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Proposal to introduce transfer pricing reporting and documentation rules – details

On 15 May 2007, the government presented a proposal concerning transfer pricing documentation rules for related companies. The proposal imposes the requirement to report the transfer pricing issues in the tax return and to prepare documentation. The tax authorities will use the documentation in order to evaluate whether the prices and conditions agreed between the related parties are similar to prices or conditions that would have been agreed between unrelated parties.

The new rules apply to companies that own or control directly or indirectly, either alone or together with a related party, at least 50% of the voting rights in another entity. A Norwegian permanent establishment with its head office in a foreign country and a foreign permanent establishment with its head office located in Norway, will be covered by the rules. Furthermore, partnerships where one or more of the partners are taxable in Norway will also be covered by the rules.

Compared to the draft proposal issued on 7 November 2006, this proposal contains few changes.

Reporting requirement

The Ministry of Finance proposes that a taxpayer in a group of companies will be obliged to give brief information about its transfer pricing related issues in its annual tax return. The main object of the reporting requirement is to provide the tax authorities with sufficient information to determine if they want to investigate further.

The proposal suggests that the reporting requirement is obligatory for taxpayers that have aggregated intra-group transactions to a value exceeding NOK 10 million and/or have inter-company loans and receivables to a value exceeding NOK 25 million.

The reporting requirement will enter into force in 2008 (i.e. with respect to the annual tax return for the income year 2007).

Transfer pricing documentation

According to the proposed rules, the taxpayer is required to prepare an explanation of the activity within the company and in the group, including the type and the volume of the transactions between the related parties, functional analysis, comparable analysis and a report of the transfer pricing method used.

Taxpayers are only obliged to prepare the documentation in writing upon request by the tax authorities. If requested, the taxpayer is given 45 days to prepare and file its transfer pricing documentation.

Small and medium-sized enterprises (i.e. entities that have less than 250 employees, and either total sales not exceeding NOK 400 million or balance sheet not exceeding NOK 350 million) will be exempt from the obligation to prepare transfer pricing documentation. When determining whether or not a taxpayer is exempt, it is necessary to take into account the transactions within the whole group, and not only transactions carried out by the taxpayer in Norway.

The transfer pricing documentation rules will enter into force on 1 January 2008, and the tax authorities may not ask for the documentation before the taxpayer has filed the annual tax return for the income year 2008 (i.e. spring 2009).


The two basic sanctions for not complying with the reporting requirement and the transfer pricing documentation rules are that the tax authorities may determine on a discretionary basis the transfer price on the actual transaction and may impose penalty taxes (15%-60%). The taxpayer could also lose its right to appeal the discretionary tax assessment made by the tax authorities.

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