1. A. Transfer pricing documentation requirements
    1.  Are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?
    2.  What is the content of the documentation that must be prepared?
    3. Which transactions must be documented (all transactions with associated enterprises, or only those which exceed a particular threshold)?
    4. What is the definition of “associated enterprises” for the purposes of this requirement (in particular, are transactions between a permanent establishment and its head office in the scope of the documentation requirement)?
    5. For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on transfer pricing documentation for associated enterprises (“EU TPD”)? If not, are taxpayers entitled to choose between the local requirements and the EU TPD?
    6. For all countries (and, in particular, OECD countries), is the content of the documentation similar to that described in the revisions to chapter V of the OECD transfer pricing guidelines (final report on Action 13 of the BEPS project)? If not, are taxpayers entitled to choose between the local requirements and the OECD approach?
    7. Do taxpayers which are not established in Norway need to undertake to provide any specific information upon request? Can your tax authorities require the taxpayer in your jurisdiction to provide information which is located in another state?     
    8. If comparable studies are to be provided, do the tax authorities generally accept regional benchmark studies (e.g. pan-European benchmark studies)?
    9. If comparable studies are to be provided in general, are safe harbours/specific circumstances exempting taxpayers from preparing benchmark studies (such as the EU Joint Transfer Pricing Forum guidelines on low value adding services or revisions to chapter VII of the OECD transfer pricing guidelines about low value adding intragroup services) in your jurisdiction or are there situations in which tax authorities do not request benchmark studies? If so, in which circumstances taxpayers are exempted from benchmark studies?
    10. What language(s) are to be used by taxpayers in submitting the transfer pricing documentation?      
    11. What is the deadline or timescale for providing TP documentation to the tax authorities - is it to be provided, for example, upon filing of the tax returns, at the beginning of a tax audit or on the specific request of the tax authorities?           
    12. In the event that the documentation is not provided within the applicable timescale or is incomplete, do documentation-related penalties apply? If so, please detail the penalties and the circumstances in which they do and do not apply.
    13. Does the absence or incompleteness of documentation reverse the burden of proof as regards the arm’s length character of the transactions?
    14. In the event that the tax authorities (i) impose documentation-related penalties and (ii) make a transfer pricing reassessment, does the imposition of documentation- related penalties prevent the taxpayer from initiating any mutual agreement procedure which may be contained in an applicable tax treaty (or, for EU countries, the procedure contained in the EU Arbitration Convention) with a view to eliminating any double taxation resulting from the transfer pricing reassessment?    
    15. Any other relevant aspect not addressed above?
  2. B. Country-by-Country reporting ("CbCR")
    1. Has the obligation to file a CbCR been implemented? If not, is the introduction of the CbCR being considered, and if so, when?
    2. If the obligation to file a CbCR is in force, what is the tax year from which this obligation applies and what is the deadline for filing the CbCR?
    3. Which taxpayers are required to file a CbCR under the applicable laws?
    4. Is the content of the CbCR fully in line with the OECD model (final report on Action 13 of the BEPS project)? If not, what are the differences?
    5. What is the penalty for failing to file the CbCR on time? Can local subsidiaries of a foreign group suffer the local penalty if the foreign group has not filed the CbCR?
    6. Are there tax treaties in force allowing the communication of CbCR with other jurisdictions?
    7. Any other relevant aspect not addressed above?
  3. C. As the case may be, other documentation / filing requirement in relation to transfer pricing?
    1. Are there any other documentation/filing requirements in relation to TP?
    2. If so, what is the content of such documentation / filing requirement? What language(s) are to be used by taxpayers?
    3. What is the deadline for meeting this documentation / filing requirement?
    4. Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?
    5. What is the penalty for failing to meet this requirement on time?
    6. Any other relevant aspect not addressed above?

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A. Transfer pricing documentation requirements

1. Are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

New documentation requirements, which are closely linked to the OECD recommendations, were introduced in the Tax Assessment Act in 2008. These were continued in Section 8-11 of the Tax Assessment Act of 2017.

All enterprises liable to pay taxes to Norway must submit the tax return through an accounting or annual accounts system for the income year 2023. Companies with controlled transactions must declare these in a separate topic in the tax return. This information was previously reported in the form RF-1123.

This separate topic in the tax return provides a starting point for the tax office to consider whether or not to look into transfer pricing matters for the company in question.

