The anti-avoidance rule is codified

As per 1 January 2020, the Anti-Avoidance rule is written in the General Tax Act § 13-2. It may be used by the tax authorities as a basis for levying tax on wealth, income, ground rent, natural resources and tonnage, as well as to national insurance contribution, employer’s contribution to the national insurance scheme and financial VAT.

Upon anti-avoidance, the arrangement as such will be disregarded. The taxable income will be deemed by way of constructing a hypothetical scheme reflecting the economic reality of the transaction (“re-characterization”).

The content of the legislative text is mainly a codification of the non-statutory anti-avoidance rule as construed by case law. Additionally, the codification is expected to hit some cases to which the old anti-avoidance rule would not be applicable.

The core of the rule is still the assessment of whether or not a transaction (or arrangement or chain of transactions) implies that it has been mainly motivated by saving tax.

If so, the anti-avoidance rule may apply if it is considered reasonable based on an overall assessment. This assessment should be based on all relevant elements. A predominant part of the conditions construed by the Norwegian Supreme Court are still valid.

New to the rule is that the total examination is supposed to be based on objective criteria, as opposed to subjective criteria. Going forward, the kernel question will be what would have been the motivation of a rational taxpayer, a “tax bonus pater familias”. The (possible) avoidance of tax in other jurisdictions has lost its relevance as a commercial argument.

As of 2020, the anti-avoidance rule is expected to “catch” a broader range of transactions, due to the new interpretation and possible application of the anti-avoidance rule as follows:

  • Non-taxable transactions might to some extent become taxable as analogical to taxable transactions
  • Exempted transactions might to some extent become taxable by way of narrow interpretation of the exempted area
     
  • A transaction not mentioned as taxable in the laws might still become taxable even though it has been explicitly mentioned as potentially taxable in the preparatory legislative documents. In other words, the taxpayer is not necessarily entitled to interpret the preparatory work antithetically.

The codification of the Norwegian anti-avoidance rule was not intended to expand the field of anti-avoidance application, yet the new rule seems to imply a slightly stricter path going forward. Time and case-law will show. Our advice is to apply for an advance ruling pre transaction. If possible.

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