Changes to tax rules and rates - reporting via the a-ordning
Reporting via the a-ordning is linked to the cash principle in Section 14-3 of the Norwegian Tax Act. Benefits must be reported in the calendar month in which they are paid or provided (see Section 5-2 of the Norwegian Tax Assessment Act).
According to the cash principle, the income must be recognised (taxed) as being received in either
- the income year in which the amount is paid or the benefit is provided, including pre-payments, or
- the earlier income year in which the amount could have been paid or the benefit provided to the taxpayer.
Therefore, it is not sufficient for the benefit to have accrued (been claimed) and for the taxpayer to have an unconditional entitlement to receive it at a later date.
The cash principle is of direct importance to the tax rates which are used as a basis for taxing a benefit. This becomes evident when income is claimed (earned) during an income year but can only be paid after the year-end. The income must be taxed in the year of payment at the tax rates applicable in the year of payment.
However, when the income is claimed is of importance in the assessment of the tax obligation. Whether or not a benefit is taxable must be assessed on the basis of the tax rules applicable as at the date of claiming, even if the benefit is to be taxed on the payment date under the tax rules applicable at the time.
Subsistence expenses claimed in 2015 and paid in 2016 – tax-related treatment and reporting in the a-ordning
Deductions for petty expenses and tax emptions for undocumented petty expenses will be abolished from the 2016 income year onwards (see Proposition 1 LS item 5.4. As a result of the regulatory changes, employers may not pay tax-free expense allowances to cover additional costs for petty expenses (subsistence expenses) incurred by employees who have free board and lodging on journeys involving overnight stays from 2016 onwards.
In the case of subsistence expenses which were reclaimed in 2015 but only paid in 2016, the tax obligation must be determined in accordance with the rules for 2015. The payment must be recognised in 2016, and therefore also reported in 2016. In 2015, the deduction entitlement for petty expenses and employer's payments of expense allowances for such petty expenses were therefore tax-free. The tax rules applicable at the time of claiming must be used as a basis for the tax-related treatment in 2016. Subsistence expenses accrued in 2015 and paid in 2016 must therefore be treated as a tax-free benefit in 2016.
Reporting using the a-ordning:
The income descriptions for subsistence expenses have been abolished from 1 January 2016 and cannot be used for reporting administrative expenses claimed in 2015 and paid in 2016. To ensure correct tax-related treatment, employers must report the benefit under 'Expense allowances – other' (see guidance)
Distance-based allowances reclaimed in 2015 and paid in 2016 – tax-related treatment and reporting in the a-ordning
The budget agreement sets the tax-free rate for distance-based allowances for using an individual's own vehicle for business travel to NOK 3.80 per kilometre for the first 10,000km during the income year for all cars from 1 January 2016 (see Recommendation S 3 (2015-2016) item 11.2.
Distance-based allowances are taxable insofar as they yield a surplus (see Section 5-11 second paragraph (a) of the Tax Act. The rates for determining when the distance-based allowance results in a surplus for tax purposes is formally determined in the annual taxation rules. The Directorate of Taxes has established rates for distance-based allowances, which must be used as a basis for the payment of distance-based allowances in 2016.
The tax rules remain unchanged for distance-based allowances which are claimed in 2015 but cannot be paid until 2016. Distance-based allowances are tax-free, provided they do not yield a surplus. As a result of the budget settlement by the Norwegian Parliament, the tax rate for determining when a distance-based allowance yields a surplus has been changed between 2015 and 2016. Therefore, the distance-based allowance must be taxed at the tax rate applicable at the time of payment.
Reporting via the a-ordning:
Car allowances up to the Directorate of Taxes' allowance rate for 2016 must be reported as 'Car allowances not subject to withholding tax' (former code 711/712): Expense allowance - distance-based allowance car (or electric car) – number of kilometres (see guidance)
The component of the car allowance that exceeds the Directorate of Taxes' allowance rate for 2016 must be reported as 'Car allowances subject to withholding tax' (former code 153) 'Expense allowance – distance-based allowance car – number of kilometres' (see guidance)
Severance pay claimed in 2015 and paid in 2016 – tax-related treatment and reporting in the a-ordning
Tax exemption for severance pay and additional severance pay in the Tax Act, Section 5-15 first paragraph (a) no. 1 (severance pay) and no. 2 (additional severance pay) has been abolished from the 2016 income year onwards (see Recommendation 4 L (2015-2016) item 11.2. As a result of the regulatory changes, employers may not pay tax-free severance pay or additional severance pay in 2016.
A separate transitional rule has been adopted for the regulatory change:
Employees who, before 1 January 2016, fulfilled the conditions to receive severance pay in accordance with the agreement between the confederations for employees and employers shall be entitled to receive tax-free severance pay paid in accordance with Section 5-15 first paragraph (a) no. 1 as worded prior to the regulatory amendment, irrespective of whether payment is made after 1 January 2016.
Similarly, employees who, before 1 January 2016, had entered into an agreement with their employers concerning the payment of additional severance pay shall be entitled to receive tax-free additional severance pay paid (partially) in accordance with Section 5-15 first paragraph (a) no. 2 as worded prior to the regulatory amendment, irrespective of whether payment is made after 1 January 2016.
Reporting via the a-ordning:
The income descriptions for tax-free severance pay have not been abolished from 1 January 2016, and can therefore be applied to the reporting of tax-free severance pay claimed in 2015 but paid in 2016 (see guidance)
Employer's contributions in connection with itinerant enterprises
The rules in the employer's contributions resolution concerning itinerant enterprises were amended with effect from 1 January 2016.
The amendments mean that the special rules for itinerant enterprises only apply in cases where employees travel to a zone with a higher rate than that applicable in the registration zone. Employers operating itinerant enterprises in a zone with a lower rate than the registration zone must calculate the employer's contributions in accordance with the rates in the registration zone for all work performed both in the registration zone and in zones with lower taxes than the registration zone.
Prior to the change, employers with itinerant enterprises in zones with a lower rate than the registration zone could use this lower rate for salaries for the work that was performed there.
The regulations applicable at the time of payment must be used as a basis for calculating employer's contributions on payments. In the case of salary paid in 2016 for work performed in 2015, the amended regulations that entered into force on 1 January 2016 will be used to calculate employer's contributions on payments.