Upon request from the tax office, the company must submit complete written documentation in a transfer pricing report. This must be filed within 45 days after such request has been made (might be extended based on request). Companies with fewer than 250 employees and a turnover of less than NOK 400 million or a total balance sheet value of less than NOK 350 million are exempted from the full documentation requirement. This exemption does not, however, apply in relation to dealings with companies located in countries without a tax treaty with Norway, and it does not apply to taxpayers that are subject to special tax under the Petroleum Tax Act.

The documentation requirement applies where one company owns or controls at least 50% of the other party to the transaction, and between companies with at least 50% direct or indirect common ownership or control.

2. What is the content of the documentation that must be prepared?

Sections 8-11-3 to 8-11-12 of the Tax Administration Regulation set out requirements for the documentation. These adhere very closely to the OECD guidelines on documentation, although in contrast to the OECD transfer pricing principles, the OECD documentation guidelines are not integrated by referral in Norwegian law. Among the requirements that may be mentioned is:

  • A description of external factors impacting the enterprise, for example, rules, regulations, political conditions, economic cycles etc.
  • A description of the industry, including significant competitive factors.
  • A brief historical account of the group, its business activities, and any prior reorganizations.
  • A description of the group’s legal structure, including ownership and formal decision-making authority, and the geographic locations of the subsidiaries.
  • Financial data for the group and the local entity.
  • A functional and comparability analysis, including a two-sided functional analysis and an explanation of the choice of transfer pricing method, including how the pricing is determined and tested.
  • Types and size of internal transactions the company has been involved in during the period covered by the transfer pricing documentation, including the nature of the transactions, the scope of the transactions and the counterparty/counterparties in the controlled transactions.
  • Companies that own intellectual property relevant to controlled transactions should describe the ownership of the intangible assets and who contributes to the development, enhancement, maintenance, protection, and exploitation (termed as DEMPE) of the intangible assets.
  • In cases of centralized services within the group, an explanation of the anticipated benefits for the receiving entities. In situations involving cost-based allocation, details on the cost basis, allocation ratio, and any mark-up applied.
  • A list of insignificant transactions that the local entity was involved in.

2.1 Which transactions must be documented (all transactions with associated enterprises, or only those which exceed a particular threshold)?

The Norwegian transfer pricing rules apply to transactions where one of the parties is a Norwegian tax resident and the other one is not, as well as to transactions where both parties are residents in Norway. In practice, they are normally not invoked for purely domestic transactions, unless the transaction implies a value transfer that could be viewed as an irregular dividend from a fully or partly owned company, or concerns transactions involving the 78% special tax regime on the NCS and the ordinary (22%) corporate tax regime.

However, these documentation requirements are not fully applicable to controlled transactions that are considered immaterial. Transactions are considered immaterial when they are isolated, have a modest financial scope and are not part of the company's core business. In the case of immaterial transactions, it is only necessary to provide a description of types of transactions the company has had and considers to be immaterial.

2.2 What is the definition of “associated enterprises” for the purposes of this requirement (in particular, are transactions between a permanent establishment and its head office in the scope of the documentation requirement)?

Following the transfer pricing documentation requirements in the Norwegian Tax Administration Act (NTAA) Section 8-11 paragraph 4, related parties are defined as

  1. any company or entity that, directly or indirectly, is at least 50 percent owned or controlled by the entity obliged to specify or document;
  2. any individual, company or entity that, directly or indirectly, has at least 50 percent ownership of, or control over, the entity obliged to specify or document;
  3. any company or entity that, directly or indirectly, is at least 50 percent owned or controlled by any entity that is deemed to be an associated party pursuant to Item b; and
  4. any parent, sibling, child, grandchild, spouse, cohabitant, parent of a spouse and parent of a cohabitant of any individual who is deemed to be an associated party pursuant to Item b, as well as any company or entity that, directly or indirectly, is at least 50 percent owned or controlled by such individuals.

The same reporting and documentation standards as outlined above are extended to transactions involving companies or entities based abroad and their permanent establishments within Norway.

2.3 For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on transfer pricing documentation for associated enterprises (“EU TPD”)? If not, are taxpayers entitled to choose between the local requirements and the EU TPD?

The regulations explicitly state that documentation based on the EU Code of Conduct on transfer pricing documentation between associated enterprises is accepted. The Master File and Local File format is accepted and has become the normal format of documentation.

2.4 For all countries (and, in particular, OECD countries), is the content of the documentation similar to that described in the revisions to chapter V of the OECD transfer pricing guidelines (final report on Action 13 of the BEPS project)? If not, are taxpayers entitled to choose between the local requirements and the OECD approach?

Norway has both primary and secondary legislation in place to enforce the minimum standard of BEPS Action 13.

