A tax controversy may commence either through an announced audit or through correspondence with the tax authorities.        

The tax authorities can perform unannounced audits. This is, however, uncommon and typically reserved for criminal cases.

While the tax authorities may audit all types of taxes and duties, a significant proportion of tax controversies concerns:

• corporate tax;
• individual income tax;
• value added tax;
• petroleum tax; and
• the application of penalty taxes due to insufficient tax return disclosures.

Some matters frequently raised are (non-exhaustive):

• deduction of financing expenses;
• tax and VAT treatment of share transaction costs;
• permanent establishment;
• transfer pricing;
• GAAR;
• application of dividend tax exemption;
• undeclared work; and
• employee travel costs and fringe benefits.

There is no general de minimis value threshold for initiating a tax audit and income adjustments proposed by the tax authorities can on occasion be relatively minor. That being said, the tax authorities tend to prioritise cases where the monetary value is significant. This is in particular true for the specialised offices working with larger entities and the office covering entities encompassed by the petroleum tax regime.

Taxpayers may request an advance ruling for intended transactions and other dealings, subject to certain material limitations. Significantly, an application cannot concern tax treaty interpretations, liability to tax in Norway, transfer pricing, valuations or tax residency of entities.

Advance rulings are binding for the tax authorities for three years after the year the ruling was issued, and provided the taxpayer’s acts are in accordance with the facts presented to the tax authorities. Advance rulings may be appealed to the Tax Appeal Board. 

Although the tax authorities are under no obligation to respond, it is also possible to request a statement from the tax authorities or from the Ministry of Finance, for instances on the interpretation or application of a specific tax provision. The tax authorities will, in some cases, also give a view on a specific case, for instance concerning tax treaty matters or valuation methods. While such statements are not binding for the tax authorities, experience is that taxpayers in most cases can rely on the tax office to act consistent with the stated view.

In 2015, the tax authorities established a centralised team dealing with advance pricing arrangements under Articles 7 and 9 of the OECD Model Convention. Although Norway does not formally have legislation providing for advance pricing arrangements, the tax authorities will adhere to the negotiated results.

Norway has taken an active role in the OECD BEPS project, and continues to take an active approach to its effect on domestic legislation. This has resulted in a number of changes, such as extending the earnings stripping rules to cover interest paid on debt to unrelated parties and the implementation of further anti-hybrid rules.

Effective 1 July 2021, Norway has implemented a limited domestic withholding tax on interest and royalties paid to related entities in low tax jurisdictions. From 1 October 2021, a similar withholding tax on lease payments for certain fixed assets (vessels, rigs, planes, etc) was also implemented.

The Ministry of Finance is also considering the introduction of DAC6-type reporting obligations. However there has been no development on this since a discussion paper was issued in December 2019. 

Norway has also committed to introducing the OECD two-pillar global minimum corporate tax, with expected introduction in 2023. In short, the rules introduce a global minimum corporate tax rate set at 15%. The minimum tax will apply to multinational enterprises with revenue above EUR750 million.

Following a decision by the tax office, when a claim for payment of outstanding tax is issued, it must be paid within three weeks. It may be possible to agree a postponement of the payment, subject to security and late payment interest.

Tax penalties are only payable when the deadline for appeal is passed or when the case is finally decided either by the Tax Appeal Board or in court.

The tax authorities do not publish which entities or individuals are targeted for audit and there are no specific guidelines or policies publicly available.

It tends to be that companies with extraordinary transactions and/or restructurings are more frequently audited. Transfer pricing and withholding tax matters are also regularly audited.

The tax authorities will often prioritise a specific industry or a specific type of case. Additionally, companies in industries with a high degree of undeclared work and labour law violations are also frequently targeted. A change of law could also trigger special attention to a specific matter.

Entities that fall into the purview of the Central Office for Taxation of Large Entities or the Petroleum Tax Office will be audited regularly. Large upstream petroleum companies can generally expect to be audited annually.

