READER QUESTION: How does property abroad affect Norway's wealth tax?
Norway's wealth tax is levied against a taxpayer's net wealth. How do the tax rules work if you own property abroad?
Question: How do Norway's tax authorities value property abroad for the wealth tax?
Do you have a question you want answered about Norway? Get in touch, and we will do our best to answer them in an article if we feel they may be helpful for other readers. Your question will be published anonymously.
Norway's wealth tax applies to more than just the super-rich. For example, assets like property are taken into account when calculating any possible wealth tax.
The tax itself is levied against one's net worth. This is the total value of your assets minus any debts or liabilities.
The municipal wealth tax rate in the country amounts to 0.7 percent, and it is calculated based on your assets exceeding a net capital tax basis of 1.7 million kroner for single or unmarried taxpayers and 3.4 million kroner for married couples in Norway.
There is also a state wealth tax rate along with the municipal wealth tax. This tax amounts to 0.3 percent and is calculated based on your assets exceeding a net capital tax basis of 1.7 million kroner if you're single or unmarried or 3.4 million kroner for married couples.
Those with a net value of more than 20 million kroner (or 40 million kroner for married couples) pay a rate of 0.4 percent.
However, there are some special rules for wealth tax and property. For starters, your primary dwelling is valued at 25 percent of its estimated market value. If the homeowner has a mortgage, this will also be deducted from the property's value.
These discounts on valuation also appear automatically, so you don't need to submit them manually when working out wealth tax. As an example, a 6 million kroner house would only be worth 1.5 million kroner in wealth tax terms if it's your primary property and you have paid off your mortgage.
Regarding wealth tax abroad, property owners should be aware of two things. Firstly, Norway has a global tax system. This means that residents or tax residents of Norway are required to pay tax to the Norwegian Tax Administration on income earned in Norway and abroad.
For example, if you own a property abroad and rent it out, the rent you collect would be classed as taxable income.
Regarding wealth tax, the rules are quite complicated. Generally, if the property is located in a country with which Norway has a tax treaty, you will not pay wealth tax on the property in Norway. Brazil, Croatia, Belgium, Italy and the USA are some of the 32 countries with which Norway has an agreement.
If the country where you own the property has a wealth tax, and you have paid it to the relevant authority, you can apply for a tax deduction in Norway to avoid double taxation. This is done by filling in form RF-1147, "Deduction for Norwegian tax paid abroad".
Should the country where you own property fall outside of these two rules, then it will likely be included in wealth tax calculations. In any case, you will need to report the property to the authorities and consult an account or tax expert on the finer points.
The Norwegian tax administration writes on its website that properties abroad are valued according to the rules that apply to leisure properties.
For leisure properties, such as second homes in Norway and abroad, there is no valuation discount. This means that foreign property is calculated at full-market price minus any discounts you may have.
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Question: How do Norway's tax authorities value property abroad for the wealth tax?
Do you have a question you want answered about Norway? Get in touch, and we will do our best to answer them in an article if we feel they may be helpful for other readers. Your question will be published anonymously.
Norway's wealth tax applies to more than just the super-rich. For example, assets like property are taken into account when calculating any possible wealth tax.
The tax itself is levied against one's net worth. This is the total value of your assets minus any debts or liabilities.
The municipal wealth tax rate in the country amounts to 0.7 percent, and it is calculated based on your assets exceeding a net capital tax basis of 1.7 million kroner for single or unmarried taxpayers and 3.4 million kroner for married couples in Norway.
There is also a state wealth tax rate along with the municipal wealth tax. This tax amounts to 0.3 percent and is calculated based on your assets exceeding a net capital tax basis of 1.7 million kroner if you're single or unmarried or 3.4 million kroner for married couples.
Those with a net value of more than 20 million kroner (or 40 million kroner for married couples) pay a rate of 0.4 percent.
However, there are some special rules for wealth tax and property. For starters, your primary dwelling is valued at 25 percent of its estimated market value. If the homeowner has a mortgage, this will also be deducted from the property's value.
These discounts on valuation also appear automatically, so you don't need to submit them manually when working out wealth tax. As an example, a 6 million kroner house would only be worth 1.5 million kroner in wealth tax terms if it's your primary property and you have paid off your mortgage.
Regarding wealth tax abroad, property owners should be aware of two things. Firstly, Norway has a global tax system. This means that residents or tax residents of Norway are required to pay tax to the Norwegian Tax Administration on income earned in Norway and abroad.
For example, if you own a property abroad and rent it out, the rent you collect would be classed as taxable income.
Regarding wealth tax, the rules are quite complicated. Generally, if the property is located in a country with which Norway has a tax treaty, you will not pay wealth tax on the property in Norway. Brazil, Croatia, Belgium, Italy and the USA are some of the 32 countries with which Norway has an agreement.
If the country where you own the property has a wealth tax, and you have paid it to the relevant authority, you can apply for a tax deduction in Norway to avoid double taxation. This is done by filling in form RF-1147, "Deduction for Norwegian tax paid abroad".
Should the country where you own property fall outside of these two rules, then it will likely be included in wealth tax calculations. In any case, you will need to report the property to the authorities and consult an account or tax expert on the finer points.
The Norwegian tax administration writes on its website that properties abroad are valued according to the rules that apply to leisure properties.
For leisure properties, such as second homes in Norway and abroad, there is no valuation discount. This means that foreign property is calculated at full-market price minus any discounts you may have.
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