DOING BUSINESS IN NORWAY 1 INTRODUCTION...... 4

2 GENERAL INFORMATION...... 4 2.1 Legal system...... 4 2.2 Monetary system...... 4 2.3 Financial incentives...... 4 2.4 Starting a business...... 5

3 BUSINESS ENTITIES...... 5 3.1 General...... 5 3.2 Limited Liability Companies...... 5 3.2.1 Overview...... 5 3.2.2 Shareholders and Share Capital...... 6 3.2.3 Board of Directors and Managing Director...... 6 3.3 Branch of Foreign Company...... 8 3.4 Financial reporting and auditing requirements...... 8 3.5 Piercing the corporate veil...... 8

4 EMPLOYMENT...... 8 4.1 Overview...... 8 4.2 Working hours and holiday entitlement...... 9 4.3 Sickness benefit...... 9 4.4 Parental leave...... 9 4.5 Termination of employment...... 9 4.6 Loyalty...... 11 4.7 Occupational safety and health...... 11

TABLE OF CONTENTS OF TABLE 5 TAXATION ...... 11 5.1 Corporate tax - general...... 11 5.2 Overview – Norwegian tax residence and limited Norwegian tax ...... liability...... 11 5.3 Taxation of business income, capital gains and dividend...... 12 5.4 Exemptions method for capital gains and dividends for corporate shareholders...... 12 5.5 Withholding taxes...... 12 5.6 Indirect taxes...... 13 5.7 Employer social security contributions and other employer obligations...... 13

6 ACQUISITIONS...... 13 6.1 General...... 13 6.2 Competition law...... 13

7 IMMIGRATION...... 13

8 INTELLECTUAL PROPERTY RIGHTS...... 13

9 PRODUCT LIABILITY...... 13

10 DISPUTE RESOLUTION...... 14 10.1 Court system...... 14 10.2 Arbitration...... 14 10.3 Choice of law...... 14

Updated per 29. September 2015

2 3 DOING BUSINESS IN NORWAY

1 INTRODUCTION implement all regulations within the transactions. Such reporting is generally may offer loans, guarantees and equity general information on how to start up a limited liability companies or doing scope of the EEA through incorporation. taken care of by the transaction bank. capital. The most important incentives business in Norway. It is not necessary to business through a Norwegian branch of The purpose of this guide is to provide a are contributons to projects in for have a Norwegian partner to start up. No the foreign company. brief introduction to various legal aspects Norway also adheres to a number of 2.3 Financial incentives scarcely populated districts and econo- operating licenses are required to which may be useful as a first introducti- international treaties and conventions, There are no special incentives for mically challenged areas. conduct business in Norway, with a few 3.2 Limited Liability Companies on for foreign enterprises starting to do including the 1980 UN Convention on the foreign investors. However, the general exceptions for specific areas such as business in Norway. International Sale of Goods (CISG), as incentives apply to both national and The state also funds two export credit insurance, banking and financial services. 3.2.1 Overview well as the 1958 New York Convention foreign investments. agencies, Eksportkreditt Norge AS and However, investors approved by EU There are two main categories of limited 2 GENERAL INFORMATION and the 2007 Lugano Convention. In Garantiinstituttet for Eksportkreditt countries may benefit from mutual liability companies: private (No.: aksjesel- order to be enforceable in Norway, The Norwegian state and the municipali- (GIEK), that make long term financing recognition of such licenses. skap or AS) and public (No.: allmennak- 2.1 Legal system international agreements need to be ties control a wide range of different available to Norwegian and foreign sjeselskap or ASA). The primary differen- The Norwegian legal system is based on incorporated into Norwegian national law. economic incentives. In general, the customers when they purchase goods or 3 BUSINESS ENTITIES ce between the two categories is related civil law, i.e. statutory law supplemented incentives are primarily for scarcely services from Norwegian exporters. to the right to turn to the public for by case law. 2.2 Monetary system populated districts and economically 3.1 General equity; only public companies can issue The currency in Norway is the Norwegi- challenged areas. 2.4 Starting a business There are many different business shares intended for trade on a stock Although not a member of the EU, an krone (NOK), in plural called kroner. 1 Starting up a business in Norway is a entities in Norway: limited liability compa- exchange or other regulated markets. Norway has been a party to the Agree- Euro is approximately equal to 9,61 NOK The state incentives are administered by relatively simple process. Local and nies, branches of foreign companies, The business activities must be in ment on the European Economic Area and 1 US Dollar is approximately equal to Innovation Norway and the municipaliti- central government in Norway widely trading partnerships, limited partnerships accordance with respectively the Limited (EEA) since 24 June 1994. While EEA 8,53 NOK*. The only exchange control es. The purpose of Innovation Norway is encourage foreign investments. Altinn.no, and several others. The most common Liability Companies Act (No.: aksjeloven) member states are not directly bound by requirement is a reporting requirement to encourage and promote potentially which is a part of the Norwegian choice for foreign companies intending and the Public Limited Liability Compani- EU regulations, they are required to for international payments and financial profitable businesses. Innovation Norway Brønnøysund Register Centre, provides to do business in Norway, is to set up es Act (No.:allmennaksjeloven) (herei-