The statute of limitation for reassessment for tax and VAT is five years after the relevant financial year. If the taxpayer has intentionally, or due to gross negligence, provided incorrect or insufficient information in its tax returns/VAT returns, the statute of limitations is extended to ten years.

A formal notice of reassessment interrupts the statute of limitations. Once the tax office issues a notice of reassessment, tax audits do not need to be resolved within the period specified in the statute of limitations.

Provided the matter is not time barred, the tax authorities are generally free to initiate an audit of any and all tax matters. A tax audit may, depending on the complexity of the matter, be resolved quickly or could potentially last for several years.

Once a tax audit has been initiated and a formal notice has been issued, the tax office is generally under no obligation to resolve a matter within a specific deadline. The tax authorities may nonetheless be restricted from making adjustments in the taxpayer’s disfavour if there is an extended period of inactivity from the tax authorities.

During the audit, the tax authorities may either be at the taxpayers’ premises or work from the tax authority’s offices. The tax authorities will generally accept electronic data. They may request electronic access to the company’s accounting systems. It is also not uncommon for the tax authorities to request interviews with personnel.

During a tax audit, the taxpayer is generally obligated to co-operate and to allow access to relevant information. The tax authorities may also collect information from other parties and from other sources.

Evidence dating from, and documentation produced during, the period under review would generally be emphasised by the tax authorities.

See 1.2 Causes of Tax Controversies for a non-exhaustive overview of the issues to which the tax office may give special attention during an audit.

Norway has, in recent years, entered into a number of exchange of information treaties. This comes in addition to a vast pre-existing tax treaty network that already includes information exchange clauses. Furthermore, Norway has joined the OECD Convention on Mutual Administrative Assistance in Tax Matters and entered into an agreement on administrative co-operation, combating fraud and recovery of claims in the field of value added tax with the European Union.

There are no published official statistics on the number of audits or exchanges of information with other jurisdictions.

There has been increased attention from the tax authorities on international tax matters and the use of information obtained through cross border exchanges.

During audits, it is important for the taxpayer to manage the process and ensure that information requests are recorded. It is also prudent to ask the tax authorities to clarify the tax matters under investigation and, if possible, to present their positions.

It is critical to consider requests for information properly. Correspondence with lawyers is generally privileged. There is also no obligation to disclose written tax considerations prepared by the taxpayer or external parties. It may be used as evidence if the taxpayer has consented to sharing such correspondence.

Audit Phase

A notice from the tax authorities normally initiates a tax audit. While this details the scope of the audit, it does not restrict the tax authorities from investigating other issues.

Often, an initial meeting will take place between representatives of the taxpayer and the tax authorities. This will be followed by a data collecting phase, where the tax authorities will request the information required to prepare a reasoned decision. This could include review of documentation as well as conducting interviews with relevant personnel.

Once the tax authorities conclude they have sufficient data, they will issue a draft audit report. The taxpayer will be allowed to correct factual inaccuracies and may submit additional evidence.

The final report is, in most cases, accompanied by an updated notice of reassessment. The taxpayer is given the opportunity to contradict the final report and is allowed to make additional submissions in fact and in law.

Before a final administrative decision can be made, the taxpayer has the right to review and comment on a draft version of the decision. The draft should be reasoned and should include a statement of relevant facts and present the tax authorities’ legal arguments.

Appeals Phase

A decision by the tax office may either be appealed to the Tax Appeal Board or brought directly before the courts.

Administrative appeals are sent to the tax office that prepared the reassessment. If the tax authorities agree with the taxpayer, they may accept the appeal and cancel the reassessment. Where the tax authorities disagree with the taxpayer, they may provide comments to the Tax Appeal Board.

Once lodged, the appeal is handled by the Tax Appeal Board secretariat, which prepares a draft decision for the Board. The taxpayer is entitled to a copy of the comments from the tax office, and also to review and comment on the draft from the secretariat. The secretariat may request additional information and has, in some cases, allowed the taxpayer to present its view in physical or virtual meetings.

