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Norway

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Budget for 2014 – Amendments

On 8 November 2013, the new government presented its amendments to the Budget Bill for 2014 . The amended Bill is the first step by the new government towards changing the tax policy. The government will promote growth of the economy through targeted tax reductions by giving high priority on infrastructure and putting emphasis on other measures to stimulate productivity and competitiveness. In general, the new government is reducing taxes, whereas the former government, Stoltenberg II, increased them. Details of the amended Budget for 2014 in respect of direct taxes, which unless otherwise indicated will apply from 1 January 2014, are summarized below.

Corporate taxation

-   The planned reduction of the corporate income tax rate to 27% (currently, 28%) will proceed as planned.
-   The main features of the former government's proposal on new rules limiting the deductibility of interest paid to related parties are maintained. Consequently, no deduction is given for interest paid to related parties if the total net interest expenses exceed 30% of the adjusted taxable income of the company paying the interest. Interest paid to unrelated creditors is taken into consideration when calculating the interest deduction limit. The amended Budget entails that the additional safe haven, under which interest expenses up to NOK 3 million remain deductible, is increased to NOK 5 million.
-   The planned introduction of 10% initial depreciation for machinery and other operating equipment in asset group D will proceed as planned. The government will also initiate an evaluation of the depreciation rules and how they relate to real value loss of operating equipment.
-   The tax incentive scheme for R&D costs (Skattefunn) is expanded. The cap on internal R&D is increased to NOK 8 million (currently, NOK 5.5 million). The overall cap on internal and outsourced R&D is maintained at NOK 22 million which is in line with the former government's proposal.

Individual taxation

-   The amended Budget entails that the personal income tax rate is reduced to 27% in order to maintain the tax rate at the same level as for companies.
-   The minimum allowance for employment income is increased to 43% (currently, 40%) and to 27% (currently, 26%) for pension income.
-   The social security contributions will be increased by 0.4 percentage points.
-   The special tax credit for pension income is adjusted to the other tax changes in order to keep the minimum pension tax free for its recipients.
-   The proposed increases to the thresholds after which the surtax of 9% or 12% on personal income (toppskatt) applies are abolished.
-   The home investment savings scheme for people below the age of 34 years (BSU) is expanded. The annual maximum deposit entitling for a tax credit is increased to NOK 25,000, whereas the overall ceiling for deposits is increased to NOK 200,000.

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