On November 24, 2023, a draft law to implement the Pillar Two GloBE rules into domestic law was introduced into the Norwegian Parliament.
The draft law includes an income inclusion rule (IIR) and a domestic minimum top-up tax (intended to be a QDMTT) for financial years beginning on or after December 31, 2023.
The under-taxed profits rule (UTPR) is not included in the draft law.
However, after reviewing this, the Norwegian Ministry of Finance has instead decided to implement the provisions as a separate act.
Whilst the geographical scope of the draft law is not directly stated in any provision, the general rules governing the scope of Norwegian taxes will apply. Svalbard is part of the Kingdom of Norway, but has been made a separate tax jurisdiction through the Svalbard Tax Act. Under the draft law, Svalbard will be treated as a separate jurisdiction for GloBE jurisdictional blending purposes.
The draft law does not comprehensively implement the GloBE rules as a standalone document. The notes to the law make it clear that the Ministry of Finance is to issue detailed regulations. These will contain the detailed definitions for the application of the law (eg for the definition of covered taxes). It is intended that the Ministry of Finance regulation will be in place at the same time as the draft law enters into force (January 1, 2024).
The notes to the draft law also address other ancillary issues, including the tax deduction scheme for research and development costs, in section 16-40 of the Tax Act. Under this scheme, the taxpayer can receive a credit for tax and social security contributions for 19 percent of research and development costs. If the credit exceeds the assessed tax in the year in question, the excess is refunded.
The Ministry of Finance confirms that it assumes that tax credits under section 16-40 of the Tax Act will constitute a qualified refundable tax credit.
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