Changes in VAT rules for cross-border trade of remotely deliverable services

Remotely deliverable services are defined as services where the execution or delivery by the nature of the service cannot or can hardly be linked to a specific physical location. Examples of remotely deliverable services include consulting services, marketing services, and IT services.

The Ministry proposes to amend the VAT Act Section 3-30 second paragraph to ensure that remotely deliverable services that are for use in Norway are taxed in Norway even if the service is acquired by or delivered to a recipient domiciled outside Norway. The proposal also includes an extended right to deduct, alternatively a right to a refund for businesses that are not VAT-registered, for acquired remotely deliverable services for use in their own business abroad. It is not intended that the right to deduct will affect the right to deduct (or the right to a refund) for MLEs otherwise.

The changes will result in increased administrative costs for MLEs (Multi Location Entities, i.e., for head offices with one or more branches) that must calculate VAT on remotely deliverable services purchased by a location (branch or head office) abroad if it is wholly or partly for use by the location (branch or head office) in Norway. The proposal is estimated to result in a revenue increase of approximately NOK 800 million.

New Section 3-30 (2) means that if, for example, a Swedish head office purchases remotely deliverable services for use by a branch in Norway, VAT must be calculated by the branch on the service or the portion of the service that is for use in Norway. This also applies to processed services for the portion of the service that is purchased. An exemption from the tax liability exists when the service is not acquired but is self-produced by the foreign head office/branch or the service is for use in VAT-liable activity in Norway.

New Section 4-8 authorizes the issuance of a regulation on the calculation basis for VAT for remotely deliverable services, e.g., when the service is not 100% purchased abroad for use in Norway but is partly processed by another branch or the head office of the legal entity (MLE).

New Section 8-9 gives Norwegian businesses the right to deduct VAT on purchased remotely deliverable services that are for use in their own activity outside of Norway. The provision does not, for example, give the right to deduct VAT on acquired remotely deliverable services that are for use by group companies, etc., outside the relevant MLE (head office with branch in one or more countries).

New Section 10-5 gives Norwegian businesses that are not registered for VAT the right to a refund of VAT on remotely deliverable services acquired for use in their own business (MLE) outside of Norway. The right to a refund extends as far as the right to deduct input VAT proposed in new Section 8-9.

New Section 3-30a. In addition to the above, a new provision is proposed in Section 3-30a on VAT liability for foreign financial businesses, i.e., companies that are not registered in Norway, that conduct cross-border sales and mediation of financial services to recipients in Norway. It is uncertain whether this provision will enter into force, as it may conflict with the EEA Agreement. Any tax liability here will affect the remotely deliverable services that foreign businesses must use to deliver or mediate VAT-exempt financial services in Norway where the foreign business obtains a VAT deduction in the EU according to the VAT Directive Section 169 C. This requires that the foreign business must have an overview of the relevant services and their value to be able to calculate Norwegian VAT. It is also unclear how this should be reported in VAT returns, etc.

The proposed changes, except for the new Section 3-30a, are proposed to take effect on January 1, 2026.