On October 15, 2025, the government presented its proposal for the Norwegian National Budget for 2026. In this context, it has been proposed to introduce stricter guidelines for multinational groups regarding procurement of remotely deliverable services.
In this article, we will review some key points from the government's proposal and considerations for how this may affect your business.
The term remotely deliverable services refers to services where the performance or delivery, by the nature of the service, cannot be linked to a specific physical location, or where such connection is difficult to establish. This includes, for example, IT services and advisory services that can be delivered remotely.
Under current regulations, VAT shall be calculated on purchases of remotely deliverable services from outside Norway if:
The starting point is that the country where the buyer is resident determines which country has the right to tax.
In addition, VAT shall be calculated on services that are for use in Norway by business or public sector entities, even if the recipient is not resident in Norway. This does not apply if it can be documented that VAT has been calculated on the service outside Norway.
The government's proposal aims to address a "gap" in the tax system concerning multinational groups when the group purchases remotely deliverable services from external companies, based on different tax practices in various countries.
Example: A parent company has its place of business in country A and has a branch in Norway. The parent company purchases remotely deliverable services from seller S to be used by both the parent company and the branch. The parent company is invoiced at the local country's VAT rate in full and has the right to deduct input VAT.
In this case, Norway under current rules will not have the right to collect the VAT attributable to the use by the Norwegian branch.
The government's new proposal imposes an obligation to calculate VAT on remotely deliverable services in cases where the recipient (for example parent company) is resident outside Norway, if the service is for use in Norway by the same legal entity (for example branch). The obligation requires that the service is for use by business or public sector activities resident in Norway.
The proposal is based on the OECD allocation model and sets up a two-step process.
In the first part of the process, it must be determined who is the recipient of the external supply. In the second part, an allocation of costs from the external service procurement shall be made based on the internal use of the services within the enterprise. Subsequently, the Norwegian part of the group will be obligated to report VAT for its share of the use of the external service.
Furthermore, some exception rules from this calculation obligation have been proposed.
Firstly, the obligation to calculate VAT will not apply if the service is entirely for use in taxable activities that would have given the right to deduct input VAT.
Secondly, the calculation obligation will not apply if the enterprise can document that VAT has been calculated on the service outside Norway and make it probable that this input VAT cannot be deducted.
The consultation note has not proposed special rules regarding the timing of VAT, and it is assumed that VAT will be timed in the ordinary manner. This means that VAT shall be reported in the VAT return for the period when the documentation is issued. This is when the external supplier of the taxable remotely deliverable service issues the sales document to the recipient of the service.
As a starting point, all supplies in Norway are subject to VAT and will, if the conditions for registration obligation are met, have the right to deduct for acquisitions for use in the taxable activity.
There are some specific types of goods and services that are not subject to VAT in Norway, including insurance services and financial services. Acquisitions for such activities will not be deductible.
The introduction of the new rules will have various consequences for companies, depending on what activities the company conducts in Norway.
For groups where the Norwegian branch conducts purely VAT liable activities that would give deduction rights for acquisitions from the parent company, a smaller amount of administrative effects is expected, depending on what documentation requirements Norwegian tax authorities impose to document that Norwegian VAT should not be calculated by the Norwegian branch.
For groups where the Norwegian branch conducts wholly or partially VAT-exempt activities, there will be both an increase in the need for administrative measures in allocating VAT, as well as economic consequences as the branch wholly or partially cannot deduct the input VAT for its share of the acquisition.
It is recommended to establish good procedures at an early stage for how the recipient of the remotely deliverable service can ensure correct allocation of the calculation basis between parent company and branch, so that the share of the calculation basis to be reported in Norway contains the correct amount and is implemented timely in accordance with the applicable VAT period. In several cases, it would also be appropriate to develop allocation keys for this distribution of acquisitions.