The Tax Appeal Board has full jurisdiction and can try all parts of the case, including new evidence. This includes considering issues not raised by the taxpayer. The Tax Appeal Board is not bound by the assertion of facts or the legal arguments made by the either the tax office or the taxpayer.

A decision by the tax office may either be appealed to the Tax Appeal Board or be brought before the courts. The tax authorities may decide that a lawsuit cannot be filed before an appeal has been heard by the Tax Appeal Board.

Appeals must be made within six weeks of the date a decision reached the taxpayer. However, extensions, when requested, are typically granted. A lawsuit must be filed within six months.

In the choice between an administrative appeal or a lawsuit, it is important to consider whether additional evidence is required and appropriate submissions have been made in the administrative process. Taxpayers are, to a certain degree, prevented from presenting new evidence in court, to the extent that they could reasonably be expected to have been presented during the administrative process. If the tax authorities have presented additional evidence, the taxpayer may be allowed to counter this new evidence. These principles are governed by case law, and can be complex to navigate.

The Norwegian court system does not include separate administrative tax courts. Cases concerning administrative tax matters are heard by the ordinary courts.

On initiating a judicial tax litigation, the claimant – in most cases the taxpayer – will lodge a written appeal bringing the case for the district court. The appeal should broadly include the claim made, the factual and legal grounds for the claim and what evidence will be presented by the claimant. The initial appeal can be supplemented though subsequent submissions to the court.

The tax authorities may appeal a decision reached by the Tax Appeals Board through a juridical litigation.

Norway is divided into court districts, consisting of one or more municipalities. The district courts are the courts of first instance.

Court hearings are decided based on oral evidence and arguments presented by the parties involved. The courts are not limited to testing the legal reasoning in the decision from the tax office, but may apply the law freely (within the boundaries of the arguments made by the parties). One limitation is that it cannot test a different transaction or factual situation.

The courts will, as a rule, not assess the tax authorities’ discretionary assessment (eg, pricing or valuations), unless the discretionary assessment is contrary to the evidence presented or regarded as arbitrary or grossly unreasonable.

Court hearings are conducted in three phases:

• presentation of the case and relevant written evidence;
• testimonies from both parties and from witnesses called by the parties are heard – expert witnesses will, where relevant, also be heard during this phase; and
• closing arguments.

Following closing arguments, the court hearings are concluded. A written judgment is prepared by the judge and served to the parties. This judgment may be appealed to the court of appeal, see 5.1 System for Appealing Judicial Tax Litigation.

Both documentary and witness evidence is relevant for civil tax litigation processes.                             

The main rule is that documentary evidence should be made available in the submissions to the court and presented in the initial phase of the court hearing. As a result of a contradictory proceeding, the parties have the opportunity to contradict documentary evidence during testimonies.

Any additional evidence should be presented during administrative proceedings and taxpayers are, to some extent, prevented from presenting new evidence during court hearings. If the tax authorities have presented additional evidence, the taxpayer may be allowed to counter this new evidence.

In civil tax litigation, the tax authorities have the burden of proof. However, if the tax authorities put forward evidence, the burden of proof may shift to the taxpayer.

In criminal tax litigation, the burden of proof lies with the tax authorities.

In a civil tax litigation, the court will, together with the parties, agree on the process in the initial preparatory phase. The court will generally allow the parties to adequately prepare for the court hearings. This means that the parties during the court hearings will be allowed to present relevant evidence and to assert its legal arguments. The process will allow for the parties to make strategic decisions, including the possibility of settling the case out of court if an agreement can be reached with the other party. The tax authorities are, in this regard, allowed to negotiate with the taxpayer and settle out of court during the court proceedings.

As addressed in 4.3 Relevance of Evidence in Judicial Tax Litigation, taxpayers are, to some extent, prevented from presenting new evidence during court hearings. It is therefore crucial to ensure that relevant documentary evidence is presented during the administrative phase.