2.5 Do taxpayers which are not established in Norway need to undertake to provide any specific information upon request? Can your tax authorities require the taxpayer in your jurisdiction to provide information which is located in another state?     

Foreign companies and entities with limited tax liability in Norway, as defined by the Norwegian Tax Act Section 2-3, are also obligated to adhere to the reporting and documentation requirements. These requirements apply for companies liable to tax according to Norwegian domestic tax law, even if they are exempted from tax Norwegian tax liability due to tax treaties. The same reporting and documentation standards are extended to transactions involving companies based abroad and their permanent establishments in Norway.

The tax office may generally ask the taxpayer to provide any documentation that may be relevant for the purpose of verifying a taxpayer’s tax position. This includes information about companies that are not liable to tax in Norway, to the extent that they are included in dealings with Norwegian taxable companies. For example, when a taxpayer uses pricing agreements from controlled transactions made by another enterprise with authorities in other countries as a reference for pricing their own controlled transactions, those agreements must be provided.

2.6 If comparable studies are to be provided, do the tax authorities generally accept regional benchmark studies (e.g. pan-European benchmark studies)?

Comparable studies are not a compulsory part of the transfer pricing documentation requirement. The tax authorities may however ask the taxpayer to present such, within 60-90 days. A preference exists for using domestic comparables rather than foreign. However, Pan-European comparables are not automatically rejected. The relevance of foreign comparables will be considered on a case-by-case basis. 

2.7 If comparable studies are to be provided in general, are safe harbours/specific circumstances exempting taxpayers from preparing benchmark studies (such as the EU Joint Transfer Pricing Forum guidelines on low value adding services or revisions to chapter VII of the OECD transfer pricing guidelines about low value adding intragroup services) in your jurisdiction or are there situations in which tax authorities do not request benchmark studies? If so, in which circumstances taxpayers are exempted from benchmark studies?

There is no general requirement to present comparable studies, ref. above. The taxpayer may apply the simplified approach in the OECD TPG Chapter 7 Section D for low value-adding intra-group services. The simplified approach shall not be regarded, however, as restricting the Norwegian Oil Taxation authorities in conducting a thorough transfer pricing analysis with regard to service costs allocated to Norwegian upstream companies subject to the Norwegian special tax on petroleum.

2.8 What language(s) are to be used by taxpayers in submitting the transfer pricing documentation?      

The documentation must be presented in Norwegian, English, Swedish or Danish.

3. What is the deadline or timescale for providing TP documentation to the tax authorities - is it to be provided, for example, upon filing of the tax returns, at the beginning of a tax audit or on the specific request of the tax authorities?           

All enterprises liable to pay taxes to Norway must submit the tax return through an accounting or annual accounts system. The general deadline for filing the annual tax return for a company is 30 May in the year following the income year. Companies with controlled transactions must declare these as a separate topic in the tax return.

Upon request from the tax office, the company must submit complete written documentation in a transfer pricing report. This must be filed within 45 days after such request has been made.

In the event that the documentation is not provided within the applicable timescale, the tax authorities may impose an enforcement fine. An enforcement fine is a daily fine that may be impose on businesses if they do not submit mandatory or requested information within the deadline. The enforcement fine will accrue until the business submit the requested information or until the maximum limit for enforcement fines has been reached. 

There are separate regulations for penalty tax if taxable income has been underreported due to erroneous transfer pricing. Generally, penalty tax applies in cases of wrong or incomplete information. The filing of proper transfer pricing documentation may therefore effectively protect against penalty taxes. However, according to court practice, misapplied pricing of more than 40% may in itself be viewed as “wrong information”.

5. Does the absence or incompleteness of documentation reverse the burden of proof as regards the arm’s length character of the transactions?

Not fulfilling the documentation requirements is likely to result in a shift in the burden of proof in favour of the tax authorities during a tax dispute.

The imposition of additional tax does not prevent a case from being processed in MAP. If the taxpayer has intentionally or through gross negligence provided incorrect or incomplete information, or has failed to provide information, so that the conditions for imposing aggravated additional tax are met, the Norwegian competent authority retains the option to refuse to process the case in MAP.

7. Any other relevant aspect not addressed above?

Duration of recordkeeping

Records must be preserved for five years. For some sectors, certain records must still be held for 10 years. Foreign and Norwegian companies with activities on the continental shelf, the building and construction industry, as well as the financial sector are subject to the 10-year preservation rule in some regards.

Advance pricing agreement (APA)

Despite the absence of a domestic legal framework for an Advance Pricing Agreement (APA) program in Norway, the Norwegian tax authorities has engaged in APAs through the mutual agreement procedures outlined in bilateral tax treaties to which Norway is a party. An APA provides a taxpayer with upfront certainty regarding the determination of arm's length remuneration or a method for determining arm's length remuneration for cross-border transactions between associated enterprises. 

