Norway: New E101 Social Security Process
The Norwegian tax authorities have announced1 an amended procedure in respect of processing the E 101 certificates and the acceptance of membership in a social security system within the European Economic Area (EEA).
The European Union (EU) regulations (these also include the countries of the EEA) define under which social security system a person shall be subject.
In this context, the competent foreign authorities issue an E 101 certificate confirming membership in the social security system of the home country. The certificate will be used for employees and self-employed persons including family members working in two or more countries, as well as seamen and various groups of cross-border working persons.
As a basic rule, a person will be a member of the Norwegian social security system if he/she starts performing work in Norway. There will neither be any formal application for membership nor any separate claim for payment of social security contributions. Respective payments will generally be processed through ordinary tax assessment. This procedure differs significantly from social security systems in many other EU/EEA countries.
Therefore, the Norwegian Labour and Welfare Service (NAV) and the Norwegian tax authorities require an E 101 certificate to ensure registration of exemption from membership in the Norwegian social security system. On the one hand, this will help ensure that the tax authorities issue a correct tax card and process a correct tax assessment without levying employee’s social security contributions in Norway. On the other hand, an E 101 prevents NAV to pay social security benefits erroneously to persons who are exempted from Norwegian social security contributions. In addition, Norwegian employers require a certificate E 101 for documentation that they are not obliged to pay the employer’s part of social security contributions to/in Norway.
From 2011 onwards, NAV and the Norwegian tax authorities have implemented a new system (see below) once one of them has been provided with an E 101 certificate by the foreign person. The main objective of the system is to exchange the information about the exemption from membership in Norway between the authorities concerned in a timely manner.
As a result, if an E 101 certificate is provided to the tax authorities, a tax card indicating exemption from Norwegian social security contributions will be issued at once. Processing time to issue a tax card may vary, but will not exceed three weeks.
In case a tax card has already been issued and includes both withholdings for income taxes and social security contributions, the tax card will be corrected upon provision of a valid E 101 certificate to the Norwegian tax authorities.
Starting with calendar year 2011 – i.e., income year of 2010 – exemption from Norwegian social security contributions will basically be registered and indicated in the taxpayer’s pre-filled tax return for 2010, in cases where an E 101 has been submitted to the Norwegian tax authorities.
KPMG Note
Prior to this new procedure, it was not sufficient just to provide an E 101 certificate to the Norwegian tax authorities to be exempt from Norwegian social security contributions. It was mandatory for foreign employees to contact NAV, which had to confirm the E101 certificate and subsequently grant exemption from paying Norwegian social security contributions. Initially, without NAV’s confirmation, the tax authorities did issue tax cards and tax assessment notes including Norwegian social security contributions even though they had been provided with an E 101 certificate.
Hence, the new procedure is a remarkable simplification precluding taxpayers from having to pay over unnecessary social security charges which would then have to be reimbursed by the tax authorities afterwards – especially as the processing time of the respective confirmation from NAV could take up to six months.
Source: KPMG