This also applies for foreign employers with employees working in Norway or on the Norwegian Continental Shelf. Pursuant to the Tax Payment Act, section 3, the person considered as an employer, is a "person paying out wages or other remuneration subject to tax deduction in advance, whether paying the wages himself or through an authorised person".
Taxation of hired out personnel
Foreign employees hired out to work in Norway will as a general rule have to pay tax in Norway from day one. This is regardless of the length of the contract, the nationality of the employee and the nationality of the lessor (the employer).
This follows both from the Norwegian Tax Act and tax conventions between Norway and other countries.
Whether an employee is considered to be hired out is determined by the Norwegian Tax Authorities. The following criteria may indicate that the arrangement constitutes hiring out of personnel:
The hirer (user) bears the responsibility or risk for the result produced by the employee’s work.
The hirer (user) has the authority to instruct the worker.
The work is performed at a place which is under the control and responsibility of the hirer (user).
The payment to the lessor (employer) is based on an hourly rate.
Tools and materials are mainly put at the employee’s disposal by the hirer (user).
The number and qualifications of the employees are not solely determined by the lessor (the employer).
Note: The lessor (the employer) is responsible for all reporting obligations towards Norwegian Tax Authorities, i.e. reporting of personnel, payment of employer’s social security premium, tax withholding etc.
The hirer (user) is jointly responsible with the lessor for any unpaid taxes and social security premium in relation to the personnel that are hired out.
The employees have to prepare and submit an annual personal tax return covering Norwegian source income.
How to make tax deductions in advance
The employer must calculate the amount of tax to be withheld from the employee’s salaries/wages. The basis of calculation includes all kinds of wages and other remuneration in cash, including allowance for working abroad, stand by allowance (as well as wages during an off-duty period relating to work performed in Norway or on the Norwegian Continental Shelf), holiday pay and bonuses. Payments in kind according to rates stipulated by the Central Tax Board, such as free housing, free car or living allowances, must also be included in the basis for withholding tax.
If employer has arranged net wage for the employees working in Norway (i.e. the employer will cover all Norwegian taxes), a gross wage has to be calculated on basis of the net wage before calculating the amount of taxes to be withheld.
How to report and pay the taxes withheld
A Norwegian employer is obliged to submit a Record Sheet to the tax collector in the municipality where he is registered with head office (head office municipality). Foreign employers (i.e. employers not resident in Norway) will be registered with head office in municipality 2312 - COFTA. The employers in question are obliged to submit a Record Sheet in two copies to Skatt Vest, Foreign Tax Affairs Department.
The employer is responsible to withhold and transfer the amount of taxes withheld in accordance with the rules and regulations in force. If this is not done, the employer will be held responsible for taxes that should have been withheld pursuant to the Tax Payment Act section 49. Failure to comply with these regulations may result in criminal liability, cf. section 50 and 51. The obligations and the responsibility that follow from the Tax Payment Act also apply to the contractor/principal in Norway.
Deal with the Chief Municipal Treasurer (Kommunekassereren) in connection with the following duties:
Obtain the advance tax deduction cards from the employees.
Deadline - Before wage/salary is paid or prepayments are made.
Establish a tax deduction account in a bank.
Deadline - Before the first salary is paid.
Give the employees a wage/salary receipt showing the deducted taxes.
Deadline - Every time the wage/salary is paid.
Establish a personal account in the business accounts for every person receiving wage/salary.
Deadline - At the first calculation of wage/salary.
Deduct taxes from the wages (PAYE).
Deadline - Every time the wage/salary is paid.
Work out and submit periodic return for advance tax deductions/calculation of payroll taxes.
Deadline - The 8th day after the end of each period except the 6th period, when the deadline is the 15th day after the end of the period.
Payment of advance tax deductions and calculated payroll tax.
Deadline - The 15th day after the end of each period.
Prepare wage- and tax deduction overviews for the employees and submit accompanying letter/annual report.
Deadline - Before 20 January of the year after the wages/taxes in question.
Deal with the local Norwegian Labour and Welfare Organization (NAV) office in connection with the following tasks:
· Notify the employee register about employee entry/exit.
Deadline - The first Friday after the employer/employees relation has changed.