A claim for payment of the outstanding tax will generally be due following a decision from the tax authorities. 

Expert reports or expert witnesses are commonly used in civil tax litigations, particularly to support tax valuations and transfer pricing assessments. A convincing expert witnesses is generally a useful tool for a taxpayer during court hearings.

Judgments by the Supreme Court are considered as precedents. The Supreme Court may set aside a precedent. There have been past examples of the Supreme Court setting aside past judgments on tax matters.

While Norway is not an EU member state, decisions made by the Court of Justice of the European Union (CJEU) are relevant for the application of the EEA agreement, to the extent the articles of the EEA agreement correspond to the articles of the EU agreement interpreted by the CJEU.

Other international court tax judgments have, in some cases, been heard by the courts, for instance if the judgments concern the interpretations of tax treaty articles.

The courts of appeal are the courts of second instance, hearing appeals against judgments in the district courts. Judgments from the district courts must be lodged within one month after the judgment was served. Leave of appeal is required for cases where the disputed amount is less than NOK250,000. The court may refuse an appeal if it finds that it is evident that it cannot succeed.

The Supreme Court is the highest court in Norway. Its decisions are final and cannot be appealed. However, the European Court of Human Rights may try the Supreme Court’s application of the European Convention on Human Rights.

An appeal to the Supreme Court requires leave. This requires that the appeal concerns questions that are also of interest to other cases, or that there are other significant reasons for requesting a judgment from the Court. There is no guarantee that leave is granted, even if the disputed amounts are material. The Supreme Court may return the matter to the Court of Appeal for new hearing.

It is, in principle, possible to make an appeal over a judgment from the district court directly to the Supreme Court. This requires leave from the Court and applies only in exceptional cases concerning cases of public importance and where a quick judgment from the Supreme Court is required.

An advisory opinion from the EFTA Court of Justice may also be requested in matters concerning EEA law. Such requests may be made at all stages of the appeals procedure by the relevant court and the Tax Appeal Board.

Court of Appeals

As mentioned above, the judgment from the district court must be appealed within one month after the judgment was served. The appellant issues a notice of appeal to the District Court. This is then served to the appellee, which should file a defence reply within a deadline of normally three weeks. The case is then transferred to the Court of Appeal.

The Court of Appeal will then decide whether there are grounds for rejecting the appeal. The Court of Appeal will also contact the parties to plan the further proceedings. This includes scheduling the oral appeal hearing, but also agreeing on, inter alia, whether mediation should take place and the deadline for written pleadings prior to the oral appeal hearing. The law requires as the main rule that an oral appeal hearing is scheduled to take place within six months from the appeal. Due to requests from the lawyers or limited resources at the court, this is not always possible.

During the subsequent trial preparations, the parties will often file multiple written pleadings to the court, presenting new evidence and arguments. This could potentially necessitate court rulings deciding whether the parties are prevented from presenting new evidence at this stage of the case.

Proceedings

The oral appeal hearing follows the same procedure as for the District Court, see 4.2 Procedure of Judicial Tax Litigation. Following closing arguments, the court proceedings are concluded. A final written judgment is prepared by the judges and served to the parties.

Supreme Court

The Court of Appeal judgment must be appealed within one month after the judgment is served. The Appeals Committee of the Supreme Court, consisting of three judges, will decide whether leave shall be granted. Typically three to five tax cases are granted leave each year.

Similar to preparations at the District Court and Court of Appeals, the parties will be contacted in order to plan the further proceedings, including the scheduling of the oral appeal hearing.

The oral appeal hearing differs from the oral hearings as the District Court and Court of Appeal as only written evidence (and expert testimonies) can be presented for the Supreme Court. Each party may address the court twice.

In the first address, the parties will present both the written evidence and the arguments. The parties’ second address shall be limited to the issues raised by the opposite party. The court proceedings are then concluded. A final written judgment is prepared by the judges and served to the parties.

