Norway-United States Tax Agreement: Understanding its Implications
The US and Norway signed a tax treaty in 1971 that was amended and updated in 2006. The tax agreement, also known as the Convention between the Government of the United States of America and the Government of Norway for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, outlines the tax rules that apply to individuals and businesses that operate between the two countries.
Here are some important