4 * This is the exchange rate pr. 29.9.2015. 5 DOING BUSINESS IN NORWAY nafter jointly referred to as the Limited generally made by simple majority, although Liability Companies Acts), and the certain resolutions require a qualified relevant company’s adopted articles of majority. association (No.: vedtekter). «There are no restrictions regarding 3.2.3 Board of Directors and Managing In a limited liability company, the sharehol- Director nationality with regards to the ders are as the main rule not personally The board’s formal responsibilities and shareholders. Nor are there liable for the obligations of the company, liabilities are regulated in the Limited restrictions concerning the total and the corporate veil is not easily pierced Liability Companies Acts, as well as in under Norwegian law. The limited liability formal guidelines such as the Norwegian number of shares in the company.» company must be registered in the Code of Practice for Corporate Gover- Register of Business Enterprises (No.: nance. The board shall manage the foretaksregisteret). A private limited company’s affairs in the best interest of liability company name must contain the the company and its shareholders. The word “aksjeselskap” or the abbreviation board’s responsibilities include all such “AS”, whilst a public company’s name must activities that do not require approval by contain the word “allmennaksjeselskap” or the shareholders’ general meeting; both the abbreviation “ASA”. The company name long-term decisions concerning policy, must not be such that it may be confused strategic planning and short-term with an existing company or trademark. decisions concerning the day to day The Limited Liability Companies Acts also management. The board may delegate list certain requirements to the articles of tasks to individuals outside the board, association; i.a. the company’s registered such as a CEO. However, the overall office must be specified. liability resides with each of the members of the board, who all may be held 3.2.2 Shareholders and Share Capital individually liable for their actions and There are no restrictions regarding omissions in such capacity. nationality with regards to the sharehol- ders. Nor are there restrictions concerning The board of directors must consist of at the total number of shares in the company. least one board member in private limited liability companies and at least three The share capital must be at least NOK board members in public limited liability 30,000 in a private limited liability company companies; or if the company has more and at least NOK 1,000,000 in a public than 200 employees, the board normally limited liability company. All shares carry must have at least five members. Public equal rights unless otherwise stated in the limited liability companies are required to articles of association, which may prescri- have a managing director (No.: daglig be two or more classes of shares. The leder), whilst this is voluntary for private various classes of shares may give the limited liability companies. The managing shareholders different voting rights or director and at least half of the members different rights to the assets or profits in of the board, must reside in Norway or the company. The face value of the shares another EEA country. The Ministry of may on the other side not differ between Justice may grant exemptions from this the share classes. rule. In public limited liability companies there are gender quota rules, which The shareholders’ rights are exercised at require that both genders are represen- the shareholders’ general meeting (No.: ted in the board. In public limited liability generalforsamlingen). Decisions are companies the managing director may

6 7

DOING BUSINESS IN NORWAY not be the chairman of the board at the same time as holding the position of managing director.

The Limited Liability Companies Acts prescribe minutes for all board meetings, which shall provide a clear representati- on of matters discussed and the decisions taken.