The appointed judges decide and write the judgments themselves for the Norwegian courts.

For the district courts, tax cases are generally held before a single professional judge. Either side can in principle demand two lay judges be seated as well. In tax cases, the appeals court will consist of three judicial judges.

Cases before the Supreme Court are normally heard by five judges, but the court can decide to hear the case with 11 judges or in plenary session.

One of the main purposes of the dispute act for civil procedures is to promote dispute resolution by mediation. Generally, cases must be heard before the conciliation board before they can be brought before the District Court. This does not apply to tax disputes, as the government is always party to such cases, the matter not being of a private law nature. 

Parties to tax disputes must expect the district court judge to promote mediation during the case preparations, as this is the normal proceeding in all cases. However, no mediation will take place unless all parties consent. Due to the nature of tax disputes, these cases are rarely resolved by mediation.

The government is generally restricted from agreeing to solutions that are not consistent with the law (in the government’s view). Cases where the facts are disputed rather than the legal reasoning are therefore slightly more likely to be resolved by mediation; ie, cases concerning transfer pricing.

Dispute resolution through arbitration is not an alternative in Norwegian tax disputes.

If the parties reach an agreement in a judicial mediation, the settlement may be concluded as an in-court settlement. This will be a publicly available document. Alternatively, the parties can disrupt the judicial mediation procedure at this point and formalise the agreement in an out-of-court settlement. These are not publicly available. Non-judicial mediations are resolved in out-of-court settlements.

As discussed in 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction, tax disputes are rarely settled by mediation. Tax assessments where the case relies on legal reasoning rather than an assessment of the facts are, in general, even more unlikely to be settled by mediation. This would also include penalties.

Interest due resulting from a tax assessment would not be part of the settlement for direct tax purposes. Such interest is not part of the appealed tax office or Tax Appeal Board decision, but merely results in a new tax statement being issued based on the tax assessment decision. 

Taxpayers may request an advance ruling for intended transactions and other dealings, subject to certain material limitations. Significantly, an application cannot concern tax treaty interpretations, liability to tax in Norway, transfer pricing, valuations or tax residency of entities.

Advance rulings are binding for the tax authorities for three years after the year the ruling was issued, and provided the taxpayer’s acts are in accordance with the facts presented to the tax authorities. Advance rulings may be appealed to the Tax Appeal Board. 

If a lawsuit is not filed within six months from the tax office or Tax Appeal Board decision, the decision is final and it is not possible to appeal. Formal mediation is therefore conducted as part of court proceedings.

The parties should not settle a dispute by agreement if not satisfied with the result, as the settlement would be legally binding. However, both out-of-court and in-court settlements may be declared invalid or amended by a judgment pursuant to the rules for invalidity and amendment of contracts.

For in-court settlements, the lawsuit must be brought within six months of the date the party became aware, or ought to have obtained knowledge, of the alleged grounds for invalidity. The outer timeframe is ten years from the settlement.

As transfer pricing cases rely heavily on facts, the government may be more willing to settle such cases by mediation. A transfer pricing dispute in one residency does, however, trigger a double tax relief procedure in the other jurisdiction concerned.

A prerequisite for reaching an agreement with the competent authority of the other jurisdiction, for the avoidance of double taxation, is that the competent authority is convinced that the settlement is in line with the arm’s-length principle. This should be kept in mind by the parties when assessing if and on what terms the dispute should be resolved by settlement.

The general rate of tax penalties is 20% (of the additional tax), and may be imposed if the taxpayer has failed to provide correct and complete information.

Penalties may be increased to 40% or 60% if the failure to provide information is deliberate or grossly negligent. In disputes over penalties, the courts can try all aspects of the decision of the tax authorities.

As penalty tax is considered as punishment, the imposition of penalty taxes will limit the prosecuting authority’s right to also apply criminal liability. The tax authorities may administratively impose penalty tax. A penalty tax appeal to the courts is treated as a civil court matter.

