A permanent establishment (PE) for foreign companies arises when business activities are carried out through a fixed place of business in Norway, either fully or partially. In general, the activity must be conducted for a sufficient period of time to trigger a PE. In most cases, the existence of a PE leads to corporate tax liability in Norway.
Examples of situations that may create a permanent establishment:
- Presence of local management
- Establishment of an office
- Local production facilities or a factory
- Retail store or other physical sales outlet
- Participation in construction and/or assembly projects lasting more than 12 months
- Individuals (e.g. agents) acting on behalf of the company with authority to conclude contracts
Exemptions and tax treaty considerations
Under several bilateral tax treaties, certain auxiliary or preparatory activities may be exempt from creating a PE. These may include:
- Use of premises solely for storage, display, or delivery of goods
- Facilities used only to collect information or conduct preparatory market research
- Fixed places of business used solely for support functions that are not part of the core business operations
National law vs. tax treaties
Whether or not a foreign company has a PE in Norway is assessed under both:
- Norwegian domestic tax law, and
- The relevant Double Taxation Agreement (DTA) between Norway and the company’s home country
In some cases, a PE may be triggered under one set of rules but not the other. It’s therefore important to review both the local tax code and applicable treaty provisions.
Recommendation
If your company is planning activities in Norway and is unsure whether these could create a permanent establishment, it is strongly recommended to:
- Seek professional tax advice, or
- Apply for a binding advance ruling from the Norwegian Tax Administration (Skatteetaten)
This can help you avoid unexpected tax liabilities and ensure compliance from the outset.