There are statutory requirements on employee board representation. The provisions apply to all companies with 30 or more employees, but the requirements «Employers must provide their vary in extent depending on the number employees with an individual of employees, as well as other factors. employment agreement 3.3 Branch of Foreign Company containing the key terms A foreign company wanting to establish of employment.» business in Norway without setting up a Norwegian company, may conduct its business activities through a Norwegian branch (No.: norskregistrert utenlandsk by Norwegian courts and/or administra- 4 EMPLOYMENT however, a number of collective agree- approximately NOK 530,000 per year compensation paid by the Norwegian foretak or NUF). The branch is not a tive bodies relevant for the enterprise. ments which specify a shorter normal (April 2015). A collective bargaining National Insurance. Such voluntary legal entity of its own, but a divisional The Norwegian labour market is regula- working week for particular types of agreement may determine that the compensation is quite standard in well office of the foreign-based company. The 3.4 Financial reporting and auditing ted by both legislation and through work. Normal working hours may, under employer has to provide for additional paid business sectors, although often foreign main company is thus responsible requirements collective bargaining agreements (No.: special circumstances, exceed 40 hours compensation. capped. Parents of children up to twelve for the duties and obligations of its Limited liability companies and branches tariffavtale). Trade unions traditionally a week, as long as the average does not years of age, and sometimes up to Norwegian branch. This is an important of foreign companies, as well as most hold a powerful position in Norway. In exceed 13 hours a day or 48 hours per 4.4 Parental leave eighteen years of age, can also get state difference between doing business in other business entities in Norway, have addition to the basic terms of employ- any 7 days. The provisions on working Parental leave is a legal right for all compensation when they need to take Norway through a branch contrary to a to maintain accounting records under the ment as set out in the Norwegian Act hours do not apply to employees in parents (regardless of gender) in time off work to look after a sick child. limited liability company. Bookkeeping Act (No.: regnskapsloven) relating to working environment, working senior posts or particularly independent Norway, and all employers are obliged by and are required by this act to adhere to hours and employment protection (No.: posts. law to give a parent time off. Parental 4.5 Termination of employment Foreign companies intending to do generally accepted accounting principles. arbeidsmiljøloven) and collective leave may be fully paid by the Norwegian According to the Norwegian Labour Act, business in Norway through a branch, Although there are some exceptions for agreements, employers must provide All employees are entitled to a minimum National Insurance for a maximum of 49 employer’s termination of an employ- must register with the Register of small companies, most companies are their employees with an individual of 25 days paid annual vacation in weeks (or maximum 59 weeks of 80 % ment contract must be based on a Business Enterprises. The Norwegian required to have their financial state- employment agreement containing the addition to public holidays. Employees pay). Parental leave may be freely justifiable basis. Termination grounds branch is not required to use the same ments audited by an auditor authorised key terms of employment. above the age of 60 are granted 6 additi- distributed among the parents, except must relate to the operation of the company name as its foreign-based main by the Financial Supervisory Authority of onal vacation days per year. that 10 weeks are reserved for each business or the employee, for example office. The name used in Norway must Norway. Most employers must contribute a parent and the first 9 weeks (starting 3 redundancy, serious misconduct or however not be suited to mislead minimum of 2% of the salary to the 4.3 Sickness benefit weeks before expected delivery of birth) disloyalty. customers. The branch has to keep its 3.5 Piercing the corporate veil mandatory Occupational Pension Employers must pay sickness benefit of the leave is reserved for the mother. own accounting records separate from As already mentioned, shareholders and Scheme. during the first 16 days of each period of The compensation paid by the state is Prior to any action to dismiss an employ- the foreign-based company even though parent companies of limited liability compa- an employee’s sick leave. The sickness capped at approximately NOK 530,000 ee, the employer must discuss the the assets and liabilities of the branch nies are generally not liable for the debt 4.2 Working hours and holiday benefit amounts to 100% of the salary. per year. matter with the employee and the are a part of the foreign-based compa- and liabilities of its subsidiaries. The entitlement After this period, the Norwegian National employee’s elected representatives. The ny’s total assets. The branch and its Supreme Court of Norway has neverthe- Ordinary working hours for full time Insurance (No.: folketrygden) is respon- The employer may pay additional statutory period of notice of termination business are subject to Norwegian law less expressed that there might be excepti- employees are usually limited to 40 hours sible for sickness benefit. The state compensation to cover the gap between varies between one and six months, and they have to follow decisions made ons from this in extraordinary cases. per week, excluding lunch. There are, funded sickness benefit is capped at the ordinary salary and the maximum depending on the duration of the