Criminal liability can be applied under the Penal Code if the taxpayer has failed to provide correct and complete information. This is generally reserved for severe cases. Criminal liability under the Penal Code is a criminal law matter and can only be imposed by the courts (the prosecuting authority may in certain cases issue fines).

No administrative or criminal sanctions can be imposed if the taxpayer has acted in accordance with the tax legislation.

For administrative sanctions, the underlying tax matter will generally be addressed at the same time as the underlying tax matter.

A criminal tax matter does not address the underlying tax matter, only the tax offence. Pre-judicial assessment of the tax matter may, however, be required as a violation of tax legislation is a prerequisite for criminal sanctions under the Penal Code.

The tax authorities would normally initiate penalty taxes parallel to the additional tax assessment, with both claims being decided in the same written decision. Depending on the specific facts, it is not unusual for the notice for penalty tax to be issued at a later stage than the notice for the additional tax assessment. This is because the tax authorities would refrain from sending notice of penalty tax until it is sufficiently clear that there will be an additional tax assessment.

The tax authorities could alternatively wait until the additional tax assessment is decided before the penalty tax procedure is initiated. The statute of limitation is the same for penalty taxes as for the tax issue it concerns.

Penalty taxes would in most cases be the tax authorities’ preferred action. Criminal proceedings for the same action would then be prevented. It is understood that if the taxpayer is given notice of penalty tax, but no decision is made, the tax authorities are not prevented from initiating criminal proceedings. Equally, if criminal proceedings are initiated but later dropped, penalty taxes could still be imposed.

Administrative penalty tax is decided by the tax authorities. A decision may be appealed to the Tax Appeal Board and, if the appeal is unsuccessful, it may be appealed to the courts.

While penalty tax is regarded as a criminal punishment under the European Convention on Human Rights, giving the taxpayer rights as if they have been criminally indicted, penalty taxes are decided as a civil court matter under domestic law.

Where a taxpayer is indicted under the Penal Code, the case is a criminal court matter. A criminal tax matter does not address the underlying tax matter, only the tax offence. However, pre-judicial assessment of the tax matter may be required as a violation of tax legislation is a prerequisite for criminal sanctions under the Penal Code.

There are no negotiations in criminal cases and plea bargains are not available under Norwegian criminal law.

Reduced sanctions may nonetheless be granted during court proceedings where the taxpayer provides a full confession. A taxpayer may also prevent court proceedings by accepting a fine by the prosecuting authority.

A taxpayer may prevent court proceedings by accepting a fine by the prosecuting authority, see 7.5 Possibility of Fine Reductions.

Payments of taxes assessed will not prevent a criminal proceeding. See 1.5 Additional Tax Assessments concerning the obligation to pay taxes assessed once a decision has been issued.

A judgment from the district court may be appealed to the court of appeal. An appeal must be lodged within two weeks of being served to the taxpayer. The appeal court can consider the district court’s application of law and factual assertions.

The appeal court’s judgment may be appealed to the Supreme Court. An appeal to the Supreme Court requires leave. The Supreme Court may only consider the appeal court’s application of law.

Transactions and operations challenged under transfer pricing rules or anti-avoidance standards may be subject to administrative and criminal sanctions, provided the conditions for such sanctions are met.

Judicial domestic litigation continues to be relatively common in Norway. In accordance with statistics produced by the tax authorities in their 2021 annual report, there were 51 new appeals lodged in 2021, 28 tax and VAT cases were concluded through a final judgment and five cases were withdrawn by the taxpayer and two by the tax authorities.

In 2015, the tax authorities established a centralised team dealing with advance pricing agreements (APAs) and mutual agreement procedures (MAPs) under Articles 7 and 9 of the OECD Model Convention. Nonetheless, the number of cases being handled through these mechanisms remains relatively modest in an international context. In accordance with data provided by the Norwegian tax authorities in their 2021 annual transfer pricing report, the tax authorities concluded 17 MAP cases and two APAs in 2020. The effects of the available tax dispute mechanisms measures adopted under the OECD MLI have so far been limited.

