The steps Americans in Norway can take to minimise or avoid double taxation
The US tax system is global, meaning Americans living overseas still need to file returns with the IRS even if they are a tax resident in another country.
While most Americans are aware of this responsibility, Rune Andersen, partner and head of the tax department at Ræder Bing law firm, said that the issue of double taxation was a common challenge faced by Americans who moved to Norway.
'Taxation based on citizenship is not common. In general, most countries tax individuals when they become residents, and the taxation ceases when they move permanently, but this is different for Americans,' he said.
Familiarise yourself with the tax treaty
In principle double taxation is avoided through a tax treaty between Norway and the US.
Americans who are tax residents in Norway can receive tax credits for the tax they pay overseas.
Meanwhile, the US has the Foreign Earned Income Exclusion (FEIE) system, which allows Americans living overseas to exclude a portion of their foreign income from US taxation. Americans can also use Form 1116 to claim a credit for taxes paid to Norway.
Seek the help of experts
However, the tax treaty between the US and Norway can be quite complex, meaning the main step Americans living in Norway can take to avoid or minimise double tax is to seek the services of a professional.
'To avoid double taxation due to the US rules, it is, in most cases, necessary to involve a US tax advisor with international experience. In addition, the tax treaty between Norway and the US is very complex and old, so it is very important to involve tax experts to make sure the tax treaty is correctly applied,' Andersen said.
Advertisement
Furthermore, gaps exist in the tax treaty, meaning Americans can be taxed in the US and Norway.
One such example is that some US Individual Retirement Accounts (IRA) end up being taxed in both Norway and the US as the account holder will be taxed by the US once the IRA is paid out, and the Norwegian authorities, who sometimes view this windfall as income.
'The Norwegian authorities have, in some cases, concluded that the IRA is savings, and accordingly, the underlying profits occurring within the account has been taxed as capital income despite the fact that no withdrawals have been made. This will lead to double taxation because Americans may be taxed in the US when the money is paid to the taxpayer at retirement. In my opinion, this is an incorrect treatment of Americans in Norway,' Andersen said.
READ ALSO:
Is it worth paying for professional help with taxes?
Ensure any professionals you use are on the same page
Ideally, those looking to try and minimise the prospect of dual taxation should have expert help with both the US and Norwegian tax systems and ensure that both experts are in contact with one another.
'Get Norwegian and US tax advisors that have experience with tax treaties. These advisors need to coordinate because it is necessary to make sure that tax credits are given,' Helene Aasland, a
senior lawyer at Ræder Bing, told The Local.
Advertisement
Approach things on a case-by-case basis
Another tip was to try and treat certain scenarios, such as trusts, on a case-by-case basis rather than take general advice to avoid paying unnecessary taxes.
'Taxpayers resident in Norway have to report their global income and wealth. We see misunderstandings related to trusts. A trust can be organised in different ways. If a beneficiary is a tax resident in Norway, the taxpayer may be deemed as owner of the assets in the trust and accordingly be liable to pay wealth tax on the assets, but there is not a clear answer to this. Each case needs to be considered separately,' Aasland said.
Keep an eye on developments
While there isn't a lot taxpayers can do to try and change policy themselves, keeping up to date with the latest developments can give Americans living in Norway a rough idea of how their tax liabilities could change in the future.
Advertisement
For example, the US could opt to
abolish taxing citizens who live overseas
.
Furthermore,
Norway's controversial wealth tax
will likely be a key debate and policy point during the general election later this year and, as a result, be changed.
"We see many Americans moving to Norway for personal reasons, business reasons or whatever, but they get into a wealth tax system that makes it too expensive to live here," Andersen said.
Norway's wealth tax is applied to global wealth and is charged at a rate of between 0.525 and 1.1 percent of one's total net wealth above 1.7 million kroner.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Local Norway
4 days ago
- Local Norway
How will Norway's shock interest rate cut affect your finances?
What has changed? Norges Bank, Norway's central bank, announced that it is reducing its policy rate by a quarter point from 4.5 percent to 4.25 percent, following a unanimous decision of its Monetary Policy and Financial Stability Committee on June 18th. This marks the first cut in the interest rate in five years. While other central banks have reduced interest rates, Norges Bank has stuck fast to its 4.5 percent rate since December 2023. In a press conference, the bank said that the cut was the start of "a cautious normalisation of the policy rate", with the rate likely to be cut again over the next six months, probably in September and December, ending the year at just under 4 percent. In her press conference, the bank's governor Ida Wolden Bache conceded that the bank had not yet reached its 2 percent inflation target, but said that other economic considerations also needed to be taken into account. "The job of getting inflation back to target is not complete. But we believe the time has now come to ease the brakes a little." Advertisement What will the change mean to mortgage rates? Norway's largest bank, DNB, immediately followed the announcement with a quarter-point cut to its mortgage rate, taking the standard rate to 5.24 percent. Its competitors Nordea and SpareBank1 Sør-Norge followed shortly afterwards with their own cuts. This will bring welcome relief to homeowners with large mortgages. In six weeks' time, according to a calculation by Norway's public broadcaster NRK , a family with a 4m kroner mortgage will be paying about 800 kroner less a month in interest before tax. "It's gratifying that Norges Bank is reducing rates today," Norway's prime minister Jonas Gahr Støre, wrote in a post on Facebook. "This is especially good news for everyone who has a mortgage." However, in the press conference Bache said that she did not expect mortgage lenders to pass through all of the future cuts the bank is planning. The bank expects the average mortgage rate to fall from 5.6 percent today to 4.6 percent in 2028. Advertisement What will the cuts mean for property prices? Lower interest rates, and the prospect of still lower rates in the future, are likely to further push up the price of apartments and detached houses in Norway as buyers calculate they will be