Israel – Norway Tax Treaty

Business Activity in Norway

Norway’s success comes from wisely managing its natural resources. Today, Norwegian businesses are creating cutting-edge technology in many fields, working closely with research communities. Norway’s GDP is expected to increase by 0.5% this year, with a per capita GDP of $461 million.

Norway has a small, open economy that relies heavily on international cooperation. The Norwegian approach emphasizes equality and teamwork, with senior management being accessible in both political and business settings.

Tourism is a huge resource for Norway’s economy, making up more than 6% of its GDP. Moreover, Norway is in the first position when it comes to the green technologies and environmental transportation, emphasizing electric engines and the creation of a new kind of batteries. Government initiatives and research programs strongly encourage and support this innovation.

Bilateral Agreements between Norway and Israel:

1. Double Taxation Agreement
2. Agreement on Agricultural Products

Convention on the Prevention of Double Taxation

The agreement between the Governments of Israel and Norway regarding the avoidance of double taxation was signed in November 21, 1966 and entered into force on March 31, 1965.

To read the agreement in English click here.

Applicability of the MLI

Both Norway and Israel have signed the “Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting” (MLI). Israel signed the agreement on June 7, 2017, and ratified it on January 1, 2019. Norway also signed the MLI on June 7, 2017, and a ratified it on July 17, 2019.

Residency for Tax Purposes in Norway

Residence of an Individual

Individuals who reside in Norway for a period of 183 days in a year or 270 days during three years, are considered tax resident. For calculation purposes in Norway, all days are included in the calculation.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

A company is considered tax resident in Norway if it is established under the Norwegian tax law, or its effective management is conducted in Norway. Factors that determine the effective management include board and daily management to be conducted in Norway.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Norway

Norway’s Tax Authority is called Skatteetaten.

Income taxation: 22%

Taxation of companies and branches: 22%, 25%

VAT: 0%, 12%, 15%, 25%

Capital gains tax: 22%

Withholding Tax

Relocation to Norway

There are several reasons why an individual or investor might relocate to Norway. For example, its strong, diverse economy and trust-based industrial culture contribute to its high rankings in political and social stability, environmental performance, and ease of doing business. The country has excellent digital infrastructure, universal internet and mobile coverage, and proficient technology professionals.

Even though Norway is not a member of the European Union, it still has access to the European market. The quality of life is high, with great public safety, a commitment to gender equality, and family-friendly laws. The education and healthcare systems are top-quality and accessible to everyone.

The Norwegian workforce is productive, qualified, and independent, which improves operational efficiency for businesses. Additionally, 98% of Norway’s electricity comes from renewable sources, supporting sustainability practices.

There are around 1,400 Jews living in Norway today. The community has its own magazine and schools and regularly organizes seminars, camps, and activities.

Real Estate Taxation in Norway

In Norway the property value is the market value of a residential property calculated by the Tax Administration. It is determined by multiplying the size of the property (primary area) by the price per square meter provided by Statistics Norway (SSB).

The taxable value for primary homes in Norway is 25% of the property value for those under 10 million NOK, while for properties exceeding 10 million NOK, it is 70% of the value. The taxable value for secondary properties is the same as the market value. The sale tax or any income generated from the rental of the property is taxed at 22%

Transfer of Funds from Israel to Norway

According to section 170(a) of the Israeli income tax ordinance, any transfer of payment to a non-Israeli resident is subject to 25% of withholding tax. The tax authority can allow, under certain circumstances, to reduce or dismiss the withholding tax. Our firm handles withholding tax matters with the Israeli Tax Authority.

Due to the fact that both countries have a tax treaty with each other, one can submit a declaration form (2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax), and under certain circumstances, there is a possibility to transfer the payment without the withholding tax and the approval of the Tax Authority.

In providing advice regarding the transfer of money abroad, in addition to the issue of withholding tax, our office handles the requirements of the foreign banks, such as an accountant’s approval regarding the payment of taxes and examines additional actions required in light of the uniform standard of CRS between the countries – automatic exchange of information between countries which is carried out first through the banks and then between the tax authorities of each two countries.

The banks raise many difficulties and charge high fees for converting shekels into other currencies, so it is important to consult before transferring the funds – Contact us.

For more information on money transfers abroad, click here.

Types of Business Entities in Norway

Most common business entities in Norway include:

Private Limited Company

Private Limited companies in Norway are a popular choice among small and medium businesses. It needs at least one shareholder, and half of its board members to reside in Norway, the EU, or the EEA. The minimum share capital needed is 30,000 NOK.

Public Limited Company

A Norwegian public limited company allows business to raise funds by selling stocks to the public, while offering this way shareholder protection and access to significant capital funds.

The major shares should be at least 1 million NOK, there must be at least one shareholder, and at least half of the board of the company should be from Norway, the EU, or the EEA.

Sole Proprietorship

In Norway, a sole proprietorship is an ideal business structure or individual entrepreneurs starting small firms. It is easy to set up and gives the owner total management control and full responsibility for debts.    

Branch of a Foreign Company

A branch in Norway is an extension of a foreign parent firm. It is easier and cheaper to open in comparison to a new company, and it is only taxed on income generated in Norway. The branch is completely controlled by the parent company.

Incentive Laws in Norway

Norway offers tax incentives to businesses, allowing them to balance international taxes with Norwegian taxes on the same revenue, and carry over unused credits for up to five years. In addition, double tax treaties allow citizens to avoid paying double taxes on foreign income.

The Ministry of Finance also offers tax benefits for asset transfers between group entities. The Norwegian Parliament has passed a law that restricts counties and municipalities to charge maximum 70% of the toll price for fossil fuel cars.

Double Tax Treaties in Norway