Norway and 2012 Budget
On 6 October 2011, Norway’s government presented to parliament the Budget Bill for 2012. In this article we highlight some of the key measures impacting individuals and their multinational employers. The proposed changes, unless indicated otherwise, will apply from 1 January 2012.
Personal Income Taxation
Net Wealth Tax – Increasing Threshold
Currently, the national net wealth tax is levied only on net wealth in excess of NOK 700,000. It is proposed to increase the threshold to NOK 750,000 (tax class 1) and to NOK 1,500,000 (tax class 2 – for spouses filing jointly).
Personal Allowances (Personfradrag)
Individuals are entitled to a personal allowance for municipal taxation purposes. It is proposed to increase the personal allowance from NOK 43,600 (2011) to NOK 45,350 (2012) in tax class 1, as well as from NOK 87,200 (2011) to NOK 90,700 (2012) in tax class 2 (for spouses filing jointly).
Rates/Thresholds and Surtax
The maximum marginal tax rate for year 2011 taxable income remains unchanged.
Surtax on Personal Income (Toppskatt til staten)
|The surtax is calculated on personal income above a certain amount. The following table illustrates the proposed changes to the income brackets for 2012. Year||Bracket 1 (NOK)||Bracket 2 (NOK)|
|2011||Over 471,200||Over 765,800|
|2012||Over 490,000||Over 796,400|
Minimum Allowance (Minstefradrag)
The maximum amount of the so-called minimum allowance – intended to cover expenses normally connected with employment – is proposed to increase from NOK 75,150 (2011) to NOK 78,150 (2012).
Trade Union Contribution
It is proposed to increase the maximum deductible amount for trade union contributions by NOK 90, i.e., from NOK 3,660 (2011) to NOK 3,750 (2012).
More Favorable Tax Deduction for Commuters
The budget introduces a more favorable tax deduction for commuters. Formerly, the tax rules included a deduction of NOK 1.50/km for trips up to 35,000 km per annum. For trips above 35,000 km per annum, a rate of NOK 0.70/km is deductible. The budget proposes to grant a tax deduction of NOK 1.50/km for trips up to 50,000 km per annum and a rate of NOK 0.70/km for trips above 50,000 km. Assuming a person travels on 230 days per calendar year, there will be an effective increase in the tax deduction; but it will increase only if travel per day exceeds 152 km (round-trip). In other words, this means a person has to travel at least 152 km per day before the change of law will have any effect for the taxpayer (assuming 230 working days per calendar year).
Moreover, the government proposed to increase the tax-free car allowance for the use of a private car on business trips from NOK 3.65/km to NOK 3.90/km for trips up to 10,000 km. When exceeding the 10,000 km threshold, the allowance shall be increased from the current NOK 3.00/km to NOK 3.25/km.
National Insurance Contribution
Employee contributions to the National Insurance Scheme (NIS) for the income year 2011 remain unchanged at 7.8 percent. NIS is not to be calculated when a taxpayer’s gross employment income does not exceed NOK 39,600. (This contribution is calculated on gross employment income.)
Abolition of Deduction of Extraordinary Expenses for Disease
The government proposed the phasing out of the deductibility of extraordinary expenses for disease (e.g., cancer, diabetes, etc.) over a three-year period. Hence, with the calendar year 2015, the deduction will be completely abolished.
Employer’s and Employee’s Contributions for Persons Who Are Compulsory Members of Norwegian Social Security Scheme
From 1 January 2012, the Norwegian social security authorities are introducing new statutory regulations regarding social security contributions for persons who are compulsory members in the Norwegian social security scheme according to European Economic Area (EEA)/European Union (EU) regulations or reciprocal agreements on social security.
As there is currently no statutory basis for contributions to be paid in cases of cross-border employment transfers, the government proposes a new legal provision that clarifies that
© 2011 KPMG Law Advokatfirma DA. The Norwegian member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 3 payments to the Norwegian Social Security Scheme become due for persons who are members of the Norwegian Social Security Scheme according to the EEA/EU Regulations or any reciprocal agreements on social security.
Other – General Fiscal Code: Taxpayer’s Compliance
There are various proposals under discussion regarding a taxpayer’s legal obligations with respect to tax compliance. Among the ideas being discussed is one for the imposition of a penalty tax of 15 percent in cases where the taxpayer does not correct false information included in his or her pre-filled tax return.
Moreover, the government is considering abolishing certain regulations in the General Fiscal Code that pertain to a taxpayer’s right of filing appeals.