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Doing business in Norway – an introduction (2010) About Moore Stephens

About this publication

The material included in this introduction to Norway is assembled by Veel Karlsen & Co ANS in Oslo, an independent associated firm of Moore Stephens Norway DA. See Appendix H for more information about Moore Stephens International and the Norwegian Moore Stephens associated firms.

The purpose of the publication is to give an introduction to those considering starting business in Norway. Our intention is to provide a description of the business environment and the main aspects of the legal framework of Norwegian business life.

All firms are independent entities, owned, controlled and managed locally, without any partnership between them. However, the firms actively strive to work together, sharing information, talent and know how.

For readers actually planning to do business in Norway, we recommend professional assistance. Please contact the liaison partner in one of the Norwegian member firms listed below if you wish to discuss any matter in further detail. We believe the information included in this introduction to be correct at the time of printing. However, we cannot accept responsibility for any loss as a result of acting or refraining of acting based on information in the publication.

Moore Stephens Norway member firms - contact information MOORE STEPHENS NORWAY DA - Oslo

VEEL KARLSEN & CO ANS - Oslo

Wergelandsveien 1-3, N-0167 Oslo Liaison partner: Kåre Kjøllesdal Telephone: +47 22 98 15 40 Fax: +47 22 98 15 41 E-mail: kk@oslo.moorestephens.no Web site: http://www.moorestephens.no

Wergelandsveien 1-3, N-0167 Oslo Liaison partner: Kåre Kjøllesdal Telephone: +47 22 98 15 40 Fax: +47 22 98 15 41 E-mail: kk@veelkarlsen.no Web site: http://www.veelkarlsen.no

PROFERO REVISJON DA - Oslo

ORKLA REVISJON AS - Trondheim

Wergelandsveien 1-3, N-0167 Oslo Liaison partner: Lill Ann Monge Telephone: +47 22 98 15 40 Fax: +47 22 98 15 41 E-mail: lam@proferorevisjon.no Web site: http://www.proferorevisjon.no

Vestre Rosten 85, N-7075 Tiller Liaison partner: Arnt Rosset Telephone: +47 72 89 94 10 Fax: +47 72 89 94 30 E-mail: arnt@orkla-revisjon.no Web site: http://www.orkla-revisjon.no

MOORE STEPHENS CONSULTING AS - Oslo Wergelandsveien 1-3, N-0167 Oslo Contact partners:Kåre Kjøllesdal (kk@veelkarlsen.no) Torhild Søberg (ts@proferorevisjon.no) Telephone: +47 22 98 15 40 Fax: +47 22 98 15 41 Web site: http://www.moorestephens.no

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Table of contents Page 1. Norway at a glance Geography, climate and population Politics, government and legal system Education Religion Currency rates Economy and standards of living European cooperation Monopolies and restraint of trade Restrictions on foreign ownership Sources of finance Tax incentives on investments The labour market and labour market legislation The social security system, holiday payment, accident liability insurance and mandatory occupational pension scheme Visa and entry requirements Communication style, business protocol, etiquette and negotiating behaviour

5 5 5 5 5 6 6 7 7 7 7 7 8 8 9

2. Forms of business organisation Introduction Limited liability companies Public limited liability companies (ASA) Private limited liability companies (AS) Branches of foreign companies Partnerships Joint ventures Sole practitioners (self employed) Representation offices European companies (SE / Societas Europaea) Other corporate forms

11 11 11 11 11 11 12 12 12 12 13

3. Establishment procedures and statutory requirements Procedures for formation Memorandum of association Articles of association Capital Liabilities of shareholders, Board Members and the general manager Costs of incorporation and later changes Management Information on public record Shelf companies Registration of business organisations Foreign entities starting business in Norway

13 13 13 14 14 14 14 15 15 15 16

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Doing business in Norway – an introduction (2010) Table of contents Page 4. Accounting and reporting requirements Documentation and records requirements Accounting period Local accounting standards/principles and differences to IFRS Differences in NGAAP between small and non-small companies Valuation rules Equity requirements and limitations of dividends Form and content of financial statements (annual accounts) Public information / filing Liquidation

16 19 19 23 24 24 25 26 27

5. Audit requirements and standards National basis for audit / statutory audit requirements Appointment of auditors Local auditing standards and differences to international standards Independence Reporting and audit opinion Quality control Mandatory certifications

27 28 28 28 28 29 29

6. Corporate taxation Tax rates and tax basis Residence, territoriality and permanent establishment Calculation of net taxable income and tax valuation principles Filing and signing of tax returns Payment, collection and interest Tax loss carry-forward/back Tax audits Items subject to withholding tax Taxation of branches and joint ventures Taxation of partnerships Taxation of sole practitioners (self employed) Non-taxable companies and organisations

29 29 30 33 33 33 33 33 33 34 34 35

7. Taxation of shipping activities Introduction Overview of the tax system Entry rules Exit rules Settlement of deferred tax from the previous tax deferral regime Tonnage tax Taxation of seamen Tax treaties

35 35 36 36 37 37 37 37

8. Social security Employers’ contribution Employees’ contribution International social security agreements

38 38 38

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Doing business in Norway – an introduction (2010) Table of contents Page 9. Personal taxation Tax rates Calculation of net taxable income Tax payment Filing of tax returns Tax residency and immigration/emigration Non-residents

39 40 40 41 41 42

10. Value added tax (VAT) Overview of the system Registration procedures Taxable transactions, exemptions and zero-rated transactions VAT rates Deductions and refunds Import of services – the reverse charge system Filing of VAT-returns and payments Foreign businesses and VAT

43 43 43 44 44 44 44 45

11. Tax treaties

12. Miscellaneous taxes Taxation of foreign artists Inheritance/gift tax Real estate (property) tax and registration fee/stamp duty Other/special taxes/duties

48 48 48 48

13. Other issues Employment of foreigners and work permits Reporting of business activities in Norway and contracts/employees Taxation of N-CFC’s (Norwegian Controlled Foreign Companies)

49 49 50

Appendices A – Useful web-links

B – Depreciation rates for tax purposes

C – Low tax countries (as defined by the Norwegian tax authorities)

D – Tax treaties

E – Considerations when doing business in Norway

F – Specimen audit opinion

G – Challenging requirements in the bookkeeping regulations

H – Information about Moore Stephens

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Doing business in Norway – an introduction (2010) 1. Norway at a glance

Labour Party (AP), the Socialist Left Party (SV) and the Centre Party (SP).

Geography, climate and population Norway is located on the western half of the Scandinavian peninsula with borders to Russia, Finland and Sweden. The country is the 7th largest in Europe with an area of 324.219 square kilometers (125.100 square miles), a long narrow shape and a coastline of 2.650 km, yet the population is only 4.85 million.

Because of decades where no single party has held an absolute parliamentary majority, politics in Norway are characterised by a consensual approach. The fact that the population is homogeneous and unilingual, except for a small Lappish minority in the north, provides a stable business environment.

Oslo is the capital with about 550.000 inhabitants (900.000 in the larger Oslo area). Bergen (250.000), Stavanger/ Sandnes (200.000), Trondheim (160.000), Fredrikstad/ Sarpsborg (120.000), Porsgrunn/Skien (85.000), Kristiansand (80.000) and Tromsø (70.000), are the largest cities after Oslo. The coastal districts have a temperate marine climate with mild winters and relative cool summers. The interior and the Oslo area, has colder winters and warmer summers.

Politics, government and legal system Norway is a constitutional monarchy with an even distribution of power among the three branches of government - the executive (the Government), the legislative (the Parliament) and the judicial (the Courts of Law). Legislative power rests in the Parliament called “Stortinget” which is elected every four years by citizens aged 18 or above under a system of proportional representation. The country is political stable. The Labour Party (AP) has been in power most periods since WW II. At present the Government is a majority coalition of the Copyright © MOORE STEPHENS NORWAY DA

The legal system goes back to the old Nordic law. After Norway’s entry to the European Economic Area Agreement (the EEA agreement, see below), European Union rules and regulations have to a large extent become an integral part of Norwegian law. Education 24% of the population has an education on university level and about 50% has finished high school (upper secondary school;10. - 12. grade). Religion 85% of Norwegians are members of the Evangelical Lutheran Church of Norway. Currency rates NOK 1 = USD 0.172 = EUR 0.120 as at December 31, 2009 (June 30, 2009: NOK 1 = USD 0.156 = EUR 0.111 and December 31, 2008: NOK 1 = USD 0.143 = EUR 0.101). Economy and standards of living Traditionally a country dominated by fisheries, forestry and agriculture, Norway has transformed its economy over the past decades into a modern diversified industrial country and today boasts one of the highest living standards in the world, with GDP (PPP) per capita in 2008 of USD 55.200 (United States: USD 47.000, UK: USD 36.500, Germany: USD 35.500, Denmark: USD 38.200, Sweden: USD 37.500 and EU: USD 33.800 (estimate)); information from the International Monetary Fund. Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Norway was on top of the United Nations Development Program “Human development index”, measuring achievements in life expectancy, educational attainment and adjusted real income, in 2001-2006, no 2 in 2007 and no 1 again in 2008. Norway is no 10 on the World Bank’s 2010 “Ease of doing business index”, scoring high on closing a business and enforcing contracts and lower on employing workers and dealing with construction permits. The oil and gas industry in the North Sea, hydroelectric power, energy intensive manufacturing industries, fisheries, forestry, shipping and tourism are most important today. Norway has the world’s 12th largest merchant marine (January 2008), with a tonnage of 15 million gross tons (Panama is 1 with 173 and Liberia is 2 with 79 million gross tons). However, 5% of the world tonnage is controlled by parent companies located in Norway; no 5 after Greece (17.4%), Japan (15.1%), Germany (8.7%) and China (7.2%). Norwegian exports are steadily increasing with about 80% to European countries. Sweden, Germany, Great Britain, USA, the Netherlands, Denmark and France are the largest importers. The most important imports are cars, electrical equipment and machinery, metals, telecommunication equipment, textiles, clothing and footwear. Sweden, Germany, Denmark, Great Britain, USA, the Netherlands and France are the largest exporters. The GDP-growth has varied between 6.1% and 1.3% between 2000 and 2008 with a growth of 2.1% in 2008. Norway has a substantial surplus on her trade balance, to a large degree from export of oil and gas. Norway was the 11th largest oil producer in 2007, with a production of 25% of Saudi Arabia’s, the world’s largest oil producer. It was the world’s 4th largest

net oil exporter in 2007 (with 29% of Saudi Arabia’s export). Norway is the 6th largest natural gas producer and the country is the 3rd largest net natural gas exporter, with 44% of Russia’s export, the world’s largest gas exporter). The inflation has varied between 0.6% and 3.0% between 2000 and 2008 with an inflation of 2.1% in 2008. The interest rate in mortgage companies has varied between 7.4% and 3.4% between 2000 and 2008 with an interest rate of 6.4% at the end of 2008. The unemployment rate has varied between 2.5% and 4.9% between 2000 and 2008 with a rate of 3.0% at the end of December 2008.

European cooperation Norway is not a member of the European Union (EU). However, there is a large degree of economic co-operation with the EU-countries through the European Economic Area Agreement (the EEA agreement; between the EU-countries and Iceland, Liechtenstein and Norway). Under this agreement, Norway largely adheres to the EU-principles of free movement of goods, persons, services and capital and the agreement gives Norway access to the EU’s internal market for most products.

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Doing business in Norway – an introduction (2010) Monopolies and restraint of trade General provisions against harmful restrictive practices regulate monopolies in Norway. Market dominance is not formally prohibited, however, if a dominant enterprise affects prices in a manner not considered beneficial to the economy, the Competition Authority (Konkurransetilsynet) is authorised to act to remedy the situation. Restrictions on foreign ownership The government maintains an open position towards foreign investment in Norway, and free enterprise, free trade and deregulation of business is usually encouraged. Existing regulations, standards and practices may, however, marginally favour Norwegian, Scandinavian and EEA investors, in that order. A Norwegian company may be 100% owned by foreign persons or companies. However, the company must have a Norwegian address. The Competition Authority must be notified of mergers and acquisitions involving companies with a total turnover of NOK 50 million or more, but not if only one of the involved companies have a turnover of 20 million or more. The merger/acquisition can not be finalized before the Competition Authority has concluded. The transaction is approved if a request for further information is not received from the Competition Authority within 15 days. Special ownership rules apply to foreigners investing in fisheries, air transport, finance, insurance, energy and offshore activities. There are no direct price controls on imports or exports and no exchange controls on payments for dividends, branch profits, royalty and service fees to foreign recipients. However, indirect price controls/ price fixing exist in the oil industry, within electricity utilities and within the fisheries.

Sources of finance Banks, factoring companies, leasing companies and the Norwegian Industrial and Innovation Norway, are the most important sources of finance. Tax incentives on investments No free trade zones and few tax incentives for investment exist. Examples are lower social security, see paragraph 8, and lower tax rates and extra deductions for individuals, see paragraph 9, in the northern regions Nord-Troms and Finnmark and some government programs for research and development and exports.

The labour market and labour market legislation The Norwegian labour market has traditions of stability and is characterized by good employeremployee relations. Labour costs are high and represent a large percentage of total production costs. Central wage negotiations are done annually between the larger employee’s and employer’s organizations. The results of these negotiations tend to serve as guidelines for the local wage negotiations. An agreement in writing between the employee and the employer is always required. A normal annual salary would be in the range of NOK 350.000 – 450.000, depending on type of industry and geographical location. The average salary in 2008 for all employees was NOK 410.000 and the average for the 10% best paid was NOK 796.000 (the 10% lowest: NOK 232 000).

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Doing business in Norway – an introduction (2010) The increase in disposable real income from 2000 to 2008 was 30%. There is no legally stipulated minimum wage. Fringe benefits such as pensions, car/travel allowance, free newspapers and telephone are often offered but not required, except for a mandatory pension scheme, see below. It is not permitted to employ children under the age of 13 and there are special provisions for children between the age of 13 and 18. Temporary employment is as a general rule not permitted. Minimum notice periods for termination and dismissals vary from one to six months subject to the period of employment and the age of the employee. To be lawful, dismissals must be based on altered conditions in or for the company, or circumstances directly related to the work performance. Normal working hours are 37.5 hours per week. Allowed amount of overtime per day, week and year is strictly regulated by law and night work is usually prohibited. There are provisions for the rights of the employees in case of sale of a company, including provisions for salaries, working conditions and dismissals. The social security system, holiday payments, accident liability insurance and mandatory occupational pension scheme All persons resident in Norway, including foreigners employed in Norwegian companies with certain exceptions, are covered by the National Insurance Act. The national insurance scheme covers medical treatment, sickness benefits after 16 days (the employer pays normal wages for the first 16 days), cash benefits in connection with maternity/adoption leave, child benefits, support during the illness of children, old-age pensions and unemployment benefits. The financing is

based on payments from employees, employers and the government, see paragraph 8. All employees are usually taking five weeks of holiday per year. However, the last four days are by binding agreement only for employees being member of an employee organization. The employee shall receive holiday pay, paid by the employer, normally 12% of gross wages (excluding holiday pay) in the preceding year. Employers must, according to the Working Environment Act, enter into an employers’ liability insurance to cover accidents at work. All employers must also establish a pension scheme for all employees. The employers contribution must be at least two percent of the employees’ gross earnings between 1 and 12G (G = the National Insurance basic amount = NOK 72.881 as at May 1, 2009). Visa and entry requirements A valid passport is required to enter Norway. Norwegian entry visas are governed by the rules of the Schengen Agreement. According to this accord, a visa issued for admission to most EU countries (including the EEA countries Norway, Liechtenstein and Iceland) is also valid for admission to other member countries. Under Schengen visa procedures, a tourist is only permitted to spend a total of three months in the “Schengen area” within any six-month period.

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Doing business in Norway – an introduction (2010) Communication style, business protocol, etiquette and negotiating behaviour Communication style Most Norwegians speak and read English fluently and many speak German or French. At the initial meeting Norwegians are usually ready to talk business after a few minutes of small talk. Light conversation does not represent an important part of doing business. Norwegians get to know their counterparts while talking business and they are used to a frank and straightforward language. On the other hand, when not really interested in a deal, they may be reluctant to say so bluntly.

partners in business gatherings. Expect little touching except for the hand-shake, and avoid arm grabbing and backslapping. Visitors from expressive, high-contact cultures should, however, not misinterpret Norwegian reserve as coldness or arrogance.

Business visitors find Norwegians egalitarian and less formal than people from more hierarchical cultures. Business meetings start on time in Norway. If you going to be a few minutes late, call your counterpart to explain the problem and advise your new arrival time. It is considered polite for visitors to suggest a probable ending time for the first meeting, if possible. This allows your counterparts to plan their day. Meetings are rarely interrupted by phone calls or other intrusions. Schedules and deadlines are firm. Norwegians quickly lose interest in dealing with business partners who fail to meet obligations in a timely manner.

Business protocol and etiquette Office hours are normally from 8:00 a.m. to 4:00 p.m. Monday through Friday. Summer hours are often from 8:00 a.m. to 3:00 p.m. Avoid the summer holiday, usually the last part of June to the first part of August and the week before and after Christmas, the week before Easter, May 17th (Norway’s National Day) and May 18th. Be aware that if a public holiday falls on a Thursday, Norwegians are likely to take Friday off. They also like to leave the office promptly at an ordinary working day.

