Proposed petroleum tax increase in Norway

31 August, 2021

Today, on 31 August 2021, the Norwegian Government announced its proposal of a crucial change to the Norwegian petroleum tax system. The proposed regime will be cash-flow based and substitute the current system with uplift and depreciations.

The proposal is expected to increase the total petroleum tax. The Ministry of Finance states that the proposed changes will increase the National Budget by approximately 7 billion NOK in total for investments made in 2022.

The new system is supposed to be more predictable, sustainable and neutral than today´s uplift system.

As the proposal will be distributed next week for discussion, the case is not yet closed.

The proposal in a nutshell:

-The 22 per cent corporate tax will become deductible in the special petroleum tax base, causing the special tax to increase from 56 per cent to 71.8 per cent.

-The prevailing rules on depreciations and uplift will be substituted by an immediate deduction of the cost of new investments (not covered by the temporary rules). The cost of new investments may be deducted immediately.

-The corporate tax refund of exploration/R&D costs and decommissioning costs will be abolished.

-Loss carry forward is to be calculated ex interest.

-An immediate refund of tax value (corporate tax as well as special tax) will be granted, in order to adjust to the new rules. The tax refund will apply to both loss carry forward and excess uplift from previous years. 

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