While an EEA member state, Norway has not adopted the EU Tax Disputes Directive.

The Norwegian GAAR and SAAR applies to cross-border situations, but only to the extent the application does not go beyond Norway’s taxing rights under a bilateral tax treaty.

There is no current practice concerning the application of the PPT introduced by the MLI. Although difficult to predict, it would be expected that the tax authorities would look to challenge pass-through and treaty shopping arrangements where there is limited substance.

It is common in Norway to bring transfer pricing challenges through domestic litigations and there have been a number of Supreme Court decisions on transfer pricing.

As addressed in 8.1 Mechanisms to Deal with Double Taxation, there is a centralised office working with double tax treaty mechanisms and a number of cases are annually processed.

Unilateral advance pricing agreements are not available for Norwegian taxpayers.

Although Norway does not formally have legislation providing for bilateral APAs, taxpayers may in practice enter into negations for such agreements. While less prevalent than in Norway’s neighbouring countries, APAs are not uncommon. 

Norway has extensive court practice on several cross-border situations and in particular concerning permanent establishments, income allocation and transfer pricing. This is partly because of the extensive activity on the Norwegian Continental Shelf, both with regard to foreign entities with temporary activity there or related to upstream petroleum companies taxed under the 78% petroleum tax regime.

The current trend is that litigation activity will continue to be high in these areas.

While Norway is not a member of the EU, the EU state aid restrictions apply under the European Economic Area (EEA) agreement. Under the agreement, tax reliefs and other beneficial taxation may be considered as state aid where the recipient gains an advantage on a selective basis.

To have individual concerns addressed, complainants have the option of bringing cases of potentially unlawful aid before the national courts. Such complaints are, in the authors’ experience however, rare.

More general state aid complaints may be brought to the EFTA Surveillance Authority (ESA), which monitors EEA members’ compliance with the EEA agreement, including the state aid rules. A formal complaint may be lodged by any interested party, including competitors and trade associations. As an example, an environmental political party recently lodged an (unsuccessful) complaint to ESA against a COVID-19 tax relief package granted to Norwegian-based oil companies, arguing that that the measure constituted unlawful state aid.

In cases where ESA concludes that unlawful or incompatible fiscal state aid has been granted, ESA will issue a decision requiring the state to enact necessary measures to ensure repayment of the unlawful state aid, including interest. This will follow normal payment enforcement procedures.

Challenges against state aid recovery have mainly concerned indirect taxes. A typical practical example concerns whether cultural events, such as concerts, are VAT exempted or whether they are considered VAT-liable commercial activities. 

There are no cases in Norway of refunds, following subsequent litigation against the state, invoking extra-contractual civil liability.

Norway has decided not to apply part VI of the MLI to the Covered Tax Agreements. In a recent white paper, the government stated that Norway, as a starting point, is moving to include arbitration provisions in its tax treaties. This has been implemented in the recent tax treaties with the Netherlands, the UK and Switzerland. However, the government’s view is that arbitration should be assessed in light of other provisions of the tax treaty, and that this is best done in bilateral negotiations. 

See 10.1 Application of Part VI of the Multilateral Instrument (MLI) to Covered Tax Agreements (CTAs).

For the recently adopted arbitration provisions in Norway’s tax treaties with the Netherlands and the UK, all issues that remain unresolved after two years can be submitted to arbitration, only if they have not already been decided by a court or other administrative tribunal in either state.

The tax treaty with Switzerland restricts arbitration in cases concerning issues relating to hard-to-value intangibles. Cases involving abusive transactions with the view of obtaining unintended benefits under the provisions of the Convention, and to which domestic anti-abuse rules apply, are also exempt from arbitration. Other than this, all issues that remain unresolved three years from the submission of the case to the competent authority can be submitted to arbitration.

