International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Statements clarify taxation of employee share schemes in Norway

Sponsored by

Norway has issued two statements on the acquisition of shares by employees

Linda K Rollefsen and Lene Bergersen of Deloitte Norway explain two recent interpretative statements from the Norwegian Directorate of Taxes and discuss how they will affect the taxation of employee share incentive schemes.

On January 1 2022, the Norwegian Directorate of Taxes issued two statements regarding the acquisition of shares by employees. One of the statements addressed the question of whether shares were acquired at discount. The second included a tax assessment of an employee share incentive model.

The statements are connected and apply to situations where employees acquire shares for a lower price than the assumed market value. 


The two statements were issued as a result of frequent enquiries from taxpayers seeking clarification on variants of the share incentive scheme that was accepted in the Kruse Smith judgment (Rt. 2000 p. 758). In the Kruse Smith judgment, the question was whether capital gains on shares acquired by employees could be taxed as salary income.

Put simply, the incentive scheme allowed employees to acquire shares at the par value, which was significantly lower than the equity value per share (NOK 10 ($1.12) compared to NOK 143). It was agreed that the difference between the par value and the equity value (NOK 133) was to be deducted from the consideration when the shares were sold later.

The Supreme Court regarded the difference as a form of interest free loan, rather than a discount that could be taxed as salary income. In contrast to a regular loan, however, the employees were not obliged to repay the entire amount if the share value fell below NOK 133 (i.e. the obligation to repay the loan was not unconditional).

Although the credit was not formally granted, the court considered that such a commitment arose as a consequence of the way in which the redemption amount of the shares had been determined.

The two statements

In the first statement, the Directorate of Taxes examined typical cases where no formal loan is granted, but employees are allowed to buy a certain percentage of the shares in the company at e.g. 20% of booked equity in exchange for the shares later having to be sold at the same discount. In the example, the market value of the shares is five times higher than the booked equity. As the employees acquire ordinary shares, the employees also have the right to 10% of the dividends in the company.

In its assessment, the Directorate asked whether an independent buyer would have paid more to acquire the shares. The Directorate pointed out that the sale clause (to sell at a discount) in such an arrangement would have a downward effect on the price in a third-party transaction, while the possibility of receiving dividends would have an upward effect on the price.

On the basis that the pricing mechanism considered the expected yield on the shares only to a limited extent, if at all, the Directorate concluded that a taxable discount would exist at the time of the acquisition of the shares, deemed to be salary income. However, subsequent returns and value developments would follow the tax rules on capital gains and losses.

The second statement examined the criteria for a reduced purchase price to be regarded as a loan rather than a taxable discount. As a requirement, the Directorate stated that the loan must be “genuine”. To meet this requirement, formalities (such as the name of the arrangement) are of no importance. The key is that the employee has an unconditional obligation to repay the loan.

With reference to judgments including Vryobloed (Rt. 1998 p. 383), the Directorate stated that a loan would not be genuine if the obligation to repay is dependent on the economic development of the company. Consequently, the loan would not be regarded as genuine in cases where it would be partly forgiven because the sale price of the shares does not cover the entire loan.

This is a stricter requirement compared to the one set out by the Supreme Court in the Kruse Smith judgment. In cases where a loan is considered ‘genuine’, and the loan is later forgiven, the debt forgiveness would be regarded a taxable benefit (without affecting the original purchase). 


Based on these two statements, our view is that it will become more challenging to use and support the Kruse Smith model. 

These statements also tie in with other recent changes that are detrimental to certain advantages previously available to employees, such as the possibility to buy certain shares at a small discount without the benefit of being subject to taxation and a simplified valuation approach to non-listed shares.

Linda Kristin RollefsenAssociate, Deloitte NorwayE:

Lene BergersenAssociate, Deloitte NorwayE:

more across site & bottom lb ros

More from across our site

Sandy Markwick, head of the Tax Director Network (TDN) at Winmark, looks at the challenges of global mobility for tax management.
Taxpayers should look beyond the headline criteria of the simplification regime to ensure that their arrangements meet the arm’s-length standard, say Alejandro Ces and Mark Seddon of the EY New Zealand transfer pricing team.
In a recent webinar hosted by law firms Greenberg Traurig and Clayton Utz, officials at the IRS and ATO outlined their visions for 2023.
The Asia-Pacific awards research cycle has now begun – don’t miss on this opportunity be recognised in 2023
An intense period of lobbying and persuasion is under way as the UN secretary-general’s report on the future of international tax cooperation begins to take shape. Ralph Cunningham reports.
Fresh details of the European Commission’s state aid case against Amazon emerge, while a pension fund is suing Amgen over its tax dispute with the Internal Revenue Service.
The OECD’s rules may be impossible for businesses to manage, according to tax experts from companies including Shell.
Sanjay Sangvhi and Sahil Sheth of Khaitan & Co explore this legal concept and its implications for companies doing business in India.
The UK government is now committed to replacing the ‘super-deduction’ with a 100% capital allowances regime to offset the impact of the corporate tax rise to 25%.
Corporate tax is set to rise in the UK for the first time in decades, but the headline rate remains historically low despite what many observers think.