Does your company supply combined deliveries of goods with installation or assembly services? These so-called “Supply & Install Contracts” often represent a challenging area of Norwegian VAT law for international businesses. For foreign entities entering the Norwegian market, understanding these complexities and prepare accordingly is crucial to avoid costly compliance failures and unexpected tax liabilities. Below are the key areas your company must understand to prevent costly VAT-related mistakes in Norway for such sales.
Supply and install contracts are integrated arrangements where a supplier provides both goods and services as part of a single commercial transaction. Typically, these contracts involve:
The defining characteristic of these contracts is that ownership and title typically transfer to the buyer either progressively during installation or upon completion of the entire installation process in Norway. Under such arrangements, the seller normally retains risk for the goods until they are installed at the client’s location, and an acceptance test or taking over certificate is provided.
Any goods or services delivered to or in Norway will be liable for VAT unless it is explicitly exempted. When your company delivers a supply and install contract, any work done outside of Norway could be included in the main delivery covered by the sellers VAT obligations. This could also include extensive procurement and engineering phase outside of Norwegian borders and the supply of equipment. A seller entering into such contracts will typically be required to charge Norwegian VAT on the entire contract amount, regardless of where the majority of their activities are performed.
Since the work done outside of Norway might be extensive, it is advantageous for the seller to plan ahead to:
Also read: 7 FAQ's about VAT for foreign companies operating in Norway
Norwegian VAT law generally treats supply and install contracts as a single, indivisible supply of goods and services. Companies must register for VAT when supplies in Norway exceed the threshold of NOK 50,000 during any 12-month period.
When the threshold is exceeded, the manufacturing phase under a supply and install contract may already have been ongoing abroad for some time, but there has not yet been any physical activity in Norway. Payments made from the client to the foreign enterprise before any activities start in Norway, are not liable for VAT until after work starts in Norway. However, when supplies in Norway are complete, the entire contract amount should normally be subject to VAT, not only the supplies of services and goods that have taken place after work in Norway commenced. This is sometimes overlooked by foreign enterprises, which can lead to quite extensive corrective measures.
Import VAT accrues on the import of goods to Norway. The company listed as the importer of the goods in the customs declaration form is responsible for payment of import VAT to Customs.
VAT registered entities may deduct input VAT and import VAT on the VAT returns. It is a requirement for deduction that the purchased or imported goods are “meant for use” in the VAT-liable business. This entails a transfer of ownership to the client.
If the client is listed as the importer while the contract regulates that ownership of the imported goods is not transferred from the foreign business until after installation or assembly, there is a risk that the VAT deduction requirements are not eligible for the client. This is because the goods at the time of import were intended for use in the seller's VAT-liable business and not the client’s business.
The seller, on the other hand, lacks the formal documents needed to deduct the import VAT, as the import declarations are not in the correct name.
This could lead to a situation where neither the seller nor the purchaser qualifies for VAT deduction.
If the seller is obliged to calculate sales VAT on the same goods previously imported when the final ownership transfers, the client will be charged with sales VAT on the same goods at a later stage in the project. This means that even if the Norwegian client is granted the right to deduct import VAT, the situation may become increasingly challenging when the seller later charges VAT on the entire contract amount – including VAT on goods that are already imported. The client may then risk being denied deduction of sales VAT charged by the seller, because import VAT has already been deducted, and one cannot deduct VAT twice on the same goods.
Also read: Import to Norway—VAT and customs
In certain cases, the Tax Administration’s strict approach to deny deduction of import VAT has been successfully challenged. An example: In a tax appeal case (SKNS1-2023-39), the purchasing company was granted the right to deduct import VAT after an appeal. This decision involved a highly discretionary assessment where ownership was found to transfer gradually, making the purchasing company the owner at the time of import.
Tax appeal cases can be time-consuming and exhausting affairs, and as the outcome is based on discretionary assessment, they can also be quite high risk.
Planning ahead before work in Norway commences, before imports starts and even at the stage of preparing contract documents with the local purchaser of the goods that are to be installed or assembled in Norway, represents the optimal approach.
For supply and install contracts, the recommended approach is:
The challenges of supply and install contracts can potentially be mitigated through careful contract structuring. If two separate contracts are entered into, completely splitting the supply of goods and services, the supply of goods may be treated as a separate delivery for Norwegian VAT purposes.
Under such arrangements:
However, this approach requires genuine commercial separation and cannot be achieved through artificial structuring. The contracts must reflect the true commercial reality of the arrangement.
Supply and install contracts create complex VAT challenges for foreign businesses in Norway. The key is proactive planning:
This approach is far more cost-effective than dealing with tax appeals and compliance failures.
For foreign entities entering the Norwegian market, professional guidance during the planning phase is essential for avoiding costly mistakes in this challenging area of Norwegian VAT law.