International Cruises in Norway Affected by Norwegian VAT

For an international cruise to be exempt from VAT calculation in Norway, the ship must be in transit through the Norwegian VAT area. Whether a cruise ship is in transit must be assessed concretely and is based on an overall evaluation of the cruise concept. The Ministry of Finance, in a letter dated May 3, 2022, has specified relevant factors in this assessment, such as the time the cruise ship spends in Norway, the number of ports of call in Norway with opportunities for passengers to disembark, and the length of stay in Norway in relation to the cruise's total duration.

In this case, the cruises started and ended in England and Germany and had a total duration of between 10-14 days, with the ships visiting seven to ten Norwegian ports during the 4-11 days of sailing within the VAT area along the Norwegian coast.

At the Norwegian ports, foreign passengers can disembark to explore the port cities on their own or participate in excursions or arrangements organized by the cruise company.

The District Court notes that the sale of goods and services is subject to VAT unless there is an exemption or exception according to VAT Act Section 3-1. VAT Act Section 6-28 provides VAT exemption for transport services that occur directly to or from locations outside the VAT area, but the exemption does not apply to round trips within the VAT area exceeding 24 hours.

The District Court assumes that neither the wording nor the preparatory works provide grounds for cruise trips from a foreign port via the Norwegian VAT area back to a foreign port to be exempt from VAT under VAT Act Section 6-28.

The cruise company argued that a statement from the Ministry of Finance dated April 19, 2004, had established a long-standing practice that international cruises within the Norwegian VAT area did not conduct taxable activities in Norway. This practice was claimed to constitute a legal norm that can only be changed by law.

The District Court disagrees with the cruise company and believes that the administrative practice has not achieved the status of a legal norm with the formal rank of law. The Tax Administration's decision, which imposed VAT while the ship was in Norway for the sale of passenger transport, catering services, and all other goods and services, was upheld.

Even though the judgment is not final, it is recommended that the cruise industry should map out its operations within the Norwegian VAT area and review contracts, route plans, invoicing procedures, etc.

We are happy to assist in assessing whether your business is affected by the VAT obligation and how your operations should proceed until there is a final clarification of the VAT obligation for international cruises in Norway.