8 9 DOING BUSINESS IN NORWAY

employment and the age of the employ- be eliminated immediately. Such routines Model. Hence, the relevant tax treaty er. The periods of notice may not be set shall apply with regards to not only should be consulted and assessed when aside by the parties in collective or other physical but also mental and social considering the actual tax consequences agreements concluded prior to notice well-being. of doing business in Norway. being given. Further, the notice of dismissal must meet certain formal The safety officer (No.: verneombud) is 5.2 Overview – Norwegian tax requirements. Summary dismissal is only the employee representative with residence and limited Norwegian tax possible if an employee has grossly regards to occupational safety and liability neglected its duties towards the health, and is required in every work A limited liability company or partnership employee. place with at least ten employees. The incorporated and registered in Norway safety officer can call for action when- will under Norwegian tax legislation be The principles regarding dismissal do not ever he recognizes a health risk. tax resident in Norway, and hence apply to the chief executive officer if he However, no direct responsibilities lie subject to Norwegian tax on their or she has waived such rights in a prior with the safety officer. A safety commit- worldwide income. Similarly, foreign agreement in exchange for compensati- tee shall be appointed in every work entities where management and control on on termination of employment. place with at least fifty employees. at board level are carried out in Norway will be considered tax resident in Norway. 4.6 Loyalty 5 TAXATION Employees have a far-reaching obligation A non-Norwegian entity or person to be loyal to their employers. The 5.1 Corporate tax - general carrying out business activities in concept of employment loyalty covers an The Norwegian corporate tax rate is 27 Norway may be subject to a limited array of different obligations such as %, and a limited liability company tax Norwegian tax liability on profit obligations for the employee to put the resident in Norway is liable to income tax attributable to the Norwegian business interests of the employer ahead of on worldwide profits. A partnership is activities. The threshold under Norwegi- personal interests and to avoid situations considered transparent, and therefore an law to get a limited Norwegian tax entailing a collision of interests. the taxation is done at the level of the liability is low. However, if a tax treaty is partners that may become taxable in applicable, the Permanent Establishment An employee must not act in such a way Norway. provisions will prevail. as to harm the employer, must observe confidentiality and must refrain from Norway has an extensive tax treaty competition during their period of network, mostly based on the OECD employment. However, the employee has a statutory right to warn the Norwegian Labour Inspection Authority (No.: Arbeidstilsynet) or other relevant authorities about censurable conditions. This is not considered to be a violation of the obligation to be loyal.

4.7 Occupational safety and health The Norwegian Labour Act (No.: «TheNorwegian corporate tax rate is arbeidsmiljøloven) requires the employer and the employees to cooperate to 27 %, and a limited liability company create a satisfactory work environment. tax resident in Norway is liable to Every work place must have routines on income tax on worldwide profits.» risk assessment, accident and emergen- cy plans, as well as action plans for such deficiencies and health risks that cannot