Interest limitation rule

Rules limiting tax deductions in the corporate tax base for interest expenses to related parties was introduced in 2014. Under the rules, deductions for intragroup interest expenses are disallowed if total net interest expenses exceed 25% of an adjusted taxable income (this was reduced from 30% as of 1 January 2016). The adjusted taxable income is taxable income increased by net interest costs and tax depreciations, similar to earnings before interest, taxes, depreciation and amortization (EBITDA).

The interest deduction cap applies to domestic as well as cross-border loans. Income accrued from interest payments is taxable income for the lender, regardless of the cap on deduction for the borrower.  The limitation rule does not apply if the net interest expenses do not exceed NOK 5 million.

B. Country-by-Country reporting ("CbCR")

1. Has the obligation to file a CbCR been implemented? If not, is the introduction of the CbCR being considered, and if so, when?

In 2016, legislation was introduced that requires certain companies to provide a country-by- country reporting to the Norwegian tax authorities. The Country-by-country reporting is primarily related to groups of companies with a parent company resident in Norway. However, the reporting requirement would also apply to foreign groups of companies (with businesses in Norway), even if the parent company does not have an obligation to provide a country-by-country report in its resident country.

2. If the obligation to file a CbCR is in force, what is the tax year from which this obligation applies and what is the deadline for filing the CbCR?

The country-by-country reporting entered into force with immediate effect for the income year 2016 for Norwegian resident companies. For foreign groups of companies, the reporting requirement entered into force on 1 January 2017.

The deadline to provide such a report for companies covered by the legislation is 31 December of the year after the relevant income year to be reported. For companies with deviating fiscal year the deadline is set at 12 months after the expiry of the fiscal year.

3. Which taxpayers are required to file a CbCR under the applicable laws?

The Norwegian parent entity of a group, with a total revenue of NOK 6.5 billion in the year preceding the financial year, is obligated to prepare and submit a country-by-country report in Norway. In specific circumstances, there can be a secondary filing requirement for subsidiaries in Norway. This secondary reporting obligation comes into play in three distinct scenarios. Norwegian companies are subject to a secondary reporting obligation if the foreign parent company is not mandated to submit a country-by-country report under its home country's legislation, if the parent company's home country has not entered into an agreement for the automatic exchange of such reports with Norway, or if the Norwegian tax authorities have informed the Norwegian entity that the parent company's home country is not complying with the obligation to exchange country-by-country reports or for other reasons is not providing Norwegian tax authorities with a country-by-country report.

Norwegian-based subsidiaries, which are part of a group obligated to submit a country-by-country report, must specify in their annual tax return the group entity responsible for submitting the country-by-country report and the jurisdiction where this group entity is based.

4. Is the content of the CbCR fully in line with the OECD model (final report on Action 13 of the BEPS project)? If not, what are the differences?

The content of the Country-by-Country Report aligns with the OECD model legislation. The comments on the model legislation offer guidance on how to interpret the reporting requirements.

5. What is the penalty for failing to file the CbCR on time? Can local subsidiaries of a foreign group suffer the local penalty if the foreign group has not filed the CbCR?

Norway has not introduced any specific penalties related to Country-by-Country reporting. Instead, the general sanctions that apply to all tax-related matters in Norway will be enforced in cases where a taxpayer fails to submit a Country-by-Country report.

6. Are there tax treaties in force allowing the communication of CbCR with other jurisdictions?

Norway signed the Multilateral Competent Authority Agreement on the Exchange of Country-by Country Reports (CbC MCAA) in 2016. The purpose of the CbC MCAA is to set forth rules and procedures as may be necessary for competent authorities to automatically exchange Country-By-Country Reports prepared by the reporting entity with the tax authorities of all jurisdictions in which the group of companies operates. 

7. Any other relevant aspect not addressed above?

The Country-By-country Report must be submitted in English.

C. As the case may be, other documentation / filing requirement in relation to transfer pricing?

1. Are there any other documentation/filing requirements in relation to TP?

Not applicable.

2. If so, what is the content of such documentation / filing requirement? What language(s) are to be used by taxpayers?

Not applicable.

3. What is the deadline for meeting this documentation / filing requirement?

Not applicable.

4. Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

Not applicable.

5. What is the penalty for failing to meet this requirement on time?

Not applicable.

6. Any other relevant aspect not addressed above?

Not applicable.

 

Footnotes