Norwegian Parliament adopted transfer pricing regulations (Tax Administration Act §4–12). The requirements became
effective as of January 2008. The transfer pricing requirements consist of two specific parts: filing and documentation requirements.
The Ministry of Finance also published the guidelines to the Norwegian documentation requirements in 2007. These guidelines outline
specific requirements to include in the Norwegian documentation.
Effective 2014, new interest deductibility restrictions on related party debt has come into effect. According to the new legislation, net
interest expense paid to a related party can be deducted only to the extent that internal and external interest expense combined does not
exceed 30% of taxable EBITDA. The restriction also covers third-party interest expenses, where a related party has provided a guarantee.
Certain exemptions are expected to apply in relation to external debt guaranteed by a related party. Exemptions to the interest
deductibility restrictions rule apply if the total amount of net interest expense does not exceed NOK5 million during the fiscal year.
OECD guidelines treatment
The NTA has a long history of following the OECD Guidelines. The Norwegian regulations follow OECD principles, and documentation
prepared in line with the OECD Guidelines will generally meet the Norwegian requirements.
The Taxation Act §13–1 gives the OECD Guidelines a strong and formal status under Norwegian tax law. However, OECD Guidelines
chapter IV (Administrative Approaches to Avoiding and Resolving Transfer Pricing Disputes) and chapter V (Documentation) are not
included. The status of the OECD Guidelines is limited to that of guidance, and they do not constitute binding rules.
We have also seen that the principles outlined in OECD Guidelines Chapter IX on the Transfer Pricing Aspects of Business Restructurings
are being applied by the NTA. Recent tax audits and court cases have shown that the principles described in OECD Guidelines chapter IX
are applied in practice.
Priorities/pricing methods
The pricing methods contained in the OECD Guidelines are accepted by the NTA. The traditional transactional methods (CUP, Resale
Price and Cost Plus) are generally preferred to the profit-based methods (TNMM and Profit Split). However, there seems to be increasing
support for the applicability of the profit-based methods under certain circumstances. A recent court case acknowledges the use of
TNMM which the NTA applies often. The NTA does not accept the use of pan-European searches any more as the tax authorities believe
that the Norwegian market in general has higher profit margins, as Norway has not been affected by the financial crisis in the same way
as many other European countries.
There is no specified priority of methods under Norwegian tax law. As stated by the Norwegian Supreme Court, the Taxation Act §13–1
allows for the use of several transfer pricing methods, including methods not described in the OECD Guidelines, provided those methods
provide arm’s length results.
Transfer pricing penalties
The transfer pricing penalty (surtax) is 30% of the tax adjustments, provided that the tax authority concludes that the taxpayer provided
incomplete or incorrect information when submitting the tax return. If sufficient and correct information is provided, no penalty will be
imposed. In case of gross negligence, a surtax of up to 60% may be levied. However, the normal surtax rate is 30%. Additionally, a nondeductible,
annual interest charge will apply.
Failure to comply with the filing requirement (described below) carries the same penalties as failure to complete the annual tax return.
The same is applicable if the documentation is not submitted by the deadline.
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