Although a warm and friendly people, most Norwegians are restrained in their verbal and nonverbal communication and this may sometimes be misinterpreted as lack of interest in a discussion. Norwegians tend to be softspoken and taciturn. On the other hand, business visitors will not experience any long gaps in conversation. It is usually not considered acceptable to interrupt another speaker at meetings. Norwegians tend to stand at an arm's length distance from conversational

At the bargaining table, Norwegians normally employ moderate gaze behaviour, i.e. alternately looking their counterparts in the eye and then looking away. Norwegians use few hand and arm gestures and facial expressions during negotiations. The 'A-OK' thumband-forefinger circle gesture is usually considered rude.

Male business visitors should normally wear a suit or jacket and tie. Women may wear a suit, dress or dressy pants. Despite the Nordic reserve, expect a warm, friendly welcome. The greeting will a firm brief handshake and steady, moderate eye contact. Shake hands with each person present and again when leaving. Some Norwegians may regard the American greeting, "How are you?" as a personal question which requires a detailed response. Better are impersonal expressions such as "Good morning" or "Good afternoon."

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Doing business in Norway – an introduction (2010) When introduced for the first time, address your counterpart by his or her full name. However, Norwegians often suggest the use of first names. Professional titles such as Doctor and Professor are used, followed by the family name, whereas business titles such as “Director” are not used. Norwegians appreciate modesty and a certain degree of humility. They normally consider flaunting wealth or success to be in poor taste. Be sure to avoid comments which could be taken as boastful or self-promoting. Good topics of conversation include hobbies, politics, travel and sports. Avoid criticism of people or cultures, Norwegians value tolerance and charity.

commonly served around 7:00 p.m. If you are going to be more than a few minutes late, call. Expect to leave around 10:00 p.m. in the winter, about 11:00 p.m. in the summer. Unless your hosts are smokers, do not light up in a private home or in an office without asking permission. It is polite to bring chocolates, pastries, wine, liquor or flowers. Present the gift to the lady of the house, who is likely to open it upon receipt.

Except for Christmas presents and logo items, this is not a gift-giving business culture. However, upon successful completion of negotiations, a bottle of cognac or whisky will be welcome.

Negotiating behaviour Norwegian business people react favourably to a well-documented, straightforward approach without hype or exaggerated claims. In contrast to some other northern European cultures, humour is quite acceptable during presentations. Jokes and casual conversation mix well with serious business discussions. But remember that self-deprecating humour is least likely to offend.

Norwegians often invite visitors out for meals. Business entertaining is usually done at lunch or dinner. If the meeting takes place in the late morning, you may invite your local counterpart for lunch. The person who invites usually pays the bill. It is usual to discuss business during lunch. At a business dinner it is polite to wait for the host to bring up business matters. It is perfectly acceptable for a female business visitor to invite a male counterpart to dinner, and she normally will have no problem paying the bill. A woman alone will also feel comfortable in a restaurant or bar. It is not uncommon for visitors to be invited home for a meal. Dinner is

Avoid a negotiating tactic starting off with a highly inflated initial offer and then offering price reductions. Using artificial deadlines as a pressure tactic is also likely to back-fire. Far worse however would be to offer, directly or indirectly, any kind of inducement which could be taken as a bribe. Norway consistently ranks at the top of any list of corruption-free countries. The written agreement is regarded as definitive when subsequent business disagreements arise. Norwegians react negatively if a counterpart relies on the strength of the relationship to renegotiate terms after the contract has been signed.

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Doing business in Norway – an introduction (2010) 2. Forms of business organisation Introduction Activities are regarded as business activities if they involve transactions of an economic nature that involve a minimum activity that exceed the threshold of a hobby, have a minimum duration, have a potential of generating profits and is carried out on the individual’s own expenses and risks. Business can be done through companies, partnerships, joint ventures or by individuals acting as sole practitioners (self employed). The choice will be influenced by the extent of personal responsibilities, risks, taxes, rights, duties and the liberty to manage the assets of the business. A company - the most common form is a public or private limited liability company - is a distinct legal entity created to separate the company’s business from the personal affairs of its owners. Investors can choose their preferred form of entity. Small companies are usually organised as private limited liability companies, whereas large companies often choose to establish themselves as a public limited liability company. Limited liability companies Public limited liability companies In Norwegian: Almennaksjeselskap, abbreviated ASA. Private limited liability companies In Norwegian: Aksjeselskap, abbreviated AS. The main differences between a public (ASA) and a private (AS) limited liability company are:  minimum paid in share capital (ASA: NOK 1.000.000 and AS: NOK 100.000)

 the shares of an ASA must be registered with Verdipapirsentralen (VPS) – The Norwegian Central Securities Depository

 only an ASA can use certain types of financial instruments or use a public prospectus for share issues  the minimum number of Board Members are different, see paragraph 3 below  the general manager (Corporate Executive Officer) can not be elected as the chairman of the Board of an ASA  only an ASA may be listed on the Oslo Stock Exchange  only an AS may arrange the annual general meeting without a physical meeting (but only if the company has less than 20 shareholders)  less stringent rules for mergers and demergers for an AS than an ASA  less stringent rules for capital increases for an AS than an ASA  less stringent accounting and valuation principles for an AS than an ASA (see paragraph 4 below)  the number of mandatory notes is lower for an AS (see paragraph 4 below)  more stringent procedures for Board approval and note disclosure of salaries, share options and other remuneration to the general manager and key executives for an ASA

Branches of foreign companies A registered branch office of a foreign company (Norskregistrert Utenlandsk Foretak (NUF)) is entitled to carry out any business activity included in the objectives of the foreign company; that is liable for all liabilities of the branch with all its assets, at home and abroad. The foreign “head office” must register the branch office with The Register of Business Enterprises (Foretaksregisteret). There is no equity investment requirement and no requirement for a separate Board of Directors. Partnerships The legal identities of partnerships are not distinct from the personal identity of the partners who have unlimited liability for the debts of the business. Three main kinds of partnerships are available:

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Doing business in Norway – an introduction (2010)  a partnership with joint and several liability (ANS – ansvarlig selskap), where each participant has unlimited personal liability for the obligations of the enterprise,  a partnership with divided liability (DA – selskap med delt ansvar) where the participant’s liability is limited relative to each participant’s share of the partnership and  a limited partnership (KS–kommandittselskap) where at least one partner has unlimited liability for the company’s total obligations while the liability of each of the other partners is limited to a fixed amount. The partner with unlimited liability is normally an AS or ASA and this partners’ minimum partnership share is 10%. It can also be arranged to include a silent partner where it is agreed that the participation shall not appear towards third parties, where the silent partner is liable only for a fixed amount and where it can be agreed that the silent partner shall be allocated a share of the profit/loss (a silent internal partnership – stille/indre selskap). There are no equity investment requirements for partnerships. Joint ventures A joint venture (samarbeidsavtale) is a business enterprise regulated by an agreement between two or more parties. Joint ventures are frequently used in project related activities, often building projects. There is no equity investment requirement. Sole practitioners (self employed) Legal identities of sole practitioners (enkeltpersonforetak) are not distinct from the personal identity of the participant, who has unlimited liability for the debts of the business. There is no equity investment requirement.

The following criteria usually indicate that an individual qualify as a sole practitioner and is not regarded as an employee:  the activities of the individual is carried out on the individual's own expenses and risks

 the individual covers all expenses, has the responsibility and/or the risk for the contract profit  the individual has more than one principal, has its own office, tools and materials and/or may use own employees  the payment is not based on an hourly rate

No single criterion is considered decisive. The tax authorities will examine the assignment as a whole before a decision is reached. Representation offices Representation offices may be established for information activities limited to "auxiliary and preparatory character". The activities must not include any kind of sales activities or power to conclude binding contracts for sales on behalf of a non-resident enterprise. If these conditions are not met, the activities are considered as a “permanent establishment” in Norway, see detailed definition in paragraph 11. European companies (SE / Societas Europaea) All provisions in the Council Regulation (EC) No 2157/2001, are incorporated into Norwegian law. Norwegian taxation rules for liquidations, see paragraph 7, will become effective when a company is converted into an SE-company and moved out of Norway. This is proposed changed, with no taxation for movements within the EU/EEC-area.

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Doing business in Norway – an introduction (2010) Other corporate forms Other corporate forms include agents representing a foreign company, cooperatives (samvirkelag), foundations (stiftelser) and legacies (legater) regulated in separate acts. A trust is not treated as an independent subject for tax purposes, and it is therefore seldom used.

3. Establishment procedures and statutory requirements Procedures for formation A national or a foreign investor who intends to set up a subsidiary in Norway may form a new company or purchase the shares of an existing company. The company is formed when the shareholders sign a memorandum of association, in which the shareholders elect the Board of Directors and the auditor. A company in the process of incorporation, and not yet registered, is not considered to be an independent entity, and the founders are fully responsible for any liabilities arising from its activities. Upon registration the company takes over all liabilities, including the liabilities related to activities carried out between the date of founding and the date of registration. The company must be registered with the Central Coordinating Register for Legal Entities (CCRLE – Enhetsregisteret) no later than three months after the date of the Memorandum of association (see below). Memorandum of association The memorandum of association (stiftelsesdokumentet) must be prepared

The comments in the paragraphs below relate to public limited liability companies (ASA), unless otherwise stated.

and signed by the founders and the following must be included:  The articles of association (see below)  The names, addresses and date of birth of the founders

 The number of shares for each founder and the subscription price of the shares

 The deadline for the subscription and payment of subscribed capital

 The name of the members of the Board of Directors  The name of the auditor  A balance sheet at the date of incorporation signed by all founders must be enclosed

For other corporate forms, except branches, joint ventures and silent partnerships, there must be a written and dated partnership agreement signed by all participants. Articles of association The articles of association (vedtektene) must include the following information:  The name of the company (at least 3 Norwegian letters or numbers and not identical to names already registered, independent of municipality and business sector)  That the company shall be an ASA (no requirement for an AS)  Location of the registered office  The business objectives of the company  Share capital (size and number of shares; common and preferred shares permitted)  Number of Board Members  Items to be decided by the Annual General Shareholders’ Meeting

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Doing business in Norway – an introduction (2010) Capital A public limited liability company must have a minimum share capital of NOK 1.000.000 (NOK 100.000 for private limited liability companies) intact after payment of the incorporation costs, see below. Consequently, a premium is needed unless it is included in the Memorandum of Association that the costs shall be absorbed by the founders. The initial shares must be fully paid before registration, by payment in cash or other assets, including property, know-how and patents. A Norwegian company may be 100% owned by foreign persons or companies. There are no duties on share issues and subsequent transfers of shares (unless traded through brokers). Liabilities of shareholders, Board Members and the general manager A shareholder’s liability is limited to the amount of shares subscribed or the purchase price of the shares. However, the company, shareholders and creditors may demand that shareholders, members of the Board of Directors and the general manager (Corporate Executive Officer) compensate any loss which they may have caused by intent or through negligence during the performance of their duties. Costs of incorporation and changes The costs of incorporating a Norwegian company typically amount to NOK 10.000 – 15.000 for professional charges related to preparation of mandatory registration documents and fees of NOK 6.000 (NOK 5.000 if filed electronically) payable to the Register of Business Enterprises (Foretaksregisteret). A flat fee of NOK 2.500 (January 2009) is charged by the Register for later changes.

Management (general manager, Board of Directors and the Annual General Meeting) The general manager’s primary task is the day-to-day management of the company based on guidelines, if any, from the Board of Directors. The day-today management does not cover matters which, in relation to the company's affairs, are of an extraordinary nature or of major importance. The general manager must ensure that the accounts of the company are in accordance with Norwegian legislation and regulations and that the assets of the company are managed in a sound manner. At least every four months and every month for an ASA, the general manager must make a statement on the company’s activities, position and profit/loss developments to the Board of Directors at a meeting or in writing. The Board of Directors must consist of at least three persons. However, if the share capital for a private limited liability company is less than NOK 3.000.000, the Board may consist of one or two members and one deputy. The Board appoints the general manager (Corporate Executive Officer). The general manager and at least half of the members of the Board must be domiciled in Norway or in an EU/EEAcountry. An ASA must always appoint a general manager. The Board may decide not to appoint a general manager in an AS if the share capital is less than NOK 3.000.000. The tasks of the general manager are in this case performed by the Board. The general manager can not be elected as the chairman of the Board of an ASA or of an AS with a share capital of more than NOK 3.000.000. The employees are entitled to representation on the Board if the company has more than 30 employees.

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Doing business in Norway – an introduction (2010) The Boards’ primary task is to ascertain a sound organisation of the company, including long term planning and budgets, and if necessary to define guidelines for the activities of the general manager (Corporate Executive Officer). The Board must be up to date about the company’s financial position, including a review of the general managers’ reporting, see below, and a follow-up of a sufficient equity level (see paragraph 4). The Board must ensure that the companies’ activities, accounts and asset management are subject to adequate controls. The Board in an AS must approve the salaries, share options and other remuneration to the general manager and to key executives in a meeting. The Board, the general manager and key executives can not receive remuneration from other firms, except from group companies. Companies with more than 200 employees must elect a “corporate assembly”, with two-thirds of the representatives chosen at the annual shareholders’ meeting and the remaining one-third selected by employees. A limited liability company must hold an Annual General Meeting (AGM) within six months after the close of each financial year, with the following items usually on the agenda: approval of the annual accounts and directors’ report, approval of distribution of dividends (if any), approval of the audit fee, approval of the Boards’ proposal for salaries, share options and other remuneration to the general manager and key executives (in an ASA), approval of all purchases from or sales to a shareholder/ Board member/ general manager (transactions outside the ordinary activities of the company) if the market value exceeds NOK

50,000 and 10% of the share capital at the transaction date (sales/purchases below NOK 50,000 can be approved by the Board of Directors), appointment of new Board members (if any), appointment of a new auditor (not reappointment) and any other business that, by law or pursuant to the Articles of association, is to be approved at the AGM. Information on public record The following details of the company must be filed on a public record with The Register of Business Enterprises (Foretaksregisteret): the share capital, names and addresses of the Board of Directors and the general manager, the Articles of association, the name of the auditor, the financial statements (which must be filed within seven months after the company's year end, but no later than one month after the AGM). Shelf companies Acquisition of a shelf company allows investors a prompt start up of business. Immediately after the acquisition has been concluded, an extraordinary shareholders' meeting is held in order to vote for the necessary changes to the Articles of association and to elect new Board Members and/or auditor. Registration of business organisations Public limited liability companies, personal limited liability companies, branches of foreign companies, partnerships, sole practitioners and foundations or associations conducting business activities must be registered with The Register of Business Enterprises (Foretaksregisteret). To have an enterprise registered, which normally takes about two weeks, part 1 of the combined registration form “Samordnet registermelding” and, if liable for VAT also part 2, must be

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Doing business in Norway – an introduction (2010) prepared and submitted to the Registry. Following registration, the company will receive a nine-digit organization number (needed for identification purposes, including opening of bank accounts, hiring employees and registering in the VAT-register). Some types of businesses require authorization before starting business. Authorization is required for businesses like driving instructors, doctors, physiotherapists, auditors, accountants, lawyers, stock-brokers and real-estate brokers.

Foreign entities starting business in Norway Foreign entities that plan to start business activities in Norway, or on the Norwegian continental shelf, must use one of the types of organisation in paragraph 2 above and all registration procedures listed above must be followed. However, if the enterprise is conducted in the course of construction and installation work and is of a limited duration (usually less than 6 or 12 months), or if there is a hiring out of people from the enterprise’s home country (see paragraph 6), no such registration is required. See, however, paragraph 13 for reporting requirements to COFTA.

4. Accounting and reporting requirements Documentation and records requirements The following entities are obliged to keep accounts according to the Accounting Act:  all public and private limited liability companies  partnerships (if the turnover exceeds NOK 5 million, if they have more than 5 employees in average or there are more than 5 partners)  sole practitioners (if total assets exceed NOK 20 million or the number of employees in average exceed 20)  finance institutions  lawyers and law firms (required by industry regulations)  foundations, co-operations and legacies (only if total assets exceed NOK 20 million or the number of employees in average exceed 20 unless profit is the business objective)  foreign entities, including branches, with taxable business activities in Norway

The Board of Directors and the general manager (Corporate Executive Officer) are responsible for maintenance of the accounting records and for preparation of financial statements. The bookkeeping may be done abroad, but the accounting material must be returned to Norway for filing after the end of the accounting period. The Bookkeeping Act contains detailed bookkeeping procedures for entities obliged to keep accounts (see above). All enterprises obliged to submit a trading statement pursuant to the Tax Assessment Act or VAT returns pursuant to the VAT Act, also have a bookkeeping obligation. The most important provisions in the Bookkeeping Act are:

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Doing business in Norway – an introduction (2010) Fundamental bookkeeping principles Bookkeeping, specification, documentation and storage of accounting information shall take place in accordance with the following fundamental principles: 1. Clear and orderly accounting system There shall be a clear and orderly accounting system that enables the production of statutory financial reporting and specifications, that is organised in such a manner that the duty of disclosure can be complied with 2. Completeness All transactions and financial activities must be entered in the accounting system 3. Substantiality Entries shall be the result of actual events or accounting valuations and shall pertain to the business of the enterprise 4. Accuracy Information shall be entered and specified correctly and accurately 5. Updating Information shall be entered and specified as often as required by the nature of the information and the nature and scope of the business of the enterprise 6. Documentation of entries Entries shall be documented in a manner that shows its justification 7. Traceability There shall be a two-way control path between documentation, specifications and statutory financial reporting 8. Storage Documentation, specifications and statutory financial reporting shall be stored for as long as reasonably required for the control of the statutory financial reporting. Storage shall take place in a form that enables the material to be read 9. Security The accounting material shall be adequately secured against alteration, deletion or loss 10. Generally accepted bookkeeping practice Bookkeeping, specification, documentation and storage of accounting information shall comply with generally accepted bookkeeping practice

owners, partners or for own business, specification of sales to owners and partners and specification of sales and other benefits to leading personnel. A specification of VAT and a specification of benefits/payments that must be included on pay-certificates and tax deducted must be prepared for each period with statutory financial reporting. The Ministry shall in a regulation give more detailed rules concerning the contents of specifications as mentioned in the first and second paragraphs.

