The Double Taxation Relief (Taxes on Income) (Norway) Order 2000

Explanatory Note

(This note is not part of the Order)

The Convention with Norway set out in the Schedule to this Order replaces the Convention signed on 3rd October 1985 and set out in the Schedule to the Double Taxation Relief (Taxes on Income) Order (S.I. 1985/1998).

The Convention provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property and gains derived from the alienation of such property may be taxed in the country in which the property is situated (Articles 6 and 13).

Shipping and air transport profits are generally to be taxed only in the country of residence of the operator (Article 8).

The Convention includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country is not to exceed 5 per cent. of the gross amount of the dividends when the beneficial owner is a company controlling at least 10 per cent. of the voting power in the company paying the dividends. In all other cases the rate of tax shall not exceed 15 per cent. of the gross amount of the dividends (Article 10).

In general, interest and royalties are to be taxed only in the country in which the beneficial owner is resident (Articles 11 and 12).

Capital gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer’s residence. Gains arising from the disposal of assets of a permanent establishment or fixed base which the taxpayer has in the other country may be taxed in that other country (Article 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 14 and 15). This general rule will not apply in circumstances where an employee and employer are resident in one country, the employment is exercised in the other country and the employer bears no responsibility for the services rendered by the employee who operates under the supervision and control of a person other than the employer. Instead the remuneration of that employee may also be taxed in the country in which the employment is exercised.

Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in the latter country (Article 16). Income derived from the activities of artistes and sportsmen may, with certain exemptions, be taxed in the country in which those activities are exercised (Article 17). Pensions (other than those paid in respect of Government service) and annuities are to be taxed only in the recipient’s country of residence (Article 18). Government Service remuneration and pensions are normally taxable only by the paying Government (Article 19). Certain payments made to visiting students and business apprentices are to be exempt from tax in the country visited (Article 20).

Other income not specified in the Convention will in most cases be taxed only by the country of which the beneficial owner is a resident (Article 21).

The Capital Article (Article 22) reflects the existence of a capital tax in Norway and provides that capital represented by immovable property may be taxed in the country in which the property is situated. Capital represented by movable property is normally to be taxed only in the taxpayer’s country of residence. Capital represented by assets of a permanent establishment or fixed base which the taxpayer has in the other country, may be taxed in the other country.

Special rules are included in respect of income or profits from activities connected with offshore oil and gas exploration. Trading profits from such activities are deemed to arise through a permanent establishment or fixed base and, subject to a de minimis time rule, may be taxed in the country where the activities are carried on. Employees may, in general, be taxed in the country in which the employment is exercised. There are also special provisions covering capital gains on the disposal of offshore mineral exploration and exploitation rights and assets (Article 23).

The Convention also includes special rules for the avoidance of double taxation of production profits from certain oil and gas fields in the North Sea, which extend across the dividing line between the United Kingdom and Norwegian sectors of the continental shelf (Articles 24 to 27).

Where income continues to be taxable in both countries, credit will be given by the country of the taxpayer’s residence in respect of tax imposed by the other country (Article 28).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 29). Provision is made for consultation and exchange of information between the taxation authorities of the two countries (Articles 30 and 31).

The Exchange of Notes clarifies the intended interpretation of certain parts of the Convention.

The Convention will enter into force on the date of the later of the notifications by each country of the completion of its legislative procedures. The Convention is to take effect in the United Kingdom from 1st April in respect of corporation tax and from 6th April for income tax and capital gains tax in the calendar year next following that in which it enters into force. The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.