This is not applicable in Norway.

Norway has, in recent tax treaties, agreed that issues that remain unresolved after two years can be submitted to arbitration.

This is not applicable in Norway.

Although much is still unclear as to how the rules will be implemented in practice, Norway has committed to introducing Pillar One and Pillar Two, with expected introduction in 2023; see 1.4 Efforts to Combat Tax Avoidance.

It is expected that the instruments to mitigate tax controversies and the tax certainty procedures may require some time to settle in order to effectively prevent and resolve disputes.

Tax treaty decisions are generally not published.

There have been few, if any, international tax court cases concerning tax treaty application.

The arbitration process may vary under differing tax treaties. The details concerning the arbitration process under the tax treaty with the UK and the Netherlands are not published. Under the treaty with Switzerland, the arbitration panel shall consist of three individual arbitrators with expertise and experience in international tax matters. The competent authorities of each contracting state appoint one arbitrator. These then appoint the third arbitrator, who will function as Chair. The Chair shall not be a national or resident of either contracting state.

No fees are payable for the administrative appeals to the tax office and to the Tax Appeal Board. There is no formal administrative litigation.

For litigations before the District Court, a number of court fees (one court fee equals NOK1,199) will incur, depending on, inter alia, the number of days the main hearing is scheduled for. The minimum fee is a total of five court fees, which equals NOK5,995. However, should the case be dismissed or cancelled, the fee will be reduced.

The minimum fee before the Court of Appeal and the Supreme Court is, as a rule, 24 court fees, equalling NOK28,776, with additional court fees depending on the number of days for oral appeal hearings.

The party filing the case or appeal is responsible for the fee, with the lawyer having joint and several liability. The fees are not due until the closing of the proceedings. The court might decide that the losing party covers the cost.

If the court decides that the initial additional tax assessment is null and void, the taxpayer would generally be entitled to full compensation from the government for necessary legal costs concerning the court proceedings.

The taxpayer would also be entitled to compensation for necessary legal costs related to the tax authorities’ procedure with the additional tax assessment. Such claim must be sent to the tax authorities, which then decides on the compensation.

The cost of alternative dispute resolution by settlement will depend on at which stage of the court proceedings the case is settled. A settlement more than four weeks prior to the oral hearing will result in at total fee of NOK2,398 at either court. A settlement less than four weeks prior to the oral hearing will result in at total fee of NOK2,398 before the City Court and NOK14,388 before the Court of Appeal and the Supreme Court. If the case is settled during the hearings, the full fee will be reduced by half. Note that if a mediator is appointed in a non-judicial mediation, the parties will in equal share be responsible for remunerating the mediator.

The number of pending tax cases is not publicly available. The tax authorities’ 2019 annual report stated there were 59 new court appeals lodged in 2019, 35 direct tax and VAT cases were concluded through final judgment and one case was withdrawn by the taxpayer.

In 2019, out of 35 total concluded court cases, 29 concerned direct taxes and seven concerned VAT; see 12.1 Pending Tax Court Cases.

In accordance with the tax authorities’ 2019 annual report, the tax office won 86% of the direct tax court cases concluded in 2019. For VAT, the tax authorities’ success rate was 100%. The tax authorities’ success rate in 2019 appears to be somewhat higher than the norm. 

Administrative Phase

During audits, it is important for the taxpayer to manage the process and ensure that information requests are recorded. It is also prudent to ask the tax authorities to clarify the tax matters under investigation and, if possible, to present their positions.

It is prudent to consider requests for information properly. Correspondence with lawyers is generally privileged. There is also no obligation to disclose written tax considerations prepared by the taxpayer or external parties. It may be used as evidence if the taxpayer has consented to sharing such correspondence.

Taxpayers are, to some extent, prevented from presenting new evidence during court hearings. It is therefore important to ensure that the relevant documentary evidence is presented during the administrative phase.