10 11 DOING BUSINESS IN NORWAY

5.3 Taxation of business income, Norway does not have a group taxation The Norwegian exemption method point subject to a 25 % statutory regulation, i.a. a mandatory offer of domicile. The processing time for capital gains and dividend system. Rather, group contributions are applies to capital gains and dividends withholding tax. However, there is an obligation is imposed when acquiring 1/3 of residence permits that also allow the As a starting point, the net income of an available to offset tax losses between relating to Norwegian and EEA entities exemption for dividends to qualifying the voting rights in the listed company. applicant to work in Norway is normally entity in Norway is taxed at the corpora- Norwegian limited liability companies, as well as to non-EEA entities not corporate shareholders in the EEA. Also, 6.2 Competition law two months. If the applicant desires to te tax rate of 27 %. However, reference and in some cases Norwegian branches resident in a low-tax jurisdiction and under the tax treaties the withholding Concentrations between companies, e.g. bring his or her family to Norway, the is made to the description of the of non-Norwegian companies. In Norway where the shareholder holds at least 10 % tax rate is normally reduced to 15 % or by mergers, acquisitions and other processing time is normally three exemption method below. In calculating mergers and de-mergers can be carried of the shares for minimum two years. For lower. transactions whereby lasting control of a months. the net income, costs are generally tax out without triggering taxation on a EEA entities in low-tax jurisdictions, it is company is transferred, are subject to a deductible, but with numerous excepti- roll-over basis retaining the original tax an additional requirement that the 5.6 Indirect taxes notification obligation to the Norwegian The application procedure for work ons that should be assessed. It should values. low-tax entity carries out a genuine Norway has a VAT system. While it is Competition Authority (No.: Konkurran- permits may vary for different positions especially be noted that there are economic activity. fairly similar to the EU VAT system, it is setilsynet) if certain turnover thresholds and types of work, but the applicant is limitations on tax deductibility for 5.4 Exemptions method for capital not harmonised. are met. The notification shall be made required to provide evidence of employ- intra-group interest payments. Deprecia- gains and dividends for corporate However, dividends received are as a by the party or parties acquiring control. ment contract or alternatively a job offer. tions are available. Please note that shareholders starting point subject to a 27 % tax on The registration threshold is NOK 50 000. An In case of mergers, the obligation to The application fees are: NOK 3,700 for these normally differ from the accoun- For qualifying shareholders, limited 3 % of the dividends received (net 0.81 % entity that does not have a fixed place of notify normally rests with the merging first time and/or renewal for residence/ ting depreciations in the annual acco- liability companies and certain other of the dividend). A group exemption is business in Norway, will have to register parties jointly. work permit, and NOK 5,900 for first unts. entities, capital gains and dividends available where the shareholder directly using a VAT representative. time permits for accompanying adults received are to a large extent fully, or or indirectly owns more than 90 % of the There is no deadline for notifying (renewal: NOK 3,200 if filed before the Losses may be carried forward for an almost fully, exempt from Norwegian tax. subsidiary, in which case no such 0.81 % 5.7 Employer social security contributi- concentrations to the Norwegian previous permit lapses). indefinite period of time. However Correspondingly, losses and costs tax is due. The 0.81 % rules are not ons and other employer obligations Competition Authority, provided that the specific regulation may lead to a directly relating to such income are not applicable to capital gains. Employer’s social security contributions parties have not started to implement 8 INTELLECTUAL premature cancellation of losses carried tax deductible. However, ownership are imposed at rates from 0 to 14.1 %, the concentration. Implementation of the PROPERTY RIGHTS forward in certain cases, especially in costs regarding such exempt assets are 5.5 Withholding taxes with the latter rate being the regular concentration is prohibited until the transactions and restructurings. Losses generally deductible. Norway does not have withholding taxes rate. The employer’s social security Norwegian Competition Authority has Like in most other jurisdictions, there are may be carried back for up to two years on royalty or interest under internal contributions are tax deductible for the processed the case. a number of different statutes that if a company is liquidated. Norwegian law. Dividend is as a starting employer. The employer also has an regulate intellectual property rights. obligation to withhold taxes to be paid by A concentration having an EEA or EU Patents, copyrights, trademarks and the employee, and to forward such taxes dimension, i.e. that meets the thresholds designs are all governed by specific laws, to the tax collector. set out in the EC Merger Regulation and/ and the Norwegian legislation within this or the merger rules of the EEA agree- field is very much in line with EU law and 6 ACQUISITIONS ment, is not covered by the obligation to regulation. Norway also adheres to most notify under the Norwegian Competition of the major global treaties concerning 6.1 General Act. IPRs. Registration is required to enjoy Acquisitions of unlisted companies are protection for patents and design rights. not governed by any specific rules save 7 IMMIGRATION Trademark rights are obtainable through for the general rules in the Limited either registration or incorporation (use). Liability Companies Act. Specific A non-EEA citizen, who wishes to reside Copyrights need no registration. The provisions may, however, be prescribed in in Norway, must apply for a residence terms of the protection vary from five the articles of association, or in a permit. Persons who have dominating years to indefinite. shareholders’ agreement (No.: aksjonær- influence over a company through avtale). Acquiring shares or the assets of ownership or otherwise, are eligible to 9 PRODUCT LIABILITY a private company is not governed by apply for a residence permit for the any requirements, but may be regulated self-employed. Other employees must Product liability is governed by the in the articles of association in each apply for a regular work permit. Product Liability Act (No.: produktan- company. It is, however, customary to svarsloven). The Act imposes strict have a written agreement and the The application for the residence permit liability for defective products on the transfer has to be registered in the and the working permit is made at a seller, the importer or the manufacturer target company’s share register. Norwegian Embassy or consulate in the depending on the situation. Liability Listed companies are subject to takeover applicant’s country of origin or country applies to personal injuries as well as