Specifications of statutory financial reporting For each period with statutory financial reporting, and at least once every fourth months, the following must be prepared: bookkeeping specification, account specification, customer specification, supplier specification, specification of withdrawals for

Rectification of entries Entries shall not be changed or deleted after the deadlines mentioned above have expired. After these deadlines have expired, rectification shall take place in the form of new, documented postings. Such corrections shall be made by the original posting being reversed in its entirety.

Accounting system The accounting system shall be capable of reproducing on paper specifications of statutory financial reporting as mentioned above. The Ministry may in a regulation require other forms of reproduction. Documentation of the accounting system shall be provided, describing the possibilities for control and how system-generated items can be checked, including relevant codes and fixed data, if this is necessary to enable the entries to be controlled. The Ministry may in a regulation set out requirements for the documentation of underlying electronic systems. Bookkeeping and updating Enterprises with a bookkeeping obligation shall enter all information necessary for the preparation of specifications of statutory financial reporting as mentioned above, and of statutory financial reporting. Entries shall be made as often as required by the nature and scope of the business and the transactions. The bookkeeping must be updated by the deadlines for statutory financial reporting, and at least once every four months. The Ministry may in a regulation grant exemption from the requirement for updating every four months for enterprises with a bookkeeping obligation which have few transactions. Cash transactions shall be registered daily, unless a fixed cash system is used. Bookkeeping currency The bookkeeping shall be in NOK, unless the Ministry decides otherwise in a regulation.

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Doing business in Norway – an introduction (2010) When information has been deleted, this shall be clearly shown in the documentation or specification. Documentation of entries Entries shall be documented. Documentation shall be issued with a content that is correct and complete, and it shall show the justification for the entries. The documentation shall not be changed after it has been issued. If the documentation consists of several documents, the primary document shall contain references to the other documents. Entries shall be easy to follow from the documentation via the specifications to the statutory financial reporting. Similarly, starting from the statutory financial reporting, it shall be easy to find the documentation for the individual entries. The documentation shall be systematised in a manner that enables its completeness to be checked. The Ministry may in a regulation stipulate requirements concerning the format of the documentation. Documentation of the balance sheet When preparing the annual accounts, all balance sheet items shall be documented unless they are insignificant. For enterprises with a bookkeeping obligation, this provision shall apply correspondingly to the balance sheet items in the trading statement. The Ministry may in a regulation provide more detailed rules for the documentation of the individual balance sheet items. Language requirement Specifications of statutory financial reporting as mentioned above and documentation of the accounting system shall be in Norwegian, Swedish, Danish or English unless the Ministry in a regulation or an individual decision decides otherwise. Storage The following accounting material is subject to a storage requirement: 1. annual accounts and other statutory financial reporting, the annual report and the auditor's report 2. specifications of statutory financial reporting as mentioned above 3. documentation of entries and deleted entries, of the accounting system and of the balance sheet 4. numbered letters from the auditor 5. agreements concerning the business, with the exception of agreements of minor importance

6. correspondence that provides important additional information in connection with an entry 7. outgoing packing slips or corresponding documentation available on paper at the time of delivery 8. price lists that are required to be prepared by act or regulation Accounting information as mentioned in the first paragraph, subparagraphs 1 to 4, shall be stored in Norway for ten years after the end of the financial year. Accounting material as mentioned in the first paragraph, subparagraphs 5 to 8, shall be stored in Norway for three years and six months after the end of the financial year. Entries which were initially electronically available shall remain electronically available for three years and six months after the end of the financial year. Accounting material that is subject to a storage requirement shall be stored in an orderly manner and shall be adequately secured against destruction, loss and alteration. It shall be possible to present the accounting material to public control authorities during the entire storage period in a form that enables it be checked. The accounting material shall be available in readable form and shall be capable of being printed on paper during the entire storage period. The Ministry may in a regulation or individual decision grant exemption from the provisions in the second paragraph concerning storage location, storage period and electronic availability. The accounting material must be transferred to Norway for storage, within 1 month after the approval of the statutory accounts but no later than 7 months after the year end, if the bookkeeping is done abroad. The Ministry has issued detailed regulations which supplement the provisions of the Accounting Act and stipulate further requirements. The following is included:  requirements for statutory specifications  requirements for updating of the bookkeeping and bookkeeping in a foreign currency  documentation of bookkeeping entries (including contents of sales documents)  documentation of the balance sheet  storage requirements  special rules for industries and sectors (building and construction, taxis, hair care businesses, hairdressers and beauticians,

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Doing business in Norway – an introduction (2010) service industries, businesses serving alcoholic beverages, hotels, foreign companies and persons with business on the Norwegian Continental shelf and dealers in second-hand goods, works of art, collectors’ items and antiques) See Appendix G for a summary of challenging requirements in the bookkeeping regulations.

Accounting period Companies must have a 31.12 year end, but a subsidiary of a foreign company with a differing accounting year may adopt its parent's year end and a non 31.12 year end may be used for companies with seasonal variations, but only if the information value of the accounts is increased. No preceding approval is required. The reasons for a non 31.12 year end must be reported to the Register of Annual Company Accounts (Regnskapsregisteret). Local accounting standards/ principles and differences to IFRS Norwegian generally accepted accounting principles (NGAAP) are transaction oriented based on a set of fundamental accounting principles, rather than the balance sheet based conceptual framework of IFRS. The financial statements are prepared based on the principle of “true and fair view” and the statements must comply with the valuation rules (see below) and the fundamental accounting principles within the Accounting Act. Ten following ten fundamental accounting principles must be applied (with due regard to cost/benefit considerations and practicability): 1. the transaction principle transactions shall be recognised at the value of the consideration at the time of the transaction, normally at the time of the transfer of risk and control

2. earned income income is recognised when earned, normally when a sales transaction takes place 3. matching costs shall be expensed in the same period as the related income 4. prudence is reflected by using the lower of cost or market in the valuation of assets and in recognition of unrealised losses 5. hedge accounting when an unrealised loss is hedged, the unrealised loss shall not be recognised 6. accounting estimates uncertain items shall be stated at the estimated value based on the information available at the time when the accounts are prepared. The estimates shall be made without excessive prudence 7. the all inclusive income concept all income and expenses shall be included in the income statement and the effect of changes in accounting policies and correction of prior periods’ errors shall be charged to equity 8. application of accounting policies the annual accounts shall be prepared according to consistent accounting policies applied consistently over time 9. going concern the annual accounts shall be prepared with the assumption of the enterprise as a going concern insofar as it is not likely that the enterprise will be wound up 10. good accounting practice matters not directly mentioned in the Accounting Act should be dealt with in compliance with good accounting practice

The enterprises listed on the Oslo Stock Exchange (OSE) have to comply with the various listing requirements included in the OSE regulations (Børsreglementet). In addition, the Norwegian Securities and Exchange Commission (Kredittilsynet) issues accounting and reporting requirements relevant to the enterprises within their jurisdiction, including financial institutions.

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Doing business in Norway – an introduction (2010) Companies listed on the OSE must use IAS/IFRS-principles in the consolidated financial statements (group accounts). Listed and non-listed companies’ financial statements (annual accounts) may be prepared using IAS/IFRS-rules or they can be prepared using NGAAP. The Accounting Act permits a simplified application of IFRS (“IFRS light”) using IFRS valuation principles (with a very limited number of divergences, including treatment of dividends and group contributions) but with less stringent note disclosures. The main differences between NGAAP for non-small companies and IFRSstandards are (see below for differences in NGAAP for non-small and small companies): General issues Form and elements of financial statements  A statement of recognised gains and losses is not required  Listed enterprises are required to present income statements and statements of cash flows for the current and preceding two years, and balance sheets for the current and preceding year  The exemptions from preparing consolidated financial statements are more limited than under IFRS Statement of cash flows  Cash and cash equivalents do not include bank overdrafts  Dividends paid are classified within financing activities  Dividends received, taxes and interest are classified within operating activities  If a cash receipt or payment relates to more than one type of activity, it is classified according to the predominant source of cash flow for the item Basis of accounting  NGAAP is based on a set of transaction oriented fundamental accounting principles rather than a balance sheet based conceptual framework

 The opportunity to carry assets and liabilities at fair value is more limited than under IFRS

 The historical cost basis is adopted for most items in the financial statements Consolidation  A subsidiary may be omitted from consolidation if its activities are significantly dissimilar from those of the parent  If a subsidiary’s financial statements are not as of the same date as those of the parent, an interim report must be prepared  Uniform accounting policies must be used throughout the group  Minority interests are computed based on fair values (except goodwill)  Minority interests are recognised as a separate component of equity Business combinations  The cost of acquisition and the valuation of the acquired assets and liabilities may alternatively be determined at the “date of agreement”  The criteria for using uniting of interests accounting are stricter than under IFRS  Registration and issue costs of equity securities are deducted from equity  Internal costs are not included in the cost of acquisition  If an acquisition is structured as a legal merger, adjustments to goodwill cannot be made after the end of the accounting period during which the transaction took place  Deferred tax relating to fair value adjustments may be discounted  Business combinations between enterprises under common control or with identical owners are accounted for at book value Foreign currency translation  Monetary items may be measured in foreign currency at the balance sheet date before being translated using the exchange rate at the balance sheet date  The financial statements of a foreign entity in a hyperinflationary economy may be measured as if its functional currency were its parent’s reporting currency Prior period adjustments and other accounting changes  Adjustments in the current period of accounting policy changes and material errors without restating comparatives are not allowed

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Doing business in Norway – an introduction (2010)  Change of accounting estimate for depreciation may be recognised as if the new useful life had always been used Events after the balance sheet date  Proposed dividends are recognised in the balance sheet as a short term liability

The balance sheet General topics  Equity must be separated between paid-in and earned capital  The current portion of long-term debt may be classified as current or non-current  There are no specific offset rules Property, plant and equipment  Dismantling and removal costs can be accrued over the estimated life of an asset, or accounted for through depreciation  Interest must be capitalised as part of the cost of an asset  The residual value of an asset is usually not considered when calculating the depreciable amount  The cumulative effect of change in the useful life of an asset may be recognised in the current year  The cost of periodic maintenance may be accrued over the period between maintenance-work  Re-measurement is not allowed  Compensation received is netted against the related loss or impairment Intangible assets  Own research and development costs may be expensed as incurred or capitalized  Revaluation is not permitted in most instances  There is no requirement for certain intangible assets to be tested annually for impairment. The assets are depreciated Investment property  Investment property is accounted for as property, plant and equipment, and remeasurement to fair value is not permitted  Investment property is not shown on a separate line Investments in associates and joint ventures  There is no distinction between jointly controlled entities, jointly controlled assets and jointly controlled operations

Financial instruments, including hedging  With the exception of certain financial instruments held for trading, accounting practice for financial instruments varies  In order to be carried at fair value, financial instruments, including derivatives, have to be held for trading and meet certain criteria  The accounting for embedded derivatives varies  The “held-to-maturity accounting method” is not allowed under NGAAP (except for debt securities held by insurance enterprises)  With limited exceptions, recognised changes in fair value must be recorded in the income statement  In many cases an impairment loss is not recognised unless it is other than temporary  There are no specific rules for de-recognition of assets and practice varies  Classification of a financial instrument as a liability or equity generally follows the legal form of the instrument  Split accounting for compound financial instruments is rare  Hedge accounting is applied more freely than under IFRS and accounting practice varies, although changes in the fair value of hedging instruments normally are deferred  In some cases special rules apply to banks and insurance enterprises Inventories

 LIFO is not permitted Biological assets  There are no specific rules  There is no reference to biological assets under NGAAP, and accounting practice may vary  In any case, biological assets are not allowed to be stated at fair value  Biological assets are not shown on a separate line Equity

 A reconciliation of changes in equity is not

required to be presented as a separate statement. A note disclosure is sufficient  Dividends are recognised as a liability in the period to which they pertain  Dividends declared are presented on the face of the income statement  The cost of issuing equity securities in a business combination is debited directly to equity

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Doing business in Norway – an introduction (2010) Provisions  Anticipated gains from the expected disposal of assets can be deducted from a restructuring provision if the disposal is an integral part of the restructuring plan  The unwinding of the discount need not be presented as a component of interest  A provision for decommissioning may be accrued over the life of the underlying asset or accounted for through depreciation  The cost of repairs and maintenance may be accrued over the period between maintenance-work  NGAAP quantifies the various levels of possibility Deferred tax  All temporary differences are recognised  Certain deferred taxes may be discounted  There are some specific requirements for industries such as oil and gas, power generation and shipping

The income statement General topics  The operating result (profit/loss) is shown on a separate line  Appropriations of profit/loss are shown on the face of the income statement  There is no specific guidance on offsetting Revenue  Dividend receivable from subsidiaries may be accounted for when shareholder approval is probable  The principle of probability is not clearly defined Government grants  A grant that funds the excess of an investment’s cost over its fair value must be offset against the cost of the investment, otherwise it should be carried separately  All grants, including “hidden” grants like interest free loans, must be booked based on the value at the time of transaction Employee benefits and share-based payments  A long-term risk-free interest rate may be used to discount employee benefit liabilities  There is no guidance on accounting for multi employee benefits and practice may vary  Vested post service costs should be spread on a straight line basis

 For options granted to employees, an expense based on the intrinsic value at the date of grant should be recognised over the vesting period Interest expense  Interest must be capitalised on qualifying current assets, but can be expensed for long term assets  The enterprise’s weighted average interest cost may be used to capitalise interest Income tax

 There is no specific guidance on accounting for withholding taxes on income

Extraordinary and exceptional items  Extraordinary items are presented separately before income taxes and the attributable income tax is presented on a separate line

Special topics Leases  There is no guidance on accounting by a lessor and practice may vary  The leased asset is always recorded at the present value of the minimum lease payments  In discounting the minimum lease payments there is a choice between the interest rate implicit in the lease and the lessee’s incremental borrowing rate  There is no guidance on separate classification of linked transactions involving buildings and land Earnings per share

 Basic and diluted EPS are presented based on income both before and after extraordinary items  The majority and minorities’ part of profit is included in income

Related party transactions  Disclosures apply only to listed and other enterprises with “considerable public importance”  Information about losses on receivables and allowance for doubtful debts is not required  Pension plans for employees are not defined as related parties

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Doing business in Norway – an introduction (2010) Financial instruments disclosure  Disclosure requirements are differentiated between large, small and other enterprises as well as financial institutions, the latter through separate regulation  The level of financial market risk disclosure varies Accompanying financial and other information

 A Directors’ report containing specified information is required

 There is no requirement to show prior period amounts in the notes

Interim financial reporting

 A balance sheet for the corresponding interim period must be shown

Differences in NGAAP between small and non-small companies Small companies may under NGAAP use less stringent accounting and valuation principles and less detailed notes. A Norwegian accounting standard (NRS 8) has been prepared for small companies by the Norwegian Accounting Standards Board (Norsk Regnskapsstiftelse). A company is defined as small if it two of the following three criteria is met: less than NOK 60 million in revenue, less than NOK 30 million of total assets and fewer than 50 employees. The main differences in NGAAP between small and non-small companies are: Form and content of financial statements (see below) Accounting principles Small companies may choose not to follow all requirements within the earned income principle, the matching principle and the hedge accounting principle (see above), if this is in accordance with the relevant accounting standards. The balance sheet Small companies may:  use only variable production cost in valuation of inventories (excluded costs must be expensed)

 choose not to capitalize the cost of developing intangible assets (costs can be expensed)  choose not to realize a net deferred tax asset (but a net deferred tax liability must be accounted for)  value listed shares and bonds that are part of a trade portfolio at the lower of cost or market  choose the completion-of contract-method for long term manufacturing contracts  choose not to account for future pension obligations covered by insurance companies as liabilities (yearly premiums paid can instead be expensed)  use net book values of assets and liabilities when accounting for mergers and demergers The income statement Small companies may:  take total sales proceeds, including payment for future service- and guarantee costs, to income with an accrual for estimated future costs  choose not to account for leasing contracts of financial nature as liabilities (costs must be expensed)  take the effect of changes in accounting principles to income as extraordinary items

 take the effect of prior years’ corrections to income as extraordinary items

 choose not to expense share based payments to management and employees The notes Number of mandatory notes is lower and the content of the notes is less detailed for small companies. Mandatory notes (see below) and other notes that must be included if they are necessary to assess the financial position and the result of the company, are listed in the Accounting Act. An ASA must disclose salaries, share options and other remuneration to the general manager and key executives. Associations and societies, including foundations, with a non profit/not business objective, may decide to use less stringent accounting/valuation principles and a differing layout of the income statement and the balance sheet, if such principles are in accordance with the applicable accounting standard.

