30 Apr 2020
Stimulus package for the Norwegian oil sector

Stimulus package for the Norwegian oil sector

By Astrid Foyn-Bruun

EY Norway, Energy, Tax Partner, Head of Law Norway, Market segment leader Energy

Attorney and the Nordic manager of the Energy Segment. Enthusiastic and bold. Divides her time between EY, her husband, two daughters and her dog.

30 Apr 2020
Related topics Tax Law Oil and gas COVID-19

On 30. April 2020, the Norwegian Government announced on a press conference several actions to mitigate the consequences the covid-19 crisis has had on the Norwegian oil industry. 

We will in the following provide you with the highlights of the proposed measures and continually update you as new information about the novel scheme is revealed. It is expected that more details will follow soon and ultimately be presented in the revised national budget on 12. May 2020.

Accelerated Tax deprecations, reduced uplift rate and refund of tax losses

In short, oil producing companies operating within Norwegian jurisdiction are subject to the general company tax (22 %) and a special tax of 56 %. In its announcement, the Norwegian Government proposes that Companies can depreciate 100% of investments against special tax basis (56%) of investments in 2020 and 2021. This measure will also include projects with PUD/PAD delivered within end of 2021 and sanctioned by end of 2022 up to start of production. Last year for full year write-off against special tax basis will in all circumstances be 2024.

Additional deduction against special tax basis (uplift) will at the same time be reduced from 20.8% (5.2% for 4 years) to 10% in investment year (only) for the same years/period as under the foregoing paragraph.

Furthermore, under the proposed scheme, companies can apply for tax refund (78%) of tax losses in 2020 and 2021.

The Norwegian Government estimates the NPV value of the suggested measures of approx. 100 billion NOK (approx. 10 billion $), ensuring immediate access to equity, future jobs and development of the sector.

Impact on Co2 fee/Carbon tax

When evaluating the carbon tax for 2021 for activities on the Norwegian continental shelf for 2021, and to mitigate potential decline in quota prices, the Norwegian Government expects a 5 percent gross growth for quota prices and carbon tax combined total.

Contact

Eivind Galta, Partner, Tax, + 47 902 711 42
Astrid Foyn-Bruun, Nordic Energy Leader, +47 415 12 989

Summary

On Thursday 30. April 2020 a new tax depreciation scheme was presented to help the oil industry amid recent global decline of oil prices.

About this article

By Astrid Foyn-Bruun

EY Norway, Energy, Tax Partner, Head of Law Norway, Market segment leader Energy

Attorney and the Nordic manager of the Energy Segment. Enthusiastic and bold. Divides her time between EY, her husband, two daughters and her dog.

Related topics Tax Law Oil and gas COVID-19