Withholding tax on dividends – new documentation requirements

As of 1 January 2019, new rules concerning the application of a withholding tax rate lower than 25 % will apply on dividend distributions from Norwegian companies to foreign shareholders. 

Some adjustments have been made to the originally adopted requirements, which mean that personal shareholders do not need to submit a certificate of residence if the dividend distribution is less than NOK 10,000.

The rules are implemented in Sections 5-10a in the Regulations pursuant to the Tax Payment Act.

One of the new documentation requirements entails that shareholders who are not natural persons must document their entitlement to a reduced withholding tax rate by presenting either

1. an approved withholding tax refund application or
2. an approval from the Norwegian tax authorities confirming the dividend recipient's entitlement to a reduced withholding tax rate.

When the shares are registered in VPS, the documentation must be presented to either the nominee (NOM accounts) or the account operator (segregated accounts). For shares outside of VPS, documentation must be presented directly to the dividend-paying company.

This approval scheme allows shareholders who are not natural persons to avoid having to submit an application for a withholding tax refund in order to document their entitlement to a withholding tax rate lower than 25 %.

The application for approval must give an account of and document that the conditions for either a reduced withholding tax rate under a double tax treaty or exemption from withholding tax under the Norwegian exemption method are met. No special form is currently required to submit an application, but the Tax Administration will consider designing a standard form.

The specific documentation requirements will not apply absolutely for dividend payments on shares not registered in VPS, provided that the dividend-paying company is able to confirm the shareholders' identity and tax status by other means. The Norwegian Directorate of Taxes has commented on this in the following statement (in Norwegian only).

In order to avoid being held liable for deficient withholding tax, by misjudgment of the shareholder's tax status, e.g. upon subsequent control from the tax office, the distributing company must nevertheless ensure that the documentation requirements are met in advance of the withholding tax deduction.

For a more detailed description of the new documentation rules, see Tax Administration statement.