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Doing business in Norway – an introduction (2010) Valuation rules Valuation rules for current assets are based upon the lower of cost, at the time of the transaction, or market (net realizable value) and for fixed assets the cost of acquisition. Costs for production of goods and fixed assets include direct and indirect variable production costs and production overheads, including borrowing costs, based on the FIFO-method. Obsolete goods must be written down to estimated future sales prices. Longterm production contracts shall be taken to income according to the progress of the project (the percentage of completion method). Small companies may use the completed contract method. Fixed assets are depreciated in accordance with a reasonable depreciation plan if the useful life is limited. Market-based financial current assets are exempted from the lower of cost or market principle. Listed shares and bonds that are part of a trade portfolio, and that are bought and sold on a continuous basis, shall be valued at market value. Monetary items denominated in a foreign currency shall be translated at the closing rate. Other assets in foreign currency shall be valued at the lower of cost or market. Research and development expenditure may be expensed or deferred to future periods if they are offset by expected future income. Deferred expenditure must be written off over the period in which the costs are expected to generate income. Purchased research and development must be capitalized. Goodwill (the undefined difference between the price paid for an acquired company and the aggregate net value of identifiable assets less liabilities) shall follow the general valuation rules for fixed assets. If the depreciation period is longer than

five years, the basis for a longer depreciation period must be substantiated and disclosed in the notes. The equity method and proportionate consolidation must be used in the consolidated accounts. Mergers and demergers must be considered as equity transactions. Equity requirements and limitations of dividends A limited liability company (AS and ASA) is required at all times, to maintain a sufficient equity for the conduct of the business, considering the risks involved in and the nature of the company’s activities. Market values in excess of book values of assets qualify as equity and liabilities not booked, if any, such as pensions and possible future costs, must be deducted. The sufficient equity level is not defined in the Companies’ Act and must be decided upon, documented and followed up by the Board of Directors based on individual circumstances. If more than 50% of the share capital is lost, the Board of Directors must formally consider if the equity is sufficient or if additional equity is required. Additional equity may be obtained from issuing new share capital, conversion of group payables to share capital, a subordinated loan or a guarantee from the parent company to secure adequate financing. Distributions of interim dividends (additional distributions during the year), are based on and are restricted by last years’ audited statutory accounts. The year’s profit after tax and prior years’ retained earnings, reduced by loans to shareholders (if not agreed in writing to be covered by dividends

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Doing business in Norway – an introduction (2010) distributed), goodwill, capitalized research and development costs, purchases of own shares and net deferred tax assets, may be distributed as dividends. However, there is a requirement that total equity, after deduction of the years’ dividend, should be a minimum of 10% of total assets at year-end. If the sufficient equity level is higher than the 10% requirement, this will be the effective equity requirement. The remaining equity after distribution of maximum dividends as detailed above, except for the minimum share capital, see paragraph 2, and the total of loans to shareholders (if not agreed in writing to be covered by dividends distributed), goodwill, capitalized research and development costs, purchases of own shares and net deferred tax assets, may be distributed to the shareholders by informing the creditors through a written note to The Register of Business Enterprises. However, the requirement of maintaining a sufficient equity for the conduct of the business at all times will usually make such a distribution impossible, unless the company has made a substantial profit after the year end. Form and content of financial statements (annual accounts) The financial statements shall give a fair presentation of the assets and liabilities, financial position and results of the company and the group. The accounts must be prepared within six months after the year-end in the Norwegian language and in NOK, unless otherwise allowed by the Ministry. The statements must show previous years’ corresponding figures and include an income statement, balance sheet, cash flow statement (if the company is not small) and notes.

The format of the income statement and the balance sheet is prescribed by the Accounting Act. Companies may present the income statement by function (and not analysed by the types of revenues and costs) and the balance sheet by liquidity (and not the current/non-current format), but only if the information value is increased. The income statement must disclose operating revenues, operating costs, the operating result, financial income and costs, the result before extraordinary items, extraordinary items, the years’ taxes and net income for the year. The tax charge shall be split into tax on ordinary result and tax on extraordinary items. Assets are divided into fixed and current assets. Fixed assets are acquired with the intention of permanent ownership or to be used in the business. Assets that fall within the revenue cycle are current assets. Debt is divided into provisions for liabilities (that include incurred costs and noncurrent liabilities where the estimated value is uncertain, inclusive of pension liabilities and deferred tax), other noncurrent liabilities and current liabilities. Equity is divided into paid in capital and retained earnings. The Accounting Act has numerous note disclosure requirements. Mandatory note disclosure is less strict for small companies and listed companies are subject to more extensive requirements from the Oslo Stock Exchange. There is a general provision stating that the notes shall disclose matters which are necessary to assess the financial position and the result of the company. In particular, the accounting policies shall be disclosed. Notes may be omitted if they are not material to the assessment of the

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Doing business in Norway – an introduction (2010) financial position and result of the company. Listed companies must disclose information about shareholders who control 10% or more of voting powers. Some notes must be made irrespective of materiality: number of shares issued, shareholders and treasury stock, number of employees, remuneration to executives and loans and security pledges in favour of executives and shareholders. A parent company must prepare consolidated financial statements for the group. If the parent company is small, a consolidated statement is not mandatory. The Board of Directors and the general manager must, as a separate document, prepare an annual report in the Norwegian language with the following minimum information: the nature of the business and where it is conducted, a true and fair summary of the company’s result, position and future development, including the main risks and uncertainty factors facing the company, information on research and development activities, comments on expected future development (if the company is not small), information on financial risks, confirmation of the going concern assumption, proposed allocation of the profit / coverage of the loss, information about the state of equality between male and female, information about the internal working environment and about conditions which may effect the external environment. The financial statements and group accounts must be approved by the shareholders at the company's annual general meeting. The annual accounts and the annual report must be signed by all members of the Board of Directors and by the general manager. If a member has objections to the accounts,

the person shall sign with an endorsement of the qualification(s) made and further information shall be given in the annual report. Public information / filing Limited liability companies must file the financial statements (annual accounts) with The Register of Annual Company Accounts (Regnskapsregisteret) within one month after the annual shareholders’ meeting, and within 7 months after the year end if filed on paper (8 months after the year end if filed electronically). Companies with a year end between January 1 and June 30 must file the financial statements within February 1 the following year and companies with a year end between July 1 and December 31 must file the financial statements within August 1 the following year (with one extra month if filed electronically). Companies with temporary activities in Norway or activities on the Norwegian Continental Shelf must file the form “Extract of accounts” with the Central Office - Foreign Tax Affairs (COFTA) if the yearly turnover exceeds NOK 5 millions. Filing after these dates results in penalties; NOK 860 for each week the first 8 weeks, NOK 1.720 for each week the next 10 weeks and NOK 2.580 for each week the last 8 weeks; a total of NOK 44.720 after 26 weeks (penalties at December 2009). The Register is starting liquidation proceedings if the filing is not done within 26 weeks after the above filing dates. The file information is public and will be provided to anyone on request. Anyone is also entitled to study the contents of the documents at the companies’ office, but only if the accounts are not available from the Register.

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Doing business in Norway – an introduction (2010) External interim reporting is not required unless the company is listed on the Oslo Stock Exchange. Some finance companies must, however, issue interim reports to the Banking, Insurance and Securities Commission (Kredittilsynet). Branches, partnerships (including silent partnerships) and other entities that are obliged to keep accounts, see above, must file the accounts within 7 months after the year end. The accounts of a branch of an EU/EEA– company are not publicly available, neither at the Register nor at the branch office. However, to avoid publication of the branch accounts, the annual accounts of the foreign “parent” company must also be filed, in Norwegian, Danish, Swedish or English, and the accounts of the “parent” company are publicly available. Entities with limited business activities in Norway and activities on the Norwegian continental shelf, that are registered with the Central Office – Foreign Tax Affairs (COFTA), must also file an “Extract of Accounts” with a detailed income statement appended to the tax return.

Liquidation The resolution to dissolve a public limited liability company or a private limited liability company must be taken by the annual general meeting of shareholders and requires a two third majority. The resolution is made public by a report to The Register of Business Enterprises (Foretaksregisteret) and by adding “under dissolution/ under liquidation” on the company’s letterhead. The Register will publish the resolution and inform the creditors to report any objections to the company within two months. Upon final settlement of the liabilities and subsequent distribution to the owners of any remaining assets, audited dissolution accounts must be presented to the annual general meeting of shareholders. When the accounts are approved by the general meeting, it shall be reported to The Register of Business Enterprises (Foretaksregisteret) that the company has been wound up. A liquidation of a partnership must be adopted by the partnership meeting. There are no special rules for the liquidation of other corporations.

5. Audit requirements and standards National basis for audit / statutory audit requirements All limited liability companies, lawyers and law firms are subject to a statutory audit regardless of size. Branches of a foreign company are also subject to a statutory audit if the turnover exceeds NOK 5 million (a proposal of audit regardless of size is under Copyright © MOORE STEPHENS NORWAY DA

consideration). Partnerships must be audited if the turnover exceeds NOK 5 million, if they have more than 5 employees or there are more than 5 partners. Sole practitioners must be audited if the turnover exceeds NOK 5 million and their assets exceed NOK 20 million or if they have more than 20 employees. Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appointment of auditors The statutory auditor is appointed at the shareholders’ Annual General Meeting. Listed companies must appoint a State Authorized Public Accountant, while all other companies and organisations may choose between the two categories of auditors in Norway; Registered Public Accountant and State Authorized Public Accountant. The Registered Public Accountants have 3 years and the State Authorized Public Accountants have 5 years of specialized education at the university level within audit, accounting, tax, law and other business related topics. Local auditing standards and differences to international standards The Norwegian Institute of Public Accountants (Den norske Revisorforening (DnR)) has accepted and translated all auditing standards issued by the International Federation of Accountants (IFAC). It is mandatory to follow all standards on all audit assignments and all international auditing standards (ISA’s) are thus adhered to. The standards are normally introduced in Norway with a delay of 6-9 months because of the time required for translation and approval procedures. Independence A statutory auditor can not provide consulting or other services if such activity is liable to influence or raise doubts about the auditors’ independence and objectivity. The auditor cannot provide services that fall under the management and inspection duties (see “Management”-section in paragraph 3) of the company subject to a statutory audit.

Reporting and audit opinion The following must be reported in numbered letters to the company’s management: 1. inadequacies in orderly and proper registration and documentation of accounting information 2. errors and defects in the organisation of and control of asset management 3. fraud and errors that may cause misstatements in the annual accounts 4. factors that may lead to liability for members of the board of directors, corporate assembly, committee of shareholders’ representatives, or the general manager 5. reason(s) for missing signatures in conjunction with confirmations provided to the public authorities pursuant to law or regulations, and 6. the reason(s) for resigning from the audit engagement

The reasons for electing new auditors outside the shareholders’ AGM must be reported to The Financial Supervisory Authority of Norway (Finanstilsynet). The audit opinion (see a specimen audit opinion in Appendix F) must include a conclusion whether the company’s management has fulfilled its duties to ensure orderly and proper registration and documentation of accounting information and whether there are factors that may lead to liability for members of the board of directors, the corporate assembly, the committee of shareholders’ representatives or the general manager. The auditor must also conclude whether the information in the directors’ report concerning the annual accounts, the going concern assumption and the proposal for the allocation of the profit/coverage (carry forward) of the loss comply with law and regulations and whether the information is consistent with the information in the annual accounts.

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Doing business in Norway – an introduction (2010) Quality control DnR, under the public oversight of The Financial Supervisory Authority of Norway (Finanstilsynet), performs quality control reviews using qualified practitioners. All auditors are visited once every 5 years. The reviews meet all minimum requirements of the 2000 ”Commission Recommendation on quality assurance for the statutory audit in the European Union”. The results of the reviews are reported to, and the reviews are based on a control plan approved by Finanstilsynet (the supervisory body of Norwegian auditors that has the overall responsibility for ensuring compliance with the rules of professional standards relating to audit and ethics and especially to ensure the independence and objectivity of statutory auditors and

audit firms). Finanstilsynet also sends their own checklists to all audit firms every second year to confirm compliance with standards, laws and regulations and they do their own riskbased monitoring of auditors and visit selected firms when deemed necessary.

6. Corporate taxation

Residence, territoriality permanent establishment

Tax rates and tax basis

Companies are resident in Norway for tax purposes if they are incorporated in Norway and have their statutory seat in the country. Furthermore, a company incorporated outside of Norway is resident for tax purposes if it has its effective management, determined by the place of the day to day business decision making, in Norway.

Norwegian domiciled companies are taxable in Norway for all their income regardless of where the income is earned. However, this may be modified through tax treaties that overrule domestic law, see paragraph 11 below. Taxable income is subject to a corporate income tax of 28%. The tax rate is identical for public limited liability companies, private limited liability companies and branches of a foreign company. Special rules apply to partnerships and sole practitioners (see below), shipping activities (see paragraph 7) and petroleum companies. There is no company tax on net assets.

Mandatory certifications An auditors’ certification is required in connection with changes of the share capital, other capital changes, mergers/de-mergers, the annual tax return and the year end salary reports (see “Filing and signing of tax returns” in paragraph 6). Companies subject to a statutory audit must present an auditor’s report on the annual accounts.

and

Non-resident companies doing business in Norway through a permanent establishment (see definition in paragraph 11) are subject to tax on all income attributable to or received from such a permanent establishment. There is, however, no requirement for a permanent establishment in order for an activity to be taxable in Norway.

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Doing business in Norway – an introduction (2010) Business activity performed in Norway and on the Norwegian continental shelf is generally liable to taxation in Norway. The enterprise may, however, be exempt from tax according to the tax treaty between Norway and the enterprise’s home country. This is normally the case if the enterprise is conducted in the course of construction and installation work and is of a limited duration (usually less than 6 or 12 months), or if there is a “hiring out” of people from the enterprise’s home country. The Norwegian company must supervise, direct or control the way the work is performed, the person hired out (the foreign company) must not be responsible for or have the risk for the contract profit, the payment must be based on hours used and the person hired out must use his own office, tools and materials for the work to satisfy the criteria for “hiring out”. No single criterion is, however, considered decisive. The tax authorities will examine the assignment as a whole before a decision is reached. Calculation of net taxable income and tax valuation principles Taxable income is based on net income in the financial statements (annual accounts). However, for certain items there are specific tax rules that take precedence over the valuation rules for accounting purposes, see above. There are also specific provisions for certain businesses such as banking, insurance and the oil and gas industry. These provisions are not dealt with in this publication. The most important differences between the tax principles and the accounting principles are: Inventories Reduction in the value from write down for obsolescence is not tax deductible until the loss has actually been incurred through sale or other realization.

Bad debt provision for accounting purposes is reversed for tax purposes. However, a deduction of 2% of gross trade receivables at year end is allowed for newly established enterprises (the founding year and the following two years). For other enterprises a tax deduction is calculated based on previous years’ realized losses and the year-end gross trade receivables. Irrecoverable losses of trade receivables from bankruptcies are tax deductible. An item is also considered lost for tax purposes if it is not settled within six months after the due date if at least three reminders have been presented.

Fixed assets – depreciation realization of profit/loss

and

Fixed assets including acquired goodwill are, for tax purposes, depreciated according to the declining balance method based on cost prices (items with cost below NOK 15.000 and with an estimated economic life of less than 3 years are expensed for accounting and tax purposes). The various groups of fixed assets are subject to different depreciation rates, see Appendix B. The rates may be varied yearly between 0% and the maximum percentage allowed. The sales proceeds from the realization of assets in groups A-D, see Appendix B, are deducted from the aggregated tax balance of the items in the group. The taxable profit/loss is calculated by way of changes in the balance on which the tax depreciation is calculated. Profit and loss from the realization of assets in groups E-I, see Appendix B, is transferred to a profit and loss balance. From this balance 20% is taken annually to taxable income as either a deduction or an addition. Land, dwellings and works of art are normally not eligible for depreciation.

Intangible assets (including capitalized costs of web sites and accounting systems) Write-down for tax purposes may only be done if and when there is a material reduction in the value. Intangible asset are depreciated over the estimated economic life for accounting purposes. A right limited in time may be depreciated using the straight-line method over the period for which the right exist.

Assets and liabilities in foreign currency Unrealized losses on long-term monetary assets/liabilities in foreign currency are net deductible, i.e. all currency losses are considered on an aggregate basis. Net unrealized gains are, however, taken to taxable income in so far as they lie within the range of previously deducted losses.

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Doing business in Norway – an introduction (2010) Long

term

manufacturing

contracts

The completion of contract method is used for tax purposes, even if the percentage of completion method is used in the financial statements. Only direct costs related to the projects are capitalized.

