On April 10 2019, Norway's Ministry of Finance (MoF)
published the proposal for a new statutory
Norway's tax authorities have used the rule to target mainly
tax driven transactions that have been deemed contrary to a
specific tax rule. In Norway, the GAAR is non-statutory, and
the rule has been largely developed by the Supreme Court.
The main reason for the proposed rule was that the MoF
disagreed with some of the assessments that were made by the
Supreme Court in anti-avoidance cases regarding three
particular judgments: Telenor, Hydro Canada,
and ConocoPhillips III.
Telenor – assessment of intent
The main objection against the Telenor case was
that the Supreme Court, when assessing whether the transaction
was mainly tax driven, adjusted the assessment of intention(s)
from an objective test deducing intent from documents, to a
subjective one, where the decisive is subjective motivation of
the taxpayer in question.
The MoF has proposed that this subjective test will be
replaced by an objective motive test (i.e. an assessment of the
motives of a hypothetically rational person in the same
situation, with respect to tax and other effects). If the
transaction is mainly tax driven, the first of two conditions
for applying the GAAR is fulfilled. The threshold for being
mainly tax driven is not 51%, but probably around 70%, which
means that a transaction should not be captured if non-tax
reasons for carrying out the transaction is 35% or higher.
Hydro Canada – foreign taxes
The second condition for applying the GAAR is a concrete
overall assessment of certain criteria mentioned in the law and
preparatory works in order to decide whether the GAAR shall be
applied (previously often referred to as the disloyalty
Under the current GAAR, discerning whether the taxation
applied is contrary to the tax provision is the most important
criteria in the overall assessment. Under the new GAAR, non-tax
business reasons should be a more important factor in the
In the Hydro Canada case, foreign tax consequences
were considered business legitimate reasons to prevent the
application of the non-statutory GAAR. Even though non-tax
effects will have a more provident position under the new GAAR,
foreign tax effects will no longer be deemed a business reason
and will thus be disregarded under the GAAR.
The MoF is of the opinion that the same should apply for
other Norwegian indirect taxes and duties, which means that
saving stamp duty on real estate transfers cannot be regarded
as a business effect under the new rule.
ConocoPhillips III – relevance of preparatory work
In ConocoPhillips III, the taxpayer de-merged real
estate (tax free) in a real estate company and sold the shares
utilising the participation exemption method. A direct transfer
of the real estate would have triggered a taxable capital
The Supreme Court accepted the transaction for tax purposes
because the use of real estate companies and a tax exempt sale
of shares was mentioned in the preparatory works. The risk had
been implicitly accepted by Parliament because no changes were
made to the rules to prevent it. In addition, the taxation was
deemed to be in accordance with the de-merger and participation
The latter rule is called the 'tool rule' to achieve tax
avoidance and is used to circumvent the more burdensome capital
gains rule in the ConocoPhillips III case.
Both the mention of possible avoidance schemes in
preparatory works and that the transaction is in accordance
with the objectives behind a tool (to achieve tax avoidance)
shall not in itself prevent the use of the new GAAR.
Application for VAT
The new GAAR will also apply for VAT in addition to social
security, payroll, income and net wealth taxes. In Norway, the
non-statutory GAAR has not been applied by the Supreme Court in
VAT cases, and it will be interesting to see whether the VAT
authorities will build on guidance found in income tax cases or
VAT anti-avoidance case law from the Court of Justice of the
European Union (CJEU).
The Supreme Court loses in the aforementioned cases resulted
in fewer cases where the GAAR was applied by the tax
It will be interesting to see whether the use of the GAAR
will increase when the new GAAR becomes effective from January
It is stated in the preparatory works that the proposal is
not expected to raise any significant revenues compared to the
current GAAR. However, the reduced threshold for using the GAAR
could entail that the statement in the preparatory works is not
By making non-tax effects and other criteria more important,
this makes GAAR decisions more concrete, and the relevance for
other cases more limited than under the current GAAR.
Consequently, this will make it necessary to carry out a
more detailed GAAR assessment when tax benefits are involved in
transactions and the outcome of other cases are of less helpful
to the assessment.
Daniel Herde (email@example.com) and Inger Camilla Gjeruldsen
Deloitte Advokatfirma AS, Deloitte
Tel: +47 482 21 973 and +47 907 45 165