12 13 DOING BUSINESS IN NORWAY damages to personal property caused by courts until a hearing has taken place mandatory provisions under Norwegian a defective product. The manufacturer before the conciliation board. law cannot be deviated from by a choice- may also be held liable for damages in of-law clause if the case has no real general tort and contract law. Norway is a signatory to the 2007 connection with any other country than Lugano Convention on Jurisdiction and Norway. It should also be noted that Under the Product Control Act (No.: the Enforcement of Judgments in Civil Norwegian courts will not apply the produktkontrolloven) the seller, importer and Commercial Matters. Consequently, parties chosen law in other matters than and manufacturer of products are civil and commercial judgements from contractual and to some extent non-con- subject to certain duties. The Product other signatories of the 2007 Lugano tractual liability, such as questions Control Act also allows the public Convention may be enforced in Norway regarding rights in rem, company law and authorities to restrict or prohibit marke- (and vice versa), subject only to the the legal capacity of physical and juridical ting and sales of services and products limitations of enforcement which is persons. due to safety reasons. allowed by the convention.

10 DISPUTE RESOLUTION Norway is per April 2015 not a signatory to the 2005 Hague Convention on 10.1 Court system Choice of Court Agreements. The courts in Norway have jurisdiction in both civil and criminal cases. The court 10.2 Arbitration system is divided into three levels, the Arbitration in Norway is governed by the District Court, the Court of Appeal, and Norwegian Arbitration Act (No.: vold- the Supreme Court. There are 66 District giftsloven). An arbitration award is Courts and 6 Courts of Appeal. In considered to be final and is not subject addition to these three levels, there are to substantive review. However, serious also specialized administrative organs procedural errors or public policy grounds which handle legal conflicts in special may be basis for challenging the award. areas such as welfare and consumer law, and whose decisions can be appealed to Norway is a signatory to the 1958 New the ordinary courts. There are also York Convention on the Recognition and certain specialized courts which decide Enforcement of Foreign Arbitral Awards. certain limited legal matters as the only Consequently, arbitration awards from competent court, meaning that their other signatories of the 1958 New York decisions cannot be appealed, such as Convention may be enforced in Norway the Labour Court (No.: Arbeidsretten), regardless of where the proceedings the Land Consolidation Court (No.: took place (and vice versa), subject only Jordskifteretten) and the Court of to the limitations of enforcement which Impeachment (No.: Riksretten). is allowed by the convention.

In addition to the regular courts, Norway 10.3 Choice of law also has a system of conciliation boards For contractual matters, Norwegian (No.: forliksråd). The conciliation boards courts will, as a general rule, recognise typically handle cases regarding smaller the parties’ choice of applicable law. economic and civil matters (up to NOK There are however certain limitations to 125,000), but in certain circumstances this rule; for example the parties might they can also handle matters concerning not be able to agree on terms less larger disputed amounts. Unless certain favourable for a consumer than what requirements are fulfilled, a civil case may follows from the Norwegian mandatory not be brought before the ordinary regulations protecting consumers, and

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