By Siv June Johansen
As in previous years, constants in connection with the accumulation of net wages must be updated. The new constants for 2017 are now available and must be updated for the net pay calculation to be correct.
In the past, the accumulation of net wages for Norwegian workers on a net wage contract abroad has been calculated by grossing net wages with tax calculated at Norwegian rates (step tax) and national insurance contributions. As a result of the Supreme Court ruling on 11 May 2016, the Directorate of Taxes has now specified that there are three different methods for accumulating net wages earned abroad:
- Where no tax is paid in the country of work, and the taxpayer is similar in accordance with the 1-year rule.
- Where tax is actually paid in the labour state, and where double taxation is avoided by means of alternative distribution (exceptions with and without progression retention in accordance with a tax treaty)
- Where tax is actually paid in the labour state, and where double taxation is avoided by credit deductions for tax paid abroad.
In cases where the taxpayer is similar in accordance with the 1-year rule, as well as when double taxation is avoided by means of alternative distribution, the sum of net salary, and any tax that the employer has paid in the country of work (this usually comes in the following year), only Norwegian national insurance contributions (i.e. Norwegian tax rates shall not be used).
In cases where double taxation is avoided by credit deductions, net wages shall be grossed up with tax calculated at Norwegian rates (step tax) and national insurance contributions. If the final tax abroad exceeds the calculated Norwegian tax (this usually comes in the following year), foreign excess tax must be grossed only with national insurance contributions.
In order to handle this differentiation, there needs to be another program change in our upscaling module. We are happy to help you with this implementation.
At the same time, we are working to put in place a solution that automates the process of calculating all the constants that are needed each year. We are currently in dialogue with the Norwegian Tax Administration to gain access to the necessary data and hope for an immediate solution.
This is a solution we believe will increase the quality of basic data, as well as provide savings in the years to come. Feel free to contact us already now if you are interested in such a solution.
Do you want assistance with the accumulation of net wages for 2017, or want information about the automated solution? Contact Marita Johansen for a non-binding chat.