Inter-company transactions and transfer pricing Inter-company transactions must follow the arms-length principle and they must be sufficiently documented to be tax deductible. Companies may deduct payments for direct purchases, shared expenses and management fees to affiliates from taxable income if they do not exceed normal cost. The income may, however, be estimated by the tax authorities if it is probable that the income is reduced due to direct or indirect connection between companies. There are specific rules introduced on transferpricing methods, transfer-pricing documentation and reporting requirements, based on the principles laid down in the OECD Transfer Pricing Guidelines. The reporting requirements are effective from 2007 and the documentation requirements from 2008.

Accruals accepted

according to accounting

“generally principles”

Accruals for future estimated/anticipated costs (including classification reserves for vessels, anticipated losses on contracts and reserves to meet expected declines in inventory prices) are, where it is probable, i.e. more likely than not that a future event will occur, not deductible for tax purposes until the loss is actually realized. However, accruals for costs related to future events not involving uncertainty are tax deductible.

Non-deductible expenses Expenses incurred for entertainment and gifts and losses incurred in circumstances not directly connected with activities within the business objectives of the company, are normally not tax deductible.

The “cut-through” principle Transactions that have no other purpose than to avoid tax may be disregarded. Formalities are in such an event disregarded and tax is levied on the basis of what is assumed to be the correct state of affairs.

Dividends and gains and losses on realization of shares A tax exemption model is applied to Norwegian resident private and public limited liability companies, other companies of the same standing for tax purposes and Norwegian stock investment funds, associations, institutions, estates in bankruptcy and municipal and stateowned companies. Only the real beneficial owner (the company that can claim and is taxable for the dividend/gain) is covered. The tax exemption model also applies to such foreign companies and other entities that correspond to the Norwegian companies covered. However, companies resident in low tax countries (as defined by the tax authorities, see Appendix C) outside the EU/EEA-area and companies resident outside the EU/EEA-area where the Norwegian ownership/control is less than 10%, at the time when gains/losses are realized or dividends declared, are not part of the tax exemption model. For companies within the tax exemption model, dividends have not been taxable in the receiving Norwegian company after March 26, 2004. 3% of the dividends are, however, taxable with a tax rate of 28% with effect from October 7, 2008. Dividends are not a deduction against taxable profit in the issuing company (inside and outside of the model). Gains on realization of shares have not been taxable and losses on realization of shares have not been tax deductible in Norway after March 26, 2004. 3% of the net gain (after deduction of losses, if any) is, however, taxable with a tax rate of 28% with effect from October 7, 2008. The foreign company (in the EU/EEA-area and in other countries) must, however, effective from 2008, document that it is actually established and effectively managed in and that it carries out factual long term commercial activities in the country of registration for no Norwegian withholding tax to be deducted. Dividends from and gains on realization of shares in companies in low tax EU/EEAcountries (see definition in Appendix C) are not taxed in Norway if the foreign company is actually established in and effectively managed in and carries out factual long term commercial activities in, the country of registration (effective from 2008). Dividends to foreign companies outside the EU/EEA-area are subject to withholding tax, see paragraph 11. Distribution of liquidation proceeds, in the year of the final dissolution of a company, is not subject

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Doing business in Norway – an introduction (2010) to withholding tax. The net proceeds are not taxable if the shareholder is a company within the tax exemption model. A personal shareholder is taxable by 28% after adjustment of the net with the value of retained and taxed earnings during the period of ownership.

making the contribution and taxable in the company receiving the contribution. 28% of the group contribution is classified as taxes in the income statement and the remaining 72% of the group contribution is transferred directly to/from equity in the statutory accounts.

Royalties

Liquidation, mergers, demergers and transfer of assets

and

technical

assistance

Royalty received is taxed as ordinary income with tax credit for any withholding taxes paid abroad. Royalty expenses determined on an arm’s-length basis are normally deductible. However, the Norwegian tax authorities can object, and reclassify excessive amounts to dividends, if Norwegian companies pay higherthan-normal fees for royalties or technical assistance. But there is neither a legal maximum nor a strict definition of a normal royalty. There is no withholding tax applicable to “acceptable” royalty payments.

Interest, shareholders financing and thin capitalisation Interest income received is taxed as ordinary income. Interest expenses are generally allowed as deductions against income. Interest charges within a group must fulfil the arms-length principle. Since non-residents are not liable to withholding tax on interest payments on loans granted from abroad to Norway, which are not considered as capital investment assimilated to the debtor’s equity, financing a company through debt rather than through equity may be a lucrative option in some cases. According to the general arm’s-length principle in Norway, interest on intercompany debts is not deductible to the extent the ratio between interest-bearing intercompany debt and equity exceeds what would have been accepted by a third-party lender if other circumstances remain unchanged. When deciding on the minimum debt-equity ratio needed, one must take into account specifics in the industry and the company concerned. No further regulations or guidelines have been issued by the tax authorities on the debt-equity ratio. However, as rule of thumb, a ratio of 4 to 1 seems to be accepted as a kind of safe harbour.

Group

contributions

(konsernbidrag)

Although companies within a group are taxed as separate companies and consolidated tax returns are not permitted, contributions within the year’s taxable profit may be made for tax purposes between domestic limited liability companies and companies of the same standing as a limited liability within a group if the total direct and indirect ownership exceeds 90%. Contributions are tax deductible in the company

Liquidation A liquidation is, for tax purposes, regarded as a sale of the liquidated company’s assets. For the shareholders the liquidation proceeds are regarded as sale of shares. Mergers A merger (the transaction by which the transferring company ceases to exist after a transfer of all of its assets and liabilities to the receiving company) is, for tax purposes, regarded as a liquidation. For the shareholders of the transferring company the received shares in the receiving company are, for tax purposes, regarded as the sales value for the shares. However, the merger is normally tax exempt for the transferring company and the shareholders if a number of conditions are fulfilled. Demergers A demerger (the transaction by which the transferring company or a part of the transferring company’s business is segregated into one or more new or existing receiving companies) is, for tax purposes, regarded as a sale of assets from or a liquidation of the transferring company. For the shareholders of the transferring company the received shares in the receiving company are, for tax purposes, regarded as the sales value of for the shares. However, the demerger can be tax exempt for the transferring company and the shareholders if a number of conditions are fulfilled. Transfer of assets Transfers of assets between companies are, for tax purposes, regarded as a sale. However, an intercompany transfer of single assets, a company’s entire business or a branch thereof can be tax exempt for the transferring company if a number of conditions are fulfilled, including:

 Both companies must be within the same group and the ownership must exceed 90%

 The transferring and the receiving company must continue to stay in the group

 The receiving company must take over the fiscal positions for the assets and/or enterprise transferred

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Doing business in Norway – an introduction (2010) Filing and signing of tax returns Income is assessed following the calendar year, but a non calendar year may be granted if a foreign parent company closes its books at a different date. Company tax returns must be filed annually, no later than 3 months after the end of the calendar year if delivered on paper, but extended to 5 months if delivered electronically. A fee of 0.1% of net assets and 0.2% of taxable income must be paid if delivered 0 – 31 days after the deadline. These percentages increase to 0.1% / 1% or 0.1% / 2% if delayed more than 1 month / 2 months. The taxable income is estimated by the tax authorities if the tax return is not filed within 3 weeks after the date of the tax authorities’ distribution of the previous years’ tax assessments in September/October. In addition to the 28% “ordinary” tax there is also a penalty tax of 30% and an interest of 2.4% (both based on the “ordinary” tax) to be paid. All rights of appeal, and the final tax loss (if any) for the year, will be lost. Tax returns for all limited liability companies and branches/partnerships with a turnover in excess of NOK 5.000.000, must be signed by a public accountant. Reporting of salaries and the employers’ National Insurance contributions must follow the calendar year, and the year end salary form must be signed by a public accountant. Payment, collection and interest Tax is paid on account in two equal instalments, February 15 and April 15, on estimated taxable income based on last years actual income. Interest is charged if less than 100% of the tax assessed in September/October after the tax year is not paid as instalments. The 2009 interest rate is 2.4% on residuals (paid in two equal amounts on September 15 and November 15), Copyright © MOORE STEPHENS NORWAY DA

unless the residual is paid within May 31 and 1.8% on excess amounts. Special rules apply for companies that did not pay tax the previous year. Tax loss carry-forward / back Tax losses could be carried forward for 10 years and offset against future taxable income until end of 2005. No restrictions apply from January 1, 2006, covering losses from 1996 and later years. Carry back of tax losses is available for 2 years when a company is liquidated. Tax loss carry-forward is usually forfeited in connection with a capital reconstruction and after a sale of the shares, but only if the main purpose of the sales transaction is to avoid tax and there are no commercial purposes present. Tax audits The local Tax Office may carry out onsite audits of the annual accounts and tax returns. Such audits are not done on a regular basis, but if performed, tax returns for up to and including the previous ten years can be investigated. Items subject to withholding tax Royalties, interest, management fees and property rentals are not subject to withholding tax, being levied only on dividends, see paragraph 11. Taxation of branches and joint ventures Branches of foreign companies are taxed on Norwegian income using the same principles as for a limited liability company. Interest paid on “loans” to the “head office” is not tax deductible. Net income from joint ventures is apportioned proportionally among the participants.

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Doing business in Norway – an introduction (2010) Taxation of partnerships Net income and net worth is assessed for the partnership as such and then apportioned proportionally among all active and passive participants. Taxable income is based on net income in the financial statements. However, for certain items there are specific tax rules that take precedence over the accounting rules, see above for the most important differences. All decisions affecting taxable income and net worth are taken by the partnership and such decisions are binding for the participants. Tax losses from partnership activities may be netted against the participants’ other taxable income. Net taxable income after deduction of salary to partners charged for work done for the partnership is taxed in the year after the fiscal year proportionally among all participants at a tax rate of 28%. Social security of 11 % (in 2009 and 2010), a progressive surtax of 9 % / 12 % (see paragraph 9) and 28 % state and local income tax, are paid on the salary charged for work done for the partnership. Personal participants, but not companies, are in addition in the year of payment, taxed with 28 % on accumulated profit actually paid/ transferred to the participants. Only payments after deduction of the 28% tax paid on net taxable income and after deduction of the average interest rate after tax of 3 month government bills multiplied by the participants cost of the share in the partnership, are subject to this additional tax. The highest marginal tax rate of 48.16 % is identical to the combined tax rate of profit tax of companies (28%) and tax

of 20.16 (28% of 0.72) on shareholders on dividends. Taxation of sole practitioners (self employed) A sole practitioner is taxed as an individual, see paragraph 9 below. However, detailed regulations for calculation of the taxable income are in existence. A net taxable income is calculated based on net income in the statutory accounts but adjusted for items with specific tax rules, see above. This net income is taxed in the year after the fiscal year at a tax rate of 28%. In addition social security of 11 % (in 2009 and 2010) and a progressive surtax (of 9 % / 12 %, see paragraph 9), are paid on a calculated “personal income”. The personal income is calculated as follows: Net taxable income (before deduction of tax losses carry forward) + Actual capital costs and losses (except losses on trade receivables, fixed assets and interest) - actual capital income from shares, banks, bonds and receivables (exclusive trade receivables) - gains on realisation of shares, banks, bonds and receivables - salary deduction (15% of total salaries including social security. The deduction may not reduce the personal income below NOK 414,648) - standard deduction (see below) - negative personal income from previous years The standard deduction is calculated as follows: Fixed assets + inventories + trade receivables + acquired goodwill and deferred research and development costs; less assets used for social activities - liabilities to finance institutions - trade payables and prepayments from customers = basis of the standard deduction This basis multiplied by the average interest rate before tax of 3 month government bills gives the standard deduction

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Doing business in Norway – an introduction (2010) Non-taxable companies and organisations Companies and organisations can, upon a successful application to the local tax authorities, be granted tax exemption. A non-business objective must be adhered to and should be included in the Articles of association

and the main objective of the company’s activities can not be obtaining profits to enable dividends. Dividends and group contributions can not be made to the shareholders/ owners and the net remaining assets from liquidation can not be distributed to the shareholders/ owners.

7. Taxation of shipping activities Introduction Effective from January 1, 2007, a new tax regime was introduced replacing the previous tax deferral system introduced in 1996. The new regime is similar to the tonnage tax regimes in other European countries, with a tax exemption on a permanent basis for income from shipping and related activities (see below). Income may be distributed from the shipping company, and the companies may leave the new regime without taxation, see however “Exit rules” below. The companies must pay a moderate tonnage tax each year (see below). Overview of the tax system Norwegian public (ASA) and private (AS) limited liability companies may choose to be taxed according to the shipping taxation rules. The company or the underlying AS/ASA must own or operate operative vessels. The company’s share must be at least 3%. Income from bareboat charter, pooloperations or a supply/anchor handling vessel for use in the oil industry and a seismic vessel can also qualify.

The company and any underlying companies can not hold other assets than ships, except for listed shares, financial assets and equipment needed for and used in shipping operations. An EU/EAA flag is not required for the operative vessel. Companies within the tax regime must keep their share of EU/EAA-registered tonnage on the same level or on an increased level compared to July 1, 2005, if this share is less than 60% of total net tonnage. However, this is not required if the total share of Norwegian EU/EAA-registered tonnage within the tax regime as at December 31 the preceding year is at the same level or increased compared to the same share the year before. The share on national level slipped from 77.5% to 73.9% from January 1 to December 12, 2008; resulting in a flag requirement on company level for the income year 2009. Companies must leave the regime effective from January 1, 2009 if their 2009 EU/EAAregistered tonnage share is lower than 60% and lower than the share at July 1, 2005. Companies have 2 months, from September 29, 2009, to fulfil the requirement. Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Income from shipping-related activities connected to qualified vessels will be tax exempt under the new regime. Examples of connected businesses are:  shipping management and administration in

The Government will in later years consider a new requirement implying that strategic and commercial management must be located in Norway.

connection with the company’s own or hired ships, ships in group companies or ships within a pool cooperation  loading and unloading of goods  temporary storage of goods in connection with further maritime transportation  maritime transport of goods and persons  the letting out of containers for the purpose of goods on board  loading and unloading of passengers  operation of ticket offices and passenger terminals  sale of goods for consumption on board and letting out of premises on board  door-to-door transportation

Entry rules New entry rules will apply to companies entering the new regime as of 2009. The shipping companies’ deferred taxes will be settled upon entry into the new regime. This involves a taxation of the difference between market values and tax values of the assets. Potential capital gains on other assets than financial assets and long term debt will be taxed on a 20 % annual basis through the profit and loss accounts. A shipping company buying a share in a partnership or a CFC-company after October 5, 2007 will be taxed based on a positive difference between the tax value and the market value of the share. This also applies to transfers of ships into a company within the new regime. If the entry generates a tax loss, this tax loss will disappear as a consequence of the exemption regime. Furthermore, the opportunity to set off tax loss carried forward from 2006 and earlier against calculated income is removed on entry into the new regime.

Financial income, such as interest income, capital gains on disposal of non-shipping shares and foreign exchange profits, will be taxed at 28% (after a pro-rata deduction of interest). Gains on sale of fixed assets (including ships) and shares in partnerships and N-CFC’s are taxable if the assets are realised within 3 years after entry into the new regime. The same apply if the company exits the regime within 3 years after entry. There will also be an additional tax if the equity exceeds 70% of gross assets, the tax is the excess amount multiplied by a rate of 3.2% (2009 rate, adjusted yearly). Companies within the new regime have an opportunity to give and receive group contributions to/from companies outside the regime. However, such group contributions will not have any tax effects. Loans from a company within the tax system to a Norwegian taxpayer (person or company) are not allowed, but only if the company has deferred tax liabilities from the “old” tax regime.

The assets of companies which were outside the new tonnage tax regime and entered the tax regime in 2007 or 2008 were valuated based on book values. These companies were subject to tax on possible capital gains, calculated in accordance with the abovementioned principles for the next three years after entry if they sell ships, shares in partnerships or a CFCcompany or they leave the regime.

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Doing business in Norway – an introduction (2010) Exit rules New tax values on operational assets and shares in partnerships or CFCcompanies will be assessed to their market value on exit from the new tonnage tax regime as of 2008. This is to prevent gains/loss occurred within the tonnage tax period from being included at a later tax assessment. To prevent adaptation, withdrawn shipping companies are denied receiving group contributions with tax effect in the exit year and the following two years.

Taxation of seamen See the section “Calculation of net taxable income” in paragraph 9 below. Tax treaties Norway has signed treaties limited to shipping activities only, with Argentina, China, Greece, Hong Kong, Lebanon, New Zealand, the Soviet Union (1974), South Africa, South Korea and Yugoslavia (1966).

Tonnage tax Companies within the tax system must pay a yearly tonnage tax calculated on the total net tonnage using the following rates per day per 1.000 net tons (for 2009 and 2010):  0 – 1.000 net tons: NOK 0  1.000 – 10.000 net tons: NOK 18  10.000 – 25.000 net tons: NOK 12  above 25.000 net tons: NOK 6 The tonnage tax may be reduced up to 25% for ships satisfying defined environmental requirements.

