Norway’s exit tax regime likely will be changing again. The government proposed a further tightening of the rules on 20 March 2024, sparking strong reactions due to the numerous and rapid changes introduced to the exit tax since 2022. The proposals—which have been revised in the 2025 National Budget—would require that exit tax be paid after 12 years even if gains on shares remain unrealised. It is also proposed that dividend distributions received by an emigrant would result in the emigrant having to make a proportional payment of the exit tax. If enacted, the new rules generally would apply to exits and transfers made as from 20 March 2024 and dividend distributions made as from 7 October 2024. The proposed rules mark a pivotal shift in emigration tax policy, giving rise to important considerations for individuals planning to relocate.
Norwegian residents who change their tax residence to another country may be subject to exit tax. The tax is triggered when a Norwegian individual tax resident relocates from Norway and there is latent capital gain in shares owned by the individual on the date they leave the country. Under the current rules, unrealised gains on shares and ownership interests in Norwegian companies are generally taxed when an individual moves out of Norway and becomes tax resident in another jurisdiction. Tax is levied at a rate of 37.84%, calculated on unrealised capital gains in shares and securities as if the shares/ownership interests were realised on the day before emigration. However, the following rules apply:
Moreover, additional technical requirements and reporting obligations must be met.
In a press release issued on 7 October, the government stated that the existing exit tax rules are inequitable as they allow individuals to depart Norway with gains accrued in the country without paying tax, while individuals in the same situation and who remain in Norway have to pay their tax as usual. The proposed changes aim to level the playing field.
The government has proposed that a taxpayer would no longer be able to defer payment of the exit tax until they divest of the shares. Instead, deferral would be available only for up to 12 years, regardless of whether the shares are sold (unless the taxpayer relocates back to Norway, in which case no tax would be due). The taxpayer would have three payment options: 1) pay all exit tax on the move-out date; (2) pay the tax in interest-free instalments over 12 years; or 3) pay the tax after 12 years, plus interest. Other proposed changes include the following:
The 2025 National Budget, including the proposed changes to the exit tax rules, still must be approved by Parliament, which will have to rely on support from other political parties. The outcome of these negotiations should be known by the first half of December.
An additional challenge is the lack of harmonisation in tax rules between countries. This means that some countries do not have corresponding exit tax rules like those in Norway, making it difficult or even impossible for taxpayers to receive credit for taxes paid to Norway. While tax treaties are intended to prevent double taxation, the practical implementation of tax credits can be challenging when taxes are triggered at different times across countries.
Anders Torkildsen Nytrøen
Ingrid Bystrøm
Irene Bredvold Weiby
BDO in Norway
Current rules
Norwegian residents who change their tax residence to another country may be subject to exit tax. The tax is triggered when a Norwegian individual tax resident relocates from Norway and there is latent capital gain in shares owned by the individual on the date they leave the country. Under the current rules, unrealised gains on shares and ownership interests in Norwegian companies are generally taxed when an individual moves out of Norway and becomes tax resident in another jurisdiction. Tax is levied at a rate of 37.84%, calculated on unrealised capital gains in shares and securities as if the shares/ownership interests were realised on the day before emigration. However, the following rules apply:
- For individuals who relocated before 29 November 2022, the exit tax is waived after five years abroad.
- For individuals who relocated between 29 November 2022 and 20 March 2024, the exit tax payment may be deferred until gains on the shares are realised.
Moreover, additional technical requirements and reporting obligations must be met.
Proposed changes
In a press release issued on 7 October, the government stated that the existing exit tax rules are inequitable as they allow individuals to depart Norway with gains accrued in the country without paying tax, while individuals in the same situation and who remain in Norway have to pay their tax as usual. The proposed changes aim to level the playing field.The government has proposed that a taxpayer would no longer be able to defer payment of the exit tax until they divest of the shares. Instead, deferral would be available only for up to 12 years, regardless of whether the shares are sold (unless the taxpayer relocates back to Norway, in which case no tax would be due). The taxpayer would have three payment options: 1) pay all exit tax on the move-out date; (2) pay the tax in interest-free instalments over 12 years; or 3) pay the tax after 12 years, plus interest. Other proposed changes include the following:
- The exit tax would be applied on the balance of capital gains exceeding NOK 3 million (the current threshold is NOK 500,000), meaning only gains exceeding NOK 3 million would be taxed. A deduction for losses exceeding NOK 3 million would be conditional upon emigration to an EU/EEA country; no loss deduction would be available for individuals who migrate outside the EU/EEA.
- The exit tax regime would be expanded to include share savings accounts and capital insurance in both Norway and abroad.
- Transfers to recipients residing or domiciled outside Norway exceeding NOK 100,000 annually would also be subject to exit tax.
- The exit tax is currently determined based on the market value of the relevant shares and securities on the day before the individual leaves Norway. There are no deductions for value decreases following emigration after the input value is generally set at market value at the time of emigration. If no exit tax is determined at the time of emigration, it is proposed that the tax administration would have the authority to adjust the tax base within a 15-year period following the year of emigration.
- Currently, capital gains tax suffered abroad upon the divestment of shares may be credited against exit tax in Norway. Under the proposed changes, Norway would retain full taxation rights and no foreign tax credit would be available. Any tax credit for capital gains paid abroad would therefore have to be requested in the emigrating individual’s new country of residence.
- Exit tax would not necessarily be due if an emigrant were to die even though the proposals announced on 20 March did not include an option for deferring payment of the exit tax upon the death of an emigrant. This situation is addressed in the 2025 National Budget proposals. If the heirs are domiciled outside Norway, they would assume the tax position of the deceased, i.e., they would have the option to defer payment of the exit tax and if the heirs reside in Norway, the exit tax would be waived. These changes would apply retroactively to transfers made on or after 20 March 2024.
- Exit tax currently is not affected by dividends received by an emigrant during the 12-year period after their departure from Norway. However, this would change under the proposals. The proposals aim to close a gap in the rules that currently allows an individual to strip the assets out of a company in which they own shares by having the company distribute dividends while they are resident outside Norway. The individual can then move back to Norway and sell the shares at a lower value. Such arrangements allow taxpayers to avoid paying tax on gains that are otherwise taxable under the exit tax.
Comments
The 2025 National Budget, including the proposed changes to the exit tax rules, still must be approved by Parliament, which will have to rely on support from other political parties. The outcome of these negotiations should be known by the first half of December.An additional challenge is the lack of harmonisation in tax rules between countries. This means that some countries do not have corresponding exit tax rules like those in Norway, making it difficult or even impossible for taxpayers to receive credit for taxes paid to Norway. While tax treaties are intended to prevent double taxation, the practical implementation of tax credits can be challenging when taxes are triggered at different times across countries.
Anders Torkildsen Nytrøen
Ingrid Bystrøm
Irene Bredvold Weiby
BDO in Norway