The corporate tax rate will be lowered, the tax credit scheme for R&D will be increased and a special first year depreciation for machinery will be introduced. At the same time the Government proposes an interest deduction limitation for interest expenses paid to related parties.
The corporate tax rate will be lowered from 28 per cent to 27 per cent. The Government thus takes a first step in a broader reform of the corporate tax regime, aimed at reducing the rates and broadening the tax base. In March, the Government appointed a commission (the Scheel-Commission) to consider the corporate tax system in light of international developments, taking into account the coherence of the overall tax regime.
The Government will propose corresponding tax cuts on business income for self-employed and persons participating in partnerships. The specific design of these provisions will be presented in the 2014 budget this autumn.
Reduced tax rates on corporations and self-employed a.o. will reduce the tax revenue from mainland businesses by approximately NOK 3 billion.
The special tax rate on petroleum extraction and the special tax on economic rent stemming from hydropower plants will be increased by 1 percentage point to 51 per cent and 31 per cent respectively. Thus, the combined marginal tax rate will remain unchanged for these companies.
To further stimulate investments, the Government will introduce a first year additional depreciation allowance of 10 per cent of investment costs for machinery, cars, equipment etc. This implies that these assets for tax purposes can be written off by 30 per cent instead of 20 per cent in the year of purchase. The economic value for businesses over the long run is estimated at approximately 400 million NOK.
The Government proposes to strengthen Skattefunn (a tax credit scheme) by 100 million NOK to further stimulate business R&D spending. This will allow for more R&D projects to be carried through.
On 11 April 2013, the Ministry of Finance issued a public consultation on limiting tax deductions for interest expenses paid to related parties. The proposal aims to avoid multinational corporations shifting taxable profit from Norway to low tax countries. Interest deduction limitations will create a more level playing field for businesses competing with corporations engaged in extensive tax planning. The resulting increase in tax revenue is estimated at approximately 3 billion NOK and will partly finance the above mentioned tax reductions for mainland businesses.
The taxable value of non-owner occupied houses and business property for net wealth tax purposes will be increased from 50 to 60 per cent of estimated market value. Increasing the taxable value of non-owner occupied houses could also help dampen the upward pressure on residential property prices. The changes will increase tax revenue by about 500 million NOK.
The overall level of taxation remains unchanged, in line with the Government’s declaration to keep the overall tax level unchanged.
The proposals will be further elaborated in the Revised National Budget for 2013, to be presented Tuesday 7 May. The Government will formally submit the proposals to Parliament in the 2014 tax bill this autumn.
In addition, the Government presents changes to the tax regime for petroleum companies. The purpose is to increase the companies’ cost awareness. These changes are proposed to enter into force as of today.