On 15 October 2025, the Støre government presented its proposed state budget for 2026. Here are the most important proposed changes within international tax.
Limitation of interest deduction for financial institutions with foreign operations
It is proposed that Norwegian financial institutions with branches abroad will no longer be able to allocate debt and debt interest proportionally between the business in Norway and the business abroad according to the so-called gross wealth method.
The gross wealth method, which is based on the ratio between assets allocated to foreign activities and the taxpayer's total assets, has proved to be imprecise for financial companies with foreign operations, as the method has allowed double deductions for interest on debt, most recently exemplified by the DNB ruling in the Supreme Court on 12 November 2024.
The state budget follows a consultation from 10 April 2025 to put in place a new scheme for financial institutions with foreign operations, where the limitation of debt and debt interest will take place according to a principle of direct allocation. This method will ensure that the deduction for debt and interest on debt is allocated according to where it is incurred, and not according to how the gross wealth is distributed.
As a result, the taxpayer will not receive a deduction in Norway for interest on debt relating to activities abroad when Norway cannot tax income earned abroad under the tax treaty.
It is proposed that the rules enter into force with effect from the income year 2026.
Updates to the Supplementary Tax Act
The Supplementary Tax Act was enacted in January 2024 and implements a model framework to ensure global minimum taxation (Pillar 2), which will ensure that large groups are taxed at a minimum of 15 per cent regardless of where they conduct their business.
The proposed changes are intended to update the Norwegian regulations in line with administrative guidelines prepared by OCED "Inclusive framework".
The Supplementary Tax Act is amended by introducing a special rule stating that the obligation to pay national supplementary tax is placed on another group entity located in Norway if it falls on a securitisation entity. If there are no other group entities located in Norway, the securitisation unit itself will be liable to pay the national supplementary tax.
Deferred tax benefits that arise due to governmental arrangements or the introduction of new corporate tax rules in jurisdictions that have not previously had such rules, shall not be included in the calculation of simplified covered taxes under the temporary Safe-Harbour rule. The safe harbour rules are an arrangement that allows groups to set the supplementary tax rate to zero for entities in certain jurisdictions, without having to carry out the full and complex calculation of the effective tax rate.
A new "switch off-rule" is introduced which means that the Safe Harbour rules in certain cases cannot be invoked by a group for a jurisdiction. This is primarily if a jurisdiction has introduced special tax advantages or incentives to attract business and these special rules are not taken into account in the tax determination of the effective tax rate under the supplementary tax rules. Then the Safe Harbour rules cannot be used.
A number of conceptual clarifications are also proposed to ensure harmony between the Supplementary Tax Act and the model regulations.
The changes are proposed to take effect from and including the income year 2024 in essence.
The state budget must be adopted by the Storting, where the minority government is dependent on several opposition parties to pass the budget and accompanying bills. A final decision is expected in early December.