able to afford the payments on larger loans. What will the change mean for Norwegian krone exchange rates? The krone has been steadily strengthening against the US dollar since the start of this year, dropping from close to 11.5 kroner to the dollar to around 9.8 earlier this week. After the rate cut was announced it shot back to about 10 kroner. This is good news for people who live in Norway but who are paid in dollars or euro, bringing an effective pay rise. It is an effective pay cut, however, for foreigners living in Norway and earning in kroner, meaning any money sent to relatives or savings accounts outside Norway will be worth less. The weakening of the krone will also make it more expensive for people living in Norway to travel abroad, especially to the eurozone. A euro, worth only 8.13 kroner in 2014, is worth 11.55 kroner, up from 11.44 before today's announcement. Advertisement What will the cuts mean for inf lation? The inflation rate in May was 3 percent , still well above the bank's 2 percent target, although the bank said in its announcement that, excluding energy prices, inflation had been "lower than expected" in recent months. The bank said that it expected restrained wage growth to pull the inflation rate back towards 2 percent even with the rate cuts. In his Facebook post, Gahr Støre, said the government could take some credit for the decision to cut rates, as could Norway's unions. "The government has led a responsible and safe economic policy, and the working parties [unions and employers] have agreed on responsible wage settlements, so that price growth can continue to go down and help lay the foundation for interest cuts." There is a risk, however, that the central bank has miscalculated and that by cutting rates too early, it will allow inflation to start to rise again. Kjetil Storesletten, Professor of Economics at the University of Minnesota, said that he believed the bank was moving too soon to cut rates. " I think this was early. They probably thought that the Norwegian krone would finally strengthen. I expect that there will be a weak krone, and that there will be inflationary pressure in Norway," he told the TV2 broadcaster . With record low unemployment and oil money being spent, he believes that inflation will bounce back.
Local Norway
4 days ago
- Local Norway
Norway's national bank announces surprise rate cut
Norges Bank lowered its policy rate by a quarter point to 4.25 percent and said it could make another cut this year "if the economy evolves broadly as currently projected". The bank had kept its rate unchanged since December 2023 after hiking them in efforts to tame inflation. Analysts had expected the bank to keep its rate unchanged until September. Norges Bank Governor Ida Wolden Bache said inflation had declined since its March monetary policy meeting. "The inflation outlook for the coming year indicates lower inflation than previously expected," she said. "A cautious normalisation of the policy rate will pave the way for inflation to return to target without restricting the economy more than necessary." Core inflation -- which excludes volatile energy prices -- slowed to 2.8 percent in May. While it is cooling, inflation remains above the central bank's two-percent target. Advertisement The rate cut comes as financial markets worry about the economic impact of US President Donald Trump's tariffs and the conflict between Israel and Iran. "The uncertainty surrounding the outlook is greater than normal," Norges Bank said in a statement. "An escalation of conflicts between countries and uncertainty about future trade policies may result in renewed financial market turbulence and could impact both Norwegian and international growth prospects," it said. The bank added: "If the economy takes a different path than currently envisaged, the policy rate path may also differ from that implied by the forecast."
Local Norway
5 days ago
- Local Norway
Norway launches flagship 34 billion kroner carbon capture project
Bearing the English name for the Vikings' wooden ships, the Longship project involves capturing carbon dioxide emitted from a cement plant, and later from an incineration plant. The CO2 will be transported by ship to a terminal on Norway's west coast, and then injected beneath the seabed for storage. The project has received significant financial support from the Norwegian state, which will cover 22 billion kroner ($2.2 billion) of the total estimated cost of 34 billion kroner for the installation and operation over the first 10 years. Norway has presented Longship as the "world's first full-scale value chain" for capture and storage of carbon, one of the greenhouse gases that cause climate change. "This is not just an important moment for Norway, it is a breakthrough for carbon capture and storage in Europe," Norwegian Energy Minister Terje Aasland said. For the capture component, the facility will be officially inaugurated Wednesday at a cement plant operated by Germany's Heidelberg Materials in Brevik, southeastern Norway. It will prevent 400,000 tonnes of CO2 from escaping into the atmosphere each year. Advertisement Another part of the project, the Hafslund Celsio waste incineration plant near Oslo, is also expected to capture 350,000 tonnes of CO2 a year starting in 2029. The liquefied carbon dioxide will be transported by ship to the Oygarden terminal near Bergen, where it will be injected into a pipeline to be stored 110 kilometres (68 miles) offshore in a saline aquifer 2.6 kilometres below the seabed. The terminal has been in place since last year as part of the Northern Lights project, led by oil giants Equinor, Shell and TotalEnergies, which claims to be "the world's first commercial CO2 transport and storage service". Also on Tuesday, Switzerland's government, known as the Federal Council, announced that it had signed an agreement with Norway on "carbon storage". Swiss Environment Minister Albert Rosti, who visited the Northern Lights project this week, said in a council statement that "carbon storage will be crucial for Switzerland on its path to net zero". "The agreement will allow Swiss CO2 to be stored in Norway and also enable both countries to trade negative emissions in a state-recognised framework," the council said. Swiss Environment Minister Albert Rosti, who recently visited the Northern Lights project, said "carbon storage will be crucial for Switzerland on its path to net zero". CCS technology is cited by the UN's Intergovernmental Panel on Climate Change (IPCC) as a way of reducing the carbon footprint of industries hard to decarbonise, but it remains complex and expensive. Without financial assistance, it is currently more profitable for industries to purchase "pollution permits" on the European carbon market than to pay for capturing, transporting and storing their CO2. The total global carbon capture capacity currently amounts to only about 50 million tonnes, according to the International Energy Agency, equivalent to just 0.1 percent of global annual emissions.
