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Withholding Tax on Pensions Paid Out Abroad from 1 January 2010
Effective 1 January 2010 withholding tax will apply to pensions originating in Norway for retirees residing abroad, i.e., retirees who are not residents of Norway as defined by the Tax Act. The tax is 15 percent of the pension disbursement.
The tax liability may still be limited by the tax treaty between Norway and the country where the retiree resides. The tax liability may also be limited for certain retirees living in other EEA countries (the 27 EU member states, Iceland and Liechtenstein) pursuant to the Norwegian tax limitation provisions. The latter states that when at least 90% of tax payer's income is taxed in Norway, the tax payer can demand that the tax is calculated based on the rules that apply to persons residing in Norway.
In order for these limitations to be considered when the advance tax withholding and final assessment are calculated for each retiree, the tax payer must put forth adequate documentation to establish tax exemption pursuant to tax treaty or applicability of tax limitation provisions.
The pension payer will, at the outset, need to withhold 15 percent of the payment as advance tax. If the pension payee has met the requirement for documentation described above, a tax withholding card with a lower or a zero tax rate will be issued and may be applied by the payer.
If a pension recipient is unable to put forth documentation on time, provisions in the Tax Payment Act allow for a reimbursement of the advance tax payment upon delivery of the documentation. In other words, the tax payer is not subject to the main rule, which states that he has to wait for the tax assessment following the tax year to get the advance tax payment back.
Therefore to a Norwegian based employer (payee with respect to pensions - being a multinational or a local entity) this implies an addtional deduction of 15% withholding tax, which is added to the regular advance tax and deducted from the pension when the regulations apply.
In some cases limitations to the regulations will apply (0% WHT) because adequate documentation has been submitted, therefore the payee may base the payment of pensions on the regular advance tax deduction in accordance wth the "tax card" provided by the tax authorities.
Your Taxand contact for further queries is:
T. +47 23 11 65 00