The Norwegian parliament passed a new tax reform in December 2004. A central part of the reform is the so-called "Exemption Model", that is, granting most corporate shareholders exemption from taxes on gains and dividends on shares, including the withholding tax on dividends.
All corporate shareholders within the European Economic Area (EEA = EU countries + Iceland, Liechtenstein and Norway) are exempt. Other foreign shareholders in Norwegian stocks are not exempt.
With respect to dividend distributions the new rules are in force from January 1 2004. Many foreign corporations within the EEA hold shares in Norwegian companies, for example in companies listed on the Norwegian stock exchange. Thus, some of these shareholders have received dividends during 2004 and have paid withholding tax. If proper documentation is provided for, the foreign shareholder may apply for a refund in accordance with the ordinary procedures, administered by the Central Office - Foreign Tax Affairs and the local tax offices.
Refund also for previous years?
As Norway has signed the EEA Agreement in 1994 the four freedoms set out in the EU Treaty must be respected. The EFTA court ruled in November 2004 that withholding tax on dividends to shareholders resident in the EEA is not in accordance with the EEA Agreement and the Norwegian EEA Act, since Norwegian shareholders has not been liable to tax on dividends from Norwegian companies (since 1992). The court ruling should apply both to corporate and natural persons holding Norwegian shares.
However, a relevant question is if it is too late to claim reassessments. For the income year 2003 it should be clear that a case might be tried before a court if a writ of summons is filed no later than March 2005. If a shareholder has paid a considerable amount of Norwegian withholding tax in the years between 1994 and 2003, the shareholder should contact a tax adviser in Norway to get an evaluation of the chances of a reassessment and repayment.
Hans Olav Hemnes (hans.o.hemnes@no.pwc.com) and Bjørn Slåtta (bjorn.slaatta@no.pwc.com), Oslo
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