Global Tax Alert | 8 November 2013
Norway's new Government issues amendments to 2014 Budget
On 8 November 2013, Norway’s new Conservative led Government released amendments to the 2014 National Budget (the Budget) originally proposed by the now resigned Labor-led Government, and which contained a proposal for new interest deduction limitation rules. The new Government supports the proposal.1 The new Government has proposed to increase the threshold for when the rules will apply from NOK 3 million to NOK 5 million (approximately US$ 830,000).
The Budget will now be discussed by the Parliament’s Financial Committee. The Financial Committee will present its proposal before the Parliament and the Parliament will vote on the Budget around 15 December. It is highly likely that the proposal will be enacted into law, as the majority of the Parliament is in favor of the proposal. If enacted, the new rules will be effective from 1 January 2014.
The proposed interest deduction limitation rules states that interest expense would be fully deductible against interest income. Interest expense exceeding interest income (i.e., net interest expense) could be fully deducted if the total amount of net interest expense does not exceed NOK 5 million during the fiscal year or if the interest is paid to a non-related party. Otherwise net interest expense paid to a related party could be deducted only to the extent that internal and external interest expense combined does not exceed 30% of taxable EBITDA (earnings before interest, taxes, depreciation, and amortization).
The interest deduction limitation rules proposed by the Labor-led Government implied that external loans guaranteed by a related party of the lender would be regarded as related party debt. The new Government maintains this part of the proposal, but has notified that the Ministry of Finance will issue a consultation paper to address certain exemptions from the interest deduction limitation rules on certain types of external debt financing guaranteed by a related party, e.g., where intra-group guarantees given by related parties are used to obtain favorable interest rates.
1. See EY Global Tax Alert, Norway releases 2014 Budget with proposals on new interest deductibility restrictions and reduction of corporate income tax rate, dated 15 October 2013.
For additional information with respect to this Alert, please contact the following:
Ernst & Young AS , Oslo
- • Øyvind Hovland
+47 24 00 22 38
- • Aleksander Grydeland
+47 24 00 22 30
- • Kari Augestad-Dyrhaug
+47 24 00 29 51
Ernst & Young LLP, Scandinavian Tax Desk, New York
- • Martin Norin
+1 212 773 2982
EYG no. CM3950