Hard Lessons of Expatriate Taxation.
Mr Erland Nørstebø, Partner and Head of Global Mobility at PwC, responds candidly. How many people make mistakes with taxes when moving abroad? A lot.
Taxation is no rocket science; you just have to be upfront. Do not wait until it is later, because it is so frustration and time-consuming afterwards.
People tend to take the experience of someone else and apply that to their own situation. Then a few months or also a few years later they find out they made a big mistake. “The most common mistake is that Norwegians move abroad and mistakenly assume they are not liable to pay taxes in Norway any longer. This is really not the case. Normally you are considered a tax resident of Norway even if you move abroad. If your goal is to avoid paying taxes to Norway (i.e to avoid paying wealth tax to Norway), there are some regulations you need to comply with.
Mr Nørstebø explains the ground rules for being considered for release of taxation. “If you intend to stay abroad for a long period with no plans for moving back to Norway, you may be considered as a non-tax resident of Norway. As a non-tax resident you are in general not liable to pay any taxes or file any tax return to Norway. However to become a non-tax resident, you need to prove that you fulfil the conditions the first three years after the year you moved out from Norway. The conditions you need to comply with are that you have permanently moved out of Norway, that you don’t own any property or have any house for your disposal in Norway. And you are only allowed to stay in Norway for a limited amount of time, maximum 61 days a year.
So the first years after you moved from Norway you have to file your tax return and claim that you should be treated as a non-tax resident of Norway. If you moved from Norway in 2016, you need to claim this in the tax return for 2016, 2017, 2018 and 2019. Then from 2020 the Norwegian Tax Authorities will accept you as a non-tax resident.
“Does that mean that a Norwegian have to pay ordinary tax to Norway during this period?” No, and this is something we often see people make mistake about. If or when you claim that you should be treated as a non-tax resident, you will normally be in a position where you are a tax resident of another country. This is something you need follow up when you file your Norwegian Tax Return. In the period when Norway is considering if you comply with the regulations for being a non-tax resident of Norway, you should use the double tax treaty between the two countries to avoid any double taxation situation.
For those who doesn’t want to break all their connections to Norway or want to spend more of their time in Norway during the year, it is important to understand that you won’t end up with any double taxation if you are doing
thing correctly. As mentioned above double tax treaties are made to avoid double taxation. Just make sure that you understand what taxes are covered in the tax treaties. In case you are a Norwegian tax resident and use a double tax treaty to avoid any double taxation, you are liable to file a tax return.
It is important to mention that if you after a few years think that it would be okay to have a apartment or condo back home in Norway, you can buy this without being considered as a tax resident of Norway again. But have in mind that you will then be limited taxable to Norway for this property and you will have to file a tax return again.
The Norwegian Business Association in Singapore arranges a tax seminar for the Norwegians living in Singapore every year. “Singapore has together with Houston in the US the largest populations of Norwegians living and working abroad. I have been giving seminars here for almost ten years, but the demand for information remains. If I meet ten different Norwegians, they will have ten different stories about taxation.” As long as this is the case, the need tax advice remains.
Mr Nørstebø’s advice is to plan upfront. Don’t just think that if I move abroad taxation will be so much easier. You have to take some actions to get there. Don’t forget to hand in a tax return as long as this is required. Have in mind that more people migrate every year, so tax authorities are making more of an effort and sharing more information across borders.”