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) 8. Social security Employers’ contribution Employers’ contribution to the National Insurance Scheme (arbeidsgiveravgift) vary, from 0% – 14.1% of total gross wages, according to what region the company is located. The lowest rates are in the northern regions, Nord-Troms and Finnmark. Defined industries, including production of electricity, oil and steel and telecommunication services, must use the 14.1% rate regardless of region if total gross wages exceed NOK 530 000 (in 2010 and 2009). Charitable and non-profit institutions and organisations do not pay social security for total gross salaries below NOK 450.000 (maximum of NOK 45.000 for each tax payer). Employees’ contribution Employees’ contribution is 7.8% (3% health insurance and 4,8% pension contribution) of gross personal income (excluding capital income) above NOK 39.600 (2010 and 2009), but 11% (in 2010 and 2009) for income from a personal enterprise and 3% (health insurance part only) for pensioners (older than 68). The social security is reported and paid every 2 months, 15 days after the end of the two-month period. January and February is thus reported and paid on March 15.

International social security agreements Norway has entered into separate agreements with Australia, Canada, Chile, Croatia, Switzerland, Turkey and the USA. It should be noted that the agreement with USA and Canada covers only the pension contribution of 4.8%, see above. These agreements regulate which nation’s insurance scheme shall be applicable. Persons from EU/EEA countries are covered by the Council Regulation (EEC) 1408/71. Membership of the Norwegian National Insurance Scheme is compulsory unless otherwise agreed in the above insurance scheme agreements. The main principle in the agreements is that the employee is covered by the social security system of the country where the work is performed. However, employees working both in Norway and another country are covered by the security system of the country of residence. The employee must document being a member of the social security system of the other country by providing the form E 101 to avoid Norwegian social security. The Norwegian employer must in such a case take the appropriate action to obtain relevant information about and pay all applicable employers’ and/or employees’ social security contributions, according to the other country’s social security system.

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) 9. Personal taxation Tax rates Norway has a personal taxation system with variable tax rates charged on world-wide property/financial and personal income and capital gains less deductible expenses: State and local income tax 28% of net taxable income (inclusive of dividends and gains from realization of shares (amounts exceeding the cost of the shares multiplied by the average interest rate after tax of 3 month government bills), other capital income and all gains from property, capital, work or enterprise, less losses from realization of shares and less deductions, see below). Surtax (“top” tax) 2010: 9% of gross personal income (gross wages and pensions but usually not capital income, see below) between NOK 456,400 and NOK 741,700 and 12% of gross personal income in excess of NOK 741,700. (2009: 9% of gross personal income (gross wages and pensions but not capital income) between NOK 441,000 and NOK 716,600 and 12% of gross personal income in excess of NOK 716,600.)

worth, after deductible liabilities, above NOK 470,000 in class 1 and NOK 940,000 in class 2). Shares in listed companies are valued at 100% of the quoted value of the shares at year end. Shares in non-listed companies are normally valued at 100% of the company’s net taxable value at the beginning of the tax year. Social security 7.8% of gross personal income above NOK 39,600 (but usually not capital income, see below), but 11% (in 2010 and 2009) if the income is derived from a personal enterprise / from selfemployment, except in farming, forestry and fishing and 3% (health insurance part only) for pensioners (older than 68). There are separate tax rates in the northern regions, Nord-Troms and Finnmark (2010: 7% top tax between NOK 456,400 and NOK 741,700 and 24.5% state and local income tax (2009: 7% top tax between NOK 441,000 and NOK 716,600 and 24.5% state and local income tax). There is also an extra deduction of NOK 15,000 in class 1 and NOK 30,000 in class 2 for a person tax resident in these regions (in 2010 and 2009).

State wealth tax 2010: 0.4% of net taxable worth, after deductible liabilities, above NOK 700,000 in class 1 and NOK 1,400,000 in class 2. (2009: 0.4% of net taxable worth, after deductible liabilities, above NOK 470,000 in class 1 and NOK 940,000 in class 2.) Municipal wealth tax 2010: 0.7% of net taxable worth, after deductible liabilities, above NOK 700,000 in class 1 and NOK 1,400,000 in class 2. (2009: 0.7% of net taxable

Tax classes Class 1: A single person or a married person assessed separately. Class 2: Married couples assessed together or one-parent families. Income from investment in property and other capital items is only subject to 28 % income tax, unless the taxable activities are of profit generating nature and exceed certain limits (considering factors like size, number of investments, number of hours used and/or whether the investments are of short or long term nature). If the limits are Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) exceedged, this income will also be subject to surtax and social security. Renting out less than 500 m2 of business property and less than 5 apartments is usually considered to be within acceptable limits. Calculation of net taxable income Most fringe benefits, including free company telephone and cars and low interest loans, are taxable. However, remuneration below fixed rates in connection with commuting, travel and use of a private car is not taxable. All taxpayers are entitled to a personal deduction (2010: NOK 42.210 in class 1 and NOK 84.420 in class 2 and 2009: NOK 40.800 in class 1 and NOK 81.600 in class 2). In addition a minimum deduction of 36% is allowed on taxable income (in 2010 and in 2009). The maximum deduction is NOK 72.800 in 2010 and NOK 70.350 in 2009, with a lower threshold of NOK 4.000. The following items are normally tax deductible if documented (use the link to “Private tax return – guidelines to items” in Appendix A for a complete list of deductible items):  interest payments (unlimited deduction for interest paid on debts)  premium for own pension insurance (maximum NOK 15.000 in 2010 and 2009)  premium for contracted illness/injury insurance  trade union membership fees (max NOK 3.660 in 2010 and NOK 3.600 in 2009)  child care/kindergarten (max NOK 25.000 for the first child and NOK 15.000 for each additional child (in 2010 and 2009))  illness expenses (unlimited above NOK 9.180 (in 2010 and 2009))

 gifts to voluntary organisations (max NOK 12.000 (in 2010 and 2009)) There is no special tax regime for expatriates in Norway. However, a standard deduction of 10% of gross salary is allowed for foreigners residing temporarily in Norway on the first two tax returns. The deduction has an upper limit of NOK 40.000 and replaces the items listed above. Seamen are (in 2010 and 2009) entitled to an extra seamen deduction of 30% of net income (maximum NOK 80.000) when working more than 130 days per year on Norwegian vessels. Seamen employed on NOR-registered passenger ships in international operations or on ships in petroleum operations, are subject to the net wage arrangement, i.e. exemption from income tax and social security and the company is exempted from social security (if the seamen are taxable to Norway for the income earned on the ship, are tax resident in Norway or an EU/EEA country and qualify for a seamen deduction). Only minimum security crew according to the ship’s alarm instructions are covered. Tax payment Employees pay tax in advance, deducted by the employer from each salary payment, with a final settlement after having received the result of the assessment for the previous year from the tax authorities in June or September/ October. The employee taxes deducted are based on tax deduction cards issued by the tax authorities after registering and obtaining an organisation number from CCRLE (see paragraph 3). Registration is done automatically in the Aa-register if information of

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Doing business in Norway – an introduction (2010) employees in Norway is given to CCRLE. The CCRLE-registration is done by filling in part 1 of the combined registration form (Samordnet registermelding). Taxes are reported and paid every 2 months, 15 days after the end of the two-month period. January and February is thus reported and paid on March 15. Taxes deducted must be deposited on a restricted bank account in the period from salary payment to payment to the tax authorities. Filing of tax returns Personal tax returns must be filed no later than 4 months after the end of the calendar year. A draft return with precompleted information is sent from the tax authorities to all personal tax payers about one month before the filing date. All drafts must be checked and if necessary corrected and any missing items/information must be added. Sole practitioners and participants in partnerships (selvstendig næringsdrivende) must file the tax return no later than 3 months after the end of the calendar year if delivered on paper, but extended to 5 months if delivered electronically. Tax residency and immigration/ emigration Immigration Individuals moving to Norway and staying in the country for more than 183 days in a twelve month period are considered to be domiciled in Norway and are subject to income tax for their world wide income independent of the source country. The same apply to an individual residing in Norway for more than 270 days in a 36 month period.

Emigration Individuals are not taxable to Norway when leaving the country on a permanent basis. To be considered emigrated the individual involved has to substantiate that he/she is (1) permanently domiciled abroad, (2) that he/she has not stayed in Norway for more than 61 days in the tax year and (3) that he/she or the spouse and/or children does not have a house available where they can stay when visiting Norway. If the individual has lived in Norway for less than 10 years before leaving Norway, he/she will be considered emigrated in the year when all three requirements are met. If the individual has lived in Norway for more than 10 years before leaving Norway, he/she will not be considered emigrated before the end of the third tax year after the year leaving Norway. Unrealized gains on shares above NOK 500 000 at the time of emigration, are taxable at 28 % to Norway, but not until the time of realization, unless the shares are owned for more than 5 years after the time of emigration. A guarantee for future possible taxes is required for all countries outside the EU/EEA-area and for Cyprus, Hungary, Malta, Slovakia, Slovenia, Spain and the United Kingdom within the EU/EEA-area. When tax treaties exist, such treaties may often result in other solutions. The country where the person is domiciled (usually the country where the permanent home is located, but if there is a permanent home available in both countries, the deciding factor will be in which country the personal and economic relations are closer/the centre of vital interests) is usually given the right of taxation of all income if the person is taxable to Norway according to Norwegian internal tax rules and taxable to another country according to the tax treaty.

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Doing business in Norway – an introduction (2010) Usually only income and assets that are closely linked to Norway, including dividends from Norwegian companies, wages earned in Norway, income from business activities in Norway and income from real property in Norway, are taxable to Norway according to the tax treaty. A Norwegian tax return including all/world-wide income must be submitted. Non-residents Non-residents are taxed on income, dividends and capital gains deriving from sources in Norway. The withholding tax on dividends (see withholding tax rates in Appendix D) for personal taxpayers tax resident in the EU/EEA-area is, if an alternative calculation is lower than the “ordinary” withholding tax, reduced to the result of

using a 25% withholding tax rate multiplied by net dividends received (net dividends is defined as dividends after a deduction of 3.8 % (2008-rate) of the cost price of the shares). Special rules exist for taxation of seamen tax resident abroad (see above), for non-residents working offshore, for subcontracted (leased) labour and for employees working in Norway for foreign companies without a permanent establishment (the 183/270 days rule, see above) and for hiring out of people from abroad (taxable to Norway from day 1). Effective from tax year 2010 there will be a 15% withholding tax on pensions paid from Norway, unless otherwise agreed in the relevant tax treaty.

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Doing business in Norway – an introduction (2010) 10. Value added tax (VAT) Overview of the system Norway applies a system based on the same principles as the European Union’s Sixth VAT Directive, but as Norway is not a member the VAT Act does not constitute an implementation of the directive. VAT is imposed on the turnover value of imports and deliveries of goods and rendering of services. VAT is calculated at all stages of the supply chain and on the import of goods and services from abroad. The VAT due at each stage amounts to the difference between the output tax on sales and the deductible input tax on purchases. The final consumer, who is not registered for VAT, absorbs VAT as part of the purchase price. Registration procedures Companies and other enterprises and persons delivering taxable goods or rendering services (including foreign businesses, see below) must register for VAT purposes by sending part 2 of the combined registration form “Samordnet registermelding” to The Central Coordinating Register for Legal Entities (Enhetsregisteret - CCRLE), if and when they have an annual taxable turnover of more than NOK 50.000 (NOK 140.000 for charitable and nonprofit institutions and organisations). Special rules exist for pre-registration and retrospective (for a maximum of three years) VAT-returns. Taxable transactions, exemptions and zero-rated transactions All deliveries of goods and rendering of services including imports of goods (see below for import of services), are taxable transactions unless specifically exempted from VAT (without credit for input VAT).

The most important exemptions are the supply and letting of real property and rights to real property, financial services, health services, social services, educational services, services that form a natural part of health, social or educational services, the hiring out of health, social and teaching personnel, cultural services, sport activities, travel agencies and guide services) and public authorities. Output tax is also calculated when a taxable person/company transfers goods or services from the ordinary business for personal use or for purposes outside the scope of the VAT Act. Many transactions are, however, zerorated (exemptions with credit for input VAT), including exports, offshore petroleum activities, deliveries to foreign ships and ships in foreign service, deliveries to aircraft on international flights, transport services directly to or from abroad, the procurement of passenger transport abroad or directly to or from abroad, transfer of a business to a new owner, newspapers, books and periodicals, used vehicles that has been previously registered in Norway, sales of certain ships, aircraft and platforms, building and repair of ships, aircraft and platforms and hiring out of certain ships, aircraft and platforms. The basis of the output tax includes all costs for the fulfilment of the agreement, including costs for packaging, dispatch and insurance, customs duty and other duties pursuant to legislation, connection charges, fees, commissions and service charges.

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Doing business in Norway – an introduction (2010) VAT rates Standard VAT-rate is 25%, for domestic sales calculated on the sales price and for imports calculated on the customs value. The VAT-rate on the supply of foodstuff is 14%. Foodstuff is any item of food or drink intended for human consumption. Medicines, water from water utilities, tobacco products and alcoholic drinks are not included. If deliveries of foodstuff are part of rendering services connected with the serving of such foodstuff, VAT is calculated at 25%. The VAT-rate is 8% on the supply of passenger transport services and on hotel accommodation and related services. The same rate applies to transport services regarding the ferrying of vehicles as part of the domestic road network, and to the television license. In the case of deliveries of raw fish to, or via, a fishmongers’ co-operative established pursuant to the Raw Fish Act, the VAT-rate is 11.11%. Deductions and refunds Registered companies are entitled to deduction for input VAT. In addition, the right to deductions applies to registered persons and companies delivering goods or rendering services that fall within the scope of the VAT Act, but are zero-rated, such as exports. Under certain circumstances, visitors from abroad (tourists) may recover Norwegian VAT paid on purchases made in Norway. Import of services – the reverse charge system VAT must be paid on the purchase of services from abroad. Liability for VAT exists if the Norwegian purchaser is a taxable company or a public institution and the service would be liable to VAT if

rendered in Norway. Private consumer purchases are not included, apart from electronic communications services rendered from abroad, see below. VAT liability applies only to those services that are capable of delivery from a remote location, i.e. where the provision of the service, by its nature, is difficult to associate with a particular physical location. Examples are all services that can be supplied digitally, consultancy services, advertising services, hiring out of people (see definition of hiring out in ”Residence, territoriality and permanent establishment” under paragraph 6), legal services and various kinds of information services. The recipient in Norway (the taxable company or the public institution) must calculate and pay VAT on all services that can be supplied from a remote location (reverse charge or selfassessment). For services that cannot be provided from a remote location, for example work on real property or goods, the hiring out of goods, transport services, hairdressing and services connected with the serving of foodstuff, the foreign business must register for VAT. If the foreign business is neither established nor resident in Norway, the company must register through a representative, see below. Filing of VAT-returns and payments Registered companies must file reports on output and input VAT for two-month periods. Shorter periods are granted if the input tax regularly exceeds the output tax by 25 % or more. Payment of the net VAT-balance must be made within 40 days after the end of the VATperiod. Taxable companies with a taxable turnover of less than NOK 1 million per year may apply to submit only one VAT return annually.

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Doing business in Norway – an introduction (2010) Foreign businesses and VAT Foreign businesses engaged in activities which are liable for VAT registration must calculate and pay VAT according to the same rules as Norwegian businesses. Foreign suppliers of electronic communications services must calculate and pay Norwegian VAT when such services are supplied to private individuals and other persons that are not engaged in business or public institutions, and who are resident in Norway. In these cases VAT must be calculated and collected by the foreign supplier through a representative who must have his residence or his place of established business in Norway, see below. Foreign businesses delivering goods and rendering services in Norway, must register when deliveries of goods and/or rendering of services exceed NOK 50 000 during a 12 month period. A written note of the business activity must be sent to The Central Coordinating Register for Legal Entities (Enhetsregisteret - CCRLE) or to the County Tax Office where the foreigner (or his representative) has his place of business/ residence. The written note shall be given by filling in the combined registration form "Samordnet registermelding" Part 1 and 2. If the business is already registered in CCRLE and has given all the necessary rendering of services in Norway. A foreign business is entitled to deduct VAT paid on goods and services which are to be used in his Norwegian business (input VAT). The right to deduction also includes VAT collected by the Customs authorities at the import of goods and VAT paid on the purchase of services from abroad. VAT-registered companies must submit returns on a bimonthly basis to the County Tax Office. Taxable companies with a taxable turnover less than NOK 1 million Copyright © MOORE STEPHENS NORWAY DA

information to this register, only part 2 of the registration form shall be filled in. A foreign non-established business with VAT taxable deliveries in Norway, must register for VAT through a representative. The representative must have his place of business or residence in Norway. Both the foreign business and the representative must sign the registration form. The foreign business must keep a complete account for its taxable activity in Norway (all purchases and deliveries). The invoices for the foreign business’ deliveries in Norway must be sent through the Norwegian representative, who shall include his own name and address, the foreign business’ registration number (organization number) followed by the letters MVA and the VAT (output VAT) on the invoice. The invoices shall be issued in at least 3 copies, and at least one must be kept by the representative. Both the foreign business and the Norwegian representative are responsible for the calculation and payment of the VAT. A foreign business established or resident in Norway must carry out its bookkeeping according to the Norwegian Bookkeeping Act, see paragraph 4 above. Foreign businesses that are registered in the VAT register must calculate and pay VAT (output VAT) on their deliveries of goods and per year may apply to submit only one VAT return annually. Foreign businesses that have not been registered or have not been engaged in an activity which is subject to registration in Norway, may on application using a standard form (RF1032) apply for refund of VAT paid on goods or services purchased within or goods imported into Norway. The conditions for refunds of VAT are that:

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Doing business in Norway – an introduction (2010)  the purchases are for use in the taxable activity  the foreign business is not liable to register for VAT in Norway  the value added tax relates to the applicant’s business activities carried out abroad  the business would have been liable to registration in accordance with the Norwegian VAT Act if it had been carried out in Norway  the VAT would in that case have been deductible. VAT on goods/services acquired or imported and sold in Norway is not refunded. This also applies to VAT on goods imported for delivery to purchasers in Norway. Refunds do not apply to purchases of items like works of art or antiques, or to expenses

related to catering at restaurants etc, entertainment or personal vehicles including rental cars. Applications must be sent to Skatt Øst, Postboks 1073 – Valaskjold, 1705 Sarpsborg, NORWAY, no later than June 30 of the year after the calendar year to which the application relates and refunds must amount to at least NOK 2.000. If the application relates to a whole calendar year or the rest of a calendar year, amounts exceeding NOK 200 can be refunded. An application must cover at least three months and at most one calendar year. The period can be less than three months if it is the rest of a calendar year.

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Doing business in Norway – an introduction (2010) 11.

Tax treaties

Tax treaties between Norway and other countries are entered into for the avoidance of double taxation, the on delivery conditions, pricing, discounts etc must not be made by the employee in Norway. The main principle in the Norwegian tax treaties has been the principle of apportionment, i.e. that income/assets taxed in another country shall be exempt from taxation in Norway. In tax treaties of recent years the credit method is used, resulting in Norwegian taxation being reduced for tax paid abroad. Withholding tax is levied only on dividends outside the tax exemption model, see “Dividends and gains and losses on realization of shares” in Article 6. Excessive royalty and interest payments may, however, be reclassified as dividends. The withholding tax rate is 25% for all countries without a tax treaty. See Appendix D for an overview of all tax treaties in effect and applicable withholding tax rates on dividends from Norway. Norway has also signed treaties limited to shipping activities only, with Argentina, China, Greece, Hong Kong, Lebanon, New Zealand, the Soviet Union (1974), South Africa, South Korea and Yugoslavia (1966). Treaties limited to air transport are signed with Argentina, Czech Republic, Greece, Hong Kong, Iran, Kuwait, Lebanon, Saudi Arabia, the Soviet Union (1974), South Africa, South Korea, Ukraine, Uruguay, Uzbekistan and Yugoslavia (1966) and a treaty limited to land transport is signed with the Soviet Union (1974).

a permanent establishment. A permanent establishment in most treaties means a fixed place of business through which the business of an enterprise is wholly or partly carried on, and includes especially a place of management, a branch, an office, a factory, a workshop, and a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. It should be noted that the Norwegian tax authorities understanding of an “office” is that there is no requirement that the office premises/ facilities must be owned or rented by the company. An office rented by the employee or the employees’ private home can qualify as an office. If all activities are performed during travels to customers, and not from a "permanent" office or from the employees’ private home, there is no permanent establishment. In order not to qualify for a permanent establishment there is also an additional requirement. The employee must perform only marketing and information activities of preparatory character and he/she can not have authority to negotiate, enter into or approve sales orders/contracts or otherwise perform activities that results in legal obligations for the company. All proceedings and signing of sales orders/contracts must take place between the Norwegian customer and the foreign company and preparations of tenders and decisions on delivery conditions, pricing, discounts etc must not be made by the employee in Norway.

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Doing business in Norway – an introduction (2010) 12. Miscellaneous taxes Taxation of foreign artists Foreign artists and athletes (henceforth named artists) who participate in events or perform as artists in Norway are taxable at a tax rate of 15% pursuant to the Foreign Artists Taxation Act. However, if the artist’s stay in Norway exceeds 183 days in the course of any 12 month period or exceeds 270 days in any 36 month period, the artist will become tax liable to Norway pursuant to the standard Norwegian tax legislation. The event or performance must be reported on a special form to Central Office - Foreign Tax Affairs (COFTA) no later than three weeks before the scheduled date. The person or company engaging the artist, or the organizer of the event, is responsible for submitting the report. All economic compensation earned in connection with activities as an artist is taxable in Norway. This also applies to benefits in kind. Any payments covering expenses must be included in the tax basis, apart from payments covering documented travel expenses, boarding and lodging expenses and agent’s commission in connection with the event in Norway. If the artist pays for the travel, boarding and lodging expenses, the tax basis is reduced by the total sum of documented expenses. No other expenses are deductible. If an artist cannot prove the expenses for boarding or travel with his/hers own means of transport for himself and his co-workers, but is likely to have incurred these expenses, the artist is entitled to

deductions according to standard rates adjusted yearly. Inheritance/gift tax The tax is payable on all inheritance from a person who, while alive, was domiciled in Norway, or was a Norwegian citizen. The same apply to gifts above 0.5 G (1 G = NOK 72.881 as at May 1, 2009) each year to persons entitled to inherit. For 2009 and 2010 0% is to be paid on inheritance to parents and children up to NOK 470.000, 6% between NOK 470.000 and NOK 800,000 and 10% above. For inheritance to other persons the 2009 and 2010 percentages are 0%, 8% and 15% with the same limits in NOK as for parents/children. Real estate (property) tax and registration fee/stamp duty These fees/duties are payable by the purchaser, unless otherwise agreed with the seller, at the time when the transfer of ownership of real estate is registered with the Real Estate Registrar. The rate is 2.5% of the purchase price. Other/special taxes/duties Special duties are imposed on certain types of goods, including sale of cars, gasoline, alcoholic beverages, tobacco and chocolate. Rates are fixed by the Parliament on an annual basis and the duties are included in the sales price.

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Doing business in Norway – an introduction (2010) 13. Other issues Employment of foreigners and work permits The Norwegian immigration regulations require work permits for all nonEU/EEA citizens. Citizens of EU/EEA countries do not require work permits, but they must be registered with the local police and tax authorities in their designated place of residence in Norway before commencing employment in the country. Reporting of business activities in Norway and contracts/employees The Central Office – Foreign Tax Affairs (COFTA) must be informed about all contracts and subcontracts awarded to an enterprise or a person resident abroad, provided that the contract is performed on a site for building and assembly work in Norway, or on a site that is under the client’s control in Norway, or on the Norwegian Continental Shelf. The obligation to report applies to Norwegian and foreign businesses and the public sector. Information is not required in the case of contracts worth less than NOK 10,000. The client (awarding the contract) must submit information about both the contractor and any employees used to carry out the assignment. The contractor is also obliged to submit information about employees used to carry out the assignment.

the assignment, guarantee/liability conditions and terms of payment. It is not necessary to submit the technical requirement specifications. Information about employees must be submitted within 14 days of the employee’s first working day on the assignment. Information about the last working day must be submitted no later than 14 days after the last working day. If changes occur after the information has been submitted, corrected information must be submitted no later than 14 days after the change occurred. Agreements can be entered into between clients at one or more levels in the contractual chain and between clients and contractors that one of them will submit the information to COFTA . Such an agreement does not release the parties from liability or exempt then from enforcement fines or penalty charges. The information must be submitted to COFTA in Norwegian or English online via altinn.no or by filling in the form RF-1199 on paper. Failure to comply with the obligation to submit information may result in enforcement fines, liability for taxes and employers’s national insurance contributions and penalty charges.

Information about the contractor must be submitted as soon as possible after the contract has been entered into and no later than 14 days after the work has commenced. A copy of the contract can be enclosed. It is enough to enclose the contract’s description of

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Doing business in Norway – an introduction (2010)

Taxation of N-CFC’s (Norwegian Controlled Foreign Companies) Norwegian owners with direct or indirect control over companies in low tax countries, are taxed in Norway for their proportional share of the net profit of the company in the low tax country. Companies in low tax countries include foundations, trusts and other corporate forms. Norwegian control requires at least 50% direct or indirect control or ownership by Norwegian domiciled tax payers (persons and companies) at the beginning and the end of the fiscal year. There is also an N-CFC (NOrskKontrollertUtenlandskSelskap (NOKUS)), if Norwegian resident taxpayers owns or controls more than 60% of such foreign entity at the yearend. There is no N-CFC if the company is established in and carries out factual long term commercial activities in an EU/EEA-country. The net profit is calculated by translating the foreign financial statements figures into NOK, using the year end currency rate, and preparing a set of tax accounts based on Norwegian taxation rules, see paragraph 6 above. Fixed assets are depreciated using the declining balance method. Dividends from such companies are not taxed in Norway if

the dividends are within the year’s net profit. Losses may be netted against other taxable income, except for companies within the shipping tax system, see paragraph 7 above. Losses in shipping, however, can be offset against future shipping profits. A country is defined as a low tax country if the average total tax, calculated over a representative period of more than one year, of such foreign entity is less than 2/3 of what the Norwegian tax (based on a tax rate of 28%) would have been, had the foreign entity been taxed in Norway. Some countries are, however, always defined as low tax countries by the tax authorities and some are never considered as low tax countries (independent of the above main principle), see Appendix C. If the effective management, determined by the place of the day to day business decision making, of such foreign entity moves to Norway, then the foreign entity will also be considered to be a Norwegian tax resident company, from the date the effective management is moved, although it was foreign registered. The above regulations do not usually apply if a tax treaty is in existence. However, N-CFC rules will normally be used if the income in the low tax country is from financial sources.

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Doing business in Norway – an introduction (2010) Appendix A – Useful web-links (see http://www.moorestephens.no/eMSlinker.htm) Background information about Norway (I)

http://www.regjeringen.no/en.html?id=4

Background information about Norway (II)

http://www.norway.no/Default.asp?

Minifacts about Norway

http://www.ssb.no/english/subjects/00/minifakta_en/en/

Bedin – company information

http://www.bedin.no/php/startside_eng/cf/hDKey_2

Central Office – Foreign Tax Affairs

http://www.skatteetaten.no/Templates/GenereltInnhold.aspx? id=9125&epslanguage=NO

Tax treaties - overview

http://www.regjeringen.no/en/dep/fin/Selected-topics/Taxesand-Duties/skatteavtaler/tax-treaties-between-norway-andother-st-2.html?id=450647

- withholding tax rates

http://www.regjeringen.no/nb/dep/fin/tema/Norsk_okonomi/top ics/treaty-withholding-tax-rates-on-dividend.html?id=418051

- limited treaties

http://www.regjeringen.no/en/dep/fin/Selected-topics/Taxesand-Duties/skatteavtaler/Tax-treaties-between-Norway-andother-st.html?id=417330

Transfer price documentation

http://www.skatteetaten.no/Templates/Artikkel.aspx?id=74001 &epslanguage=NO&TopicTypeID=ArtikkelTopicType

Private tax return – guidelines to items http://www.skatteetaten.no/upload/PDFer/Rettledninger_2009/ Guidelines_to_the_induvidual_items.pdf Other tax information (taxnorway.no)

http://www.skatteetaten.no/Templates/International/Internation alDefault.aspx?id=75713&epslanguage=EN

Guide to VAT in Norway

http://www.skatteetaten.no/Templates/Brosjyre.aspx?id=7160 &epslanguage=NO

Refunds of VAT to foreign businesses http://www.skatteetaten.no/Templates/Brosjyre.aspx?id=9464 &epslanguage=NO Norwegian Customs

http://www.toll.no/default.aspx?id=3&epslanguage=EN

Guide for foreign employers and employees

http://www.skatteetaten.no/Templates/Brosjyre.aspx?id=7496 9&epslanguage=NO

Ministry of Finance

http://www.regjeringen.no/en/dep/fin.html?id=216

Oslo Stock Exchange

http://www.oslobors.no/ob/?languageID=1

Oslo Axess

http://www.osloaxess.no/ob/auma_forside?languageID=1

Requirements for listing on the Stock Exchange

http://www.oslobors.no/ob/noteringavaksjer?languageID=1

Norwegian Commercial Registry

http://www.brreg.no/english/

The Norwegian Institute of Accountants http://www.revisorforeningen.no/a9018654/English SSB – Statistics Norway

http://www.ssb.no/english/

The Financial Supervisory Authority

http://www.kredittilsynet.no/wbch3.exe?p=2068

Central Bank of Norway

http://www.norges-bank.no/default____106.aspx

Legislation translated into English

http://www.lovdata.no/info/uenga.html

Nordic eTax

http://www.nordisketax.net/default.asp?l=eng

Nordic Social Insurance Portal

http://www.nordsoc.org/

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Doing business in Norway – an introduction (2010) Appendix B – Depreciation rates for tax purposes Maximum rate 2008

(the maximum rates are reduced proportionally if the company changes its accounting year)

Group A

Office machinery etc

30%

Group B

Acquired goodwill

20%

Group C

Trailers, lorries, buses and taxicabs

20%

Group D

Cars, tractors, machinery, tools, instruments, fixtures and furniture

20%

Group E

Ships, vessels and offshore rigs

14%

Group F

Aircrafts and helicopters

12%

Group G

Constructions for transfer of electricity

Group H

Buildings and constructions and hotels (time of use > 20 years) Buildings and constructions and hotels (time of use < 20 years)

4% 8%

Group I

Office buildings

Group J

Technical installations in office buildings and other commercial buildings 10%

Appendix C – Low tax countries (as defined by the Norwegian tax authorities) A country is defined as a low tax country if the average total tax, calculated over a representative period of more than one year, of such foreign entity is less than 2/3 of what the Norwegian tax (based on a tax rate of 28%) would have been, had the foreign entity been taxed in Norway. When tax treaties exist, such treaties may result in other solutions. The following countries are always considered as low tax countries (independent of the above main principle):

The following countries are never considered as low tax countries (independent of the above main principle):

- Andorra - Bahamas - Bahrain, except companies taxable for oil activities - Bermuda - Cayman Islands - Channel Islands (Jersey, Guernsey, Lihou, Jethou, Herm, Alderney, Great Sark, Little Sark and Brecqhou) - Hong Kong - Isle of Man - Liberia - Macao - Marshall Islands - Moldova - Monaco - Montenegro - Nauru - Oman - Panama - Paraguay - St. Kitts & Nevis - United Arab Emirates - Vanuatu - Virgin Islands (American and British)

- Australia - Belarus - Canada - Chile - China - Croatia - India - Japan - New Zealand - Russia - Ukraine - USA (this is not binding, however, for profits from realisation of shares in companies in low tax countries)

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appendix D – Tax treaties at February 18, 2010 Country

Without tax treaty Albania Algeria Andorra Anguilla Antigua Argentina Aruba Azerbaijan Republic Australia Austria Bahamas Bangladesh Barbados Barbuda Belgium Belize Benin Bosnia Hercegovina Brazil British Virgin Islands Bulgaria Canada Cayman Islands Chile China Cook Islands Croatia Cyprus Czech Republic Denmark (see Nordic countries) Egypt Estonia Faeroe Islands (see Nordic countries) Finland (see Nordic countries) France Gambia Germany Gibraltar Greece Greenland Grenada Guernsey Hungary Iceland (see Nordic countries) India Indonesia Iran Ireland Israel Italy Ivory Coast Jamaica

Withholding tax rates Ordinary Parent/ Parent/subsidiary rate Main rates subsidiary requirements Status method 25 25 1 C 15 5 25% capital participation 3 3 2 3 1 C 15 10 25% capital participation 2 1 C 15 10 30% capital participation and an investment of > USD 100 000 1 C 15 5 10% voting power, rate = 0% if Article 10, § 3 is fulfilled 1 C 15 0 Beneficial owner is a company 3 1 C 15 10 10% capital participation 1 A 15 5 10% capital participation 3 1 A 15 5 25% capital participation 3 1 A 20 20 1a) A 15 15 1 A 25 25 2 1 A 15 15 1 C 15 15 2 1 C 15 5 25% voting power 1d) A 15 15 2 1a) A 15 15 1/3c) C 5 0 50% voting power 1 C 15 0 10% capital participation 1/3 1

A C

15 15

15 5

25% capital participation

1 1/3 2 1 1 3 3 1

C A

15 15

0 5 5 0

25% of the share-capital >10%, <25% of the share-capital 25% capital participation 25% capital participation

C C

1/3 1 3 1 1 1/3 1 1

C A

25 15

15 15

25% capital participation

C A A A A

15 15 15 15 15

5 5 15 15 15

10% voting power 50% voting power

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appendix D - Tax treaties at February 18, 2010 Country

Japan Kasakhstan Kenya Latvia Lebanon Liechtenstein Lithuania Luxembourg Makedonia Malawi Malaysia Malta Marocco Mauritius Mexico Monaco Nepal Netherlands Netherlands Antilles New Zealand Nordic countries Pakistan Philippines Poland Portugal Qatar Romania Russia Saint Lucia Samoa San Marino Senegal Serbia Sierra Leone Singapore Slovak Republic Slovenia South Africa South Korea Spain Sri Lanka Sweden (see Nordic countries) Switzerland Tanzania Thailand Trinidad and Tobago Tunisia Turkey Turks & Caicos Islands Uganda Ukraine United Kingdom USA Venezuela Vietnam

Withholding tax rates Main Ordinary Parent/ Parent/subsidiary rate Status method rates subsidiary requirements 1 C 15 5 25% voting power 1 C 15 5 10% capital participation 1 A 25 15 25% voting power 1 C 15 5 25% capital participation 3 3 1 C 15 5 25% capital participation 1 C 15 5 25% capital participation 3 1/2c) C 5 0 50% voting power 1/3 A 0 0 1/3 A 15 15 1 A 15 15 3 1 C 15 0 25% capital participation 3 1 C 15 5 25% of the share-capital 10 >10%, <25% of the share-capital 1 C 15 0 25% capital participation ½ A 15 5 25% capital participation 1 C 15 15 1 C 15 0 10% capital participation 1 A 15 15 1 A 25 15 10% capital participation 1/2 C 15 5 25% capital participation 1/3 A 15 10 25% capital participation 1 1 C 10 10 1 C 10 10 3 2 3 1 C 16 16 1 a) A 15 15 1 c) C 5 0 50% voting power ½ C 15 5 25 % capital participation 1 b) C 15 5 25% capital participation 1a) A 15 15 1 C 15 5 25 % capital participation 1 A 15 15 1 C 15 10 25% capital participation 1 A 15 15 1/2 1 1 1 1 1/2 2 1 1 1 1/3 1 1

C C C A A A

15 20 15 20 20 25

0 20 10 10 20 20

20% capital participation

C C C A C C

15 15 15 15 10 15

10 5 5 15 5 5 10

25% capital participation 25 % capital participation 10% voting power

10 % capital participation 25% voting power 25% capital participation

10 % capital participation 70% of the share-capital >25%, <70% of share-capital

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appendix D - Tax treaties at February 18, 2010 Country

Yugoslavia Zambia Zimbabwe

Withholding tax rates Main Ordinary Parent/ Parent/subsidiary rate Status method rates subsidiary requirements 1 a) 25 25 1 A 15 15 1 A 20 15 25% capital participation

1) The treaty is in force 2) The treaty is signed but not yet ratified / not yet in force 3) The treaty is being renegotiated / is under negotiation

a) The tax treaty between Norway and Yugoslavia of 1 September 1983 is temporarily suspended. By the exchange of notes the treaty has been given effect for Croatia as from 6 March 1996, for Slovenia as from the date of independence of the Republic of Slovenia, for Serbia from March 29, 2003 and for Bosnia Hercegovina as from the fiscal year 2009 b) The tax treaty between Norway and Czechoslovakia of 27 June 1979 will temporarily apply for the Slovak Republic c) The treaty with United Kingdom also covers Cyprus, Malawi and Sierra Leone d) The treaty with China does not cover Hong Kong

A) The method of apportionment C) Credit method A separate method may be used for salaries; contact us for more information

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appendix E – Considerations when doing business in Norway (not necessarily exhaustive)

•

Is a work permit necessary? - see details in paragraph 13

•

Is registration of persons with the local police and/or tax authorities necessary? - see details in paragraph 13

•

Is the Central Office – Foreign Tax Affairs (COFTA) informed about all contracts and any subcontracts given to foreign businesses or foreign self-employed persons, provided that the contract is performed on a site for building and assembly work in Norway, or on a site that is under the client’s control in Norway, or on the Norwegian Continental Shelf? - see details in paragraph 13

•

Has the client/principal and/or the contractor given information about persons who are employed by the contractor and working on the contract in question? - see details in paragraph 13

•

Are employees taxable to Norway and must local personal tax returns be prepared? (people hired out from abroad are taxable to Norway from day 1 and subcontracted (leased) labour follow the 183/270 days rule) - see details in paragraph 9

•

Is there a “permanent establishment” in Norway, is there a Norwegian CFC, are the company’s activities taxable to Norway and must a corporate tax return be prepared? - see details in paragraph 6 and 13

•

Must Norwegian social security be paid by the employer and/or employee? - see details in paragraph 8

•

Must the company and the employees be registered in the Aa- (employer/ employee) register? (to enable the tax authorities to issue tax deduction cards). If registration is necessary, the company must first register in the CCRLE (see paragraph 3) to obtain an organisation number. Registration is done automatically in the Aa-register if information of employees in Norway is given to CCRLE - see details in paragraph 9

•

Is the company liable to VAT in Norway? (foreign businesses engaged in activities which are liable for VAT registration must calculate and pay VAT according to the same rules as Norwegian businesses – normally every 2 months) - see details in paragraph 10

•

Must bookkeeping be performed according to the Norwegian Bookkeeping Act? - see details in paragraph 4

•

Must local financial statements be prepared? (statutory accounts (filed with The Register of Annual Company Accounts) or ”Extract of accounts” to COFTA (for temporary activites in Norway or activities on the Norwegian Continental Shelf in excess of NOK 5 millions) - see details in paragraph 4

PLEASE CONTACT THE LOCAL MOORE STEPHENS-OFFICE IN TIME TO DISCUSS NECESSARY ACTION

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appendix F – Specimen audit opinion To the Annual Shareholders’ Meeting of ABC AS AUDITOR’S REPORT FOR 2009 We have audited the annual financial statements of the ABC AS as of 31 December 2009, showing a profit/loss of NOK xxx for the parent company and a profit/loss of NOK xxx for the group. We have also audited the information in the Board of Directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit/coverage of the loss. The annual financial statements comprise the parent company’s financial statements and the group accounts. The parent company’s financial statements comprise the balance sheet, the statements of income and cash flows, the statement of changes in equity and the accompanying notes. The group accounts comprise the balance sheet, the statements of income and cash flows, the statement of changes in equity and the accompanying notes. The rules of the Norwegian accounting act and good accounting practice in Norway/International Financial Reporting Standards as adopted by the EU/Simplified IFRS according to the Norwegian Act on Accounting § 3-9 have been applied to produce the financial statements. The financial statements are the responsibility of the Company’s Board of Directors and Managing Director. Our responsibility is to express an opinion on the financial statements and on the other information according to the requirements of the Norwegian Act on Auditing and Auditors. We have conducted our audit in accordance with the Norwegian Act on Auditing and Auditors and good auditing practice in Norway, including standards on auditing adopted by Den Norske Revisorforening. These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit include, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit also include an evaluation of the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and good auditing practice an audit also comprises a review of the management of the Company’s financial affairs and its accounting and internal control systems. We believe our audit provides a reasonable basis for our opinion. In our opinion, • the financial statements are prepared in accordance with the law and regulations and give a true and fair view of the financial position of the Company and of the Group as of December 31, 2009, and the results of its operations and its cash flows (and the changes in equity) for the year then ended, in accordance with good accounting practice in Norway/International Financial Reporting Standards as adopted by the EU/ Simplified IFRS according to the Norwegian Act on Accounting § 3-9 • the company’s management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good bookkeeping practice in Norway • the information in the Board of Directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit/coverage of the loss are consistent with the financial statements and comply with the law and regulations. January 31, 2010 VEEL KARLSEN & CO ANS Johnny (without) Cash State Authorized Public Accountant (Norway) Note: This translation from Norwegian has been prepared for information purposes only

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appendix G – Challenging requirements in the bookkeeping regulations Is the following accounting material produced: detailed journals/specifications of all transactions/entries for each accounting period? (in systematic order specifying the documentation date and reference, assignment codes and other relevant processing codes) detailed general ledger (with all transactions sorted by g/l account for each accounting period) including specification for each account of the account code and account name, all items in systematic order specifying the documentation date and documentation reference, other relevant processing codes and opening and closing balances) detailed accounts receivable/customer subledger (with all transaction sorted by customer for each accounting period) stating the customer code and name, all items in systematic order specifying the documentation date and documentation reference and opening and closing balances detailed accounts payable/supplier subledger (with all transaction sorted by supplier for each accounting period) stating the supplier code, name and organisation number, all items in systematic order specifying the documentation date and documentation reference and opening and closing balances detailed lists of withdrawals for owners, partners and own business (all withdrawals of assets and services specified by owner, partner or own business in systematic order at fair value with the documentation date and documentation reference) detailed lists of all sales to owners and partners in enterprises with fewer than ten owners or partners (all sales of goods and services specified by owner or partner in systematic order stating the documentation date and documentation reference; even though the owners or partners are acting as consumers) detailed lists of sales and other transactions/payments/benefits to leading personnel. All sales of goods and services to leading personnel must be specified by employee in systematic order stating the documentation date and documentation reference. This applies even though such leading personnel are acting as consumers) Are all accounting vouchers numbered with a two-way control path (audit trail) between the detailed general ledger journals/specifications, the physical accounting vouchers and the required financial reports? Are specification of benefits/payments liable for inclusion in the year end certificate of pay and tax deducted (pay statement) prepared? (benefits/payments liable for inclusion in the pay statement by period and by the accounts in the accounting system. It shall also be possible to specify benefits/payments liable to payment of employers’ national insurance contribution in total, by contribution rate and municipality) Are all balance sheet items documented/specified at year end (unless they are immaterial) and is the documentation stored for 10 years? Is the accounting system documented (including any cash sale systems) describing the possibilities for control and how system-generated items can be checked, including relevant codes and fixed data, if this is necessary to enable the entries to be controlled)? Timing and frequency of bookkeeping Are all transactions booked within the deadlines for financial reporting (every 2nd month + 40 days for VATregistered entities; except VAT-registered entities with turnover below 1 mill NOK, if a yearly VAT-return is approved; these entities can book transactions once a year if they have less than 300 transactions), every 4th month + 60 days if the number of transactions > 300 and only once a year if number of transactions < 300? Printing of journals/specifications / “locking” of the accounting journals Are all journals/specifications (including the detailed general ledger, customers/suppliers subledgers and documentation of hours (see below)) printed and “locked” after the end of each financial reporting deadline? (only paper and non-editable printfiles (including PDF-files) are accepted) Bookkeeping period Are all transactions booked based on the date on the documents (sales- and suppliers invoices must be booked based on the invoice date even if physical delivery is in another month) and are accruals/prepayments used at year end to recognise the income in the month of delivery? Deadline for the issuing of sales documentation Is sales documentation issued as soon as possible and one month at the latest after delivery? (services delivered on a continuous basis (auditors, lawyers and consultants) shall be invoiced one month at the latest after expiry of the ordinary value added tax period, for services that are delivered on the basis of metering of actual consumption (electricity, telecommunications and similar), sales documentation can be issued for longer periods, limited to one year, for services that are delivered on the basis of a tender or equivalent pre-agreed price, the sales documentation can be issued in accordance with an agreement between the parties, unless the agreed invoicing deviates materially from the actual progress and sales documentation for passenger transport, catering, subscriptions, rents, service charges and similar may be issued before delivery takes place, limited however to a period of one year)

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appendix G – Challenging requirements of the bookkeeping regulations Does the documentation of the sale of goods and services (the invoice) contain: - number and date of issue of the documentation - specification of the parties - nature and scope of the goods/service provided - time and place of the delivery of the goods/service - payment and due date for payment - VAT, if applicable, and other taxes relating to the transaction that are required to be specified pursuant to legislation or regulations. VAT shall be specified in Norwegian kroner Are customer and supplier specifications as mentioned above (including cash sales and purchases) prepared when the goods or services are intended for resale or as direct input factors in production or in the delivery of services, or when the payment is more than NOK 40 000 including VAT? Are all cash sales (in which the purchaser’s payment obligation to the vendor is settled on delivery) registered continuously in a cash register, terminal or other equivalent system with dated, numbered cash register tapes or equivalent reports that specify the time of each individual sale? (this does not apply to enterprises that engage in ambulant or sporadic cash sales that, for such business, do not exceed three times the national insurance basic amount during the financial year). Are dated, numbered cash register tapes («Z reports«) or equivalent reports of the information registered in the cash register, terminal or equivalent system prepared daily and is the documentation/bookkeeping of the cash sales reconciled to the daily counting of the cash holding? Is value added tax (VAT) specified/reconciled? (output and input value added tax and the basis for the calculation of the tax specified by period and by the accounts in the accounting system. The specification shall also show taxfree turnover and withdrawals, and turnover and withdrawals that fall outside the scope of the provisions of the VAT Act. It shall also be possible to specify input and output VAT by transaction) Is the bookkeeping in the building and construction industry, organised in such a manner that it is possible to prepare separate specifications (project accounts) for projects whose tender price or estimated turnover value exceeds NOK 300.000 excluding value added tax? Are travel and subsistence expenses and hospitality expenses documented (including the purpose of spending the expenses and the person(s) that participated)? Are satisfactory explanations and/or underlying documentation prepared for all internal entries and entries correcting previous entries? Do enterprises that perform services where the remuneration is based on time consumption document the number of hours worked, sorted by client/customer, for each owner and employee? - the hours shall be specified per day, divided between internal time consumption and the individual customers/ assignments. The provisions also apply in cases where a fixed price has been agreed - internal/administrative hours can be registered as a total per day - the documentation must be prepared within the deadlines for financial reporting (see above) - the provisions do not apply to owners and employees who only perform administrative tasks internally Are annual accounts and other statutory financial reporting, the annual report and the auditor’s report, specifications of statutory financial reporting as mentioned above, documentation of entries and deleted entries, documentation of the accounting system etc, documentation of the balance sheet and numbered letters from the auditor, stored in Norway for ten years after the end of the financial year? Are agreements concerning the business (with the exception of agreements of minor importance), correspondence that provides important additional information in connection with an entry, outgoing packing slips or corresponding documentation available on paper at the time of delivery and price lists, stored in Norway for three years and six months after the end of the financial year? Do entries which were initially electronically available remain electronically available for three years and six months after the end of the financial year? Do enterprises that keep their accounts abroad transfer the accounting material for storage in Norway within one month after the adoption of the annual accounts and no later than seven months after the end of the financial year? Are additional provisions and special rules for defined industries/sectors (including building and construction, taxis, hair care businesses, hairdressers and beauticians, service industries, businesses serving alcoholic beverages, hotels and foreign companies and persons engaged in business activities on the Norwegian Continental Shelf) adhered to?

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appendix H – Information about Moore Stephens Moore Stephens Norway DA is a non-operative umbrella company coordinating the national and international activities of the Norwegian firms of accountants that have joined forces in the Moore Stephens Norway association. All member firms are independent entities, owned, controlled and managed locally, without any partnership between them. However, we actively strive to work together, sharing information, talent and know how. The Norwegian firms are all independent members of Moore Stephens International Limited, the 13th largest accounting and consulting association worldwide with 630 offices in 98 countries and 20,900 partners and staff. The association has 8,100 people in 337 offices and 207 firms in 44 countries in Europe, and it is among the 10 largest associations in the Nordic/Baltic region based on turnover. Firms associated with Moore Stephens Norway DA: • Veel Karlsen & CO ANS – Oslo Wergelandsveien 1-3, N-0167 Oslo Telephone: +47 22 98 15 40 - http://www.veelkarlsen.no 12 partners and employees – MS-member from 1998 The company's main activity is statutory audits including related tax- and consulting work, concentrated in the Oslo-area. •

Profero Revisjon DA – Oslo Wergelandsveien 1-3, N-0167 Oslo Telephone: +47 22 98 15 40 - http://www.proferorevisjon.no 8 partners and employees – MS-member from 2006 The company's main activity is statutory audits including related tax- and consulting work, concentrated in the Oslo-area.

•

Orkla Revisjon AS – Trondheim Vestre Rosten 85, N-7075 Tiller Telephone: +47 72 89 94 10 - http://www.orkla-revisjon.no 13 partners and employees – MS-member from 2006 The company's main activity is statutory audits including related tax- and consulting work, concentrated in the Trondheim-area.

•

Moore Stephens Consulting AS – Oslo Wergelandsveien 1-3, N0167 Oslo Telephone: +47 22 98 15 40 - http://www.moorestephens.no The company is owned 50/50 by Profero Revisjon DA and Veel Karlsen & Co ANS. It’s main activity is corporate finance work, including investigations, due diligence, valuations and management for hire (including technical preparation of tax returns, interim accounts and financial statements for larger non-audit clients), concentrated in the Oslo area, but work is also performed country wide.

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Appendix H – Information about Moore Stephens The Norwegian associated firms have agreed on the following areas of cooperation: • • • • • • • •

Professional training, conferences, meetings and courses Quality control Marketing (including brochures and “Doing-business-guides”) Recruiting Courses for clients Newsletters Information technology (hardware, software and websites) Development of audit methods and technical material

Moore Stephens Norway associated firms can help you in the following areas:  Starting a business - drafting of memorandum and articles of association - registration - assistance in obtaining necessary permits 

Running a business - financial reporting to parent company - tax returns - statutory accounts - special projects (including installation of new accounting systems)



Taxation - corporate tax - international tax - tax returns - tax planning - VAT registration - custom and duties



Audit and assurance services - statutory annual audit - special purpose audits



Corporate finance and other services - mergers and acquisitions - business valuations - due diligence work - forensic, insolvency and other investigations - outsourcing of accounts preparation and tax return preparation



Closing a business - liquidation audits - statutory accounts/reports - tax returns



Services for individuals - registrations - help in obtaining permits (if required) - social security - personal taxes - VAT (if self-employed) - pensions

Updated: April 30, 2010

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Doing business in Norway – an introduction (2010) Notes

Updated: April 30, 2010

OORE STEPHENS NORWAY DA Wergelandsveien 1-3, N-0167 Oslo, Norway Contact: Kåre Kjøllesdal Tel: +47 22 98 15 40 • Fax: +47 22 98 15 41 E-mail: info@moorestephens.no Website: www.moorestephens.no