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Amendments to CFC rules

On 3 October 2006, the Directorate of Taxes made some amendments to the current CFC rules (Regulation of 19 November 1999 No. 1158). The amendments apply from 1 January 2007. Details of the amendments are summarized below.

CFC legislation

Under the CFC legislation, if a foreign company is owned or controlled, directly or indirectly, for at least 50% by Norwegian taxpayers, its profits, whether or not distributed, are attributed proportionately to its Norwegian resident shareholders if the company is located in a "low-tax country". A "low-tax country" is defined as a country where the general income tax rate on corporate profits is less than two thirds of the Norwegian corporate tax rate, which would apply if the company would have been resident in Norway. A black list applies for the determination of countries that are assumed to be low-tax countries. Correspondingly, a white list includes countries assumed not to be low-tax countries. If the company is resident in a tax treaty country, the CFC legislation applies only if the company's income is mainly of a "passive" nature.

After the amendments:

-   the white list is extended to include Denmark, Sweden and Finland;
-   Morocco is removed from the white list; and
-   India is treated as a white list country only if an Indian company is not taxed at a reduced rate or is not exempt from tax under Indian tax incentives rules (previously, without any reservations).

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