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Update - Tax Treaty between Norway and Romania Signed

On 27 April 2015, officials from Norway and Romania signed a new income tax treaty. Once in force and effective, the new treaty will replace the 1980 income and capital tax treaty between the two countries, which currently applies.

Taxes Covered

The treaty covers Romanian tax on income and tax on profit. It covers the following Norwegian taxes:

  • The national tax on income;
  • The county municipal tax on income;
  • The municipal tax on income;
  • The national tax relating to income from the exploration for and the exploitation of submarine petroleum resources and activities and related work, including pipeline transport of petroleum produced; and
  • The national tax on remuneration to non-resident artistes

Residence

If a company is considered resident in both Contracting States, then the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement based on its place of effective management, place of registration and any other relevant factors. If the authorities cannot reach mutual agreement, then any relief or exemption from tax provided by the treaty will not apply unless agreed upon by the competent authorities.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through an individual or individuals present in the other state for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 10%
  • Interest - 5%
  • Royalties - 5%

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest or royalties are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of the Articles

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or comparable interests in a company, the assets of which consists wholly or principally of immovable property situated in the other State

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

The 1980 treaty between the two countries will terminate once the new treaty enters into force, and will cease to have effect from the date the new treaty is effective.

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