The move, which is certain to please the country's oil and shipping billionaires, was the most eye-catching of a total eight billion kroner in tax cuts ($1.3bn).
"We are starting the work to turn the Norwegian economy in a better direction, where we acknowledge that value must be created before it can be shared," Siv Jensen, the country's new finance minister said in her speech announcing the budget on Friday.
"Changes in the tax system will make it more profitable to work, save and invest," she said. "The inheritance tax is an unfair and unnecessary."
The government also announced plans to trim the rate of personal income tax from 27 percent to 28 percent.
It said it would spend 139.0 billion kroner ($23.2 billion) of revenues from its oil fund, a marginal increase on the 135 billion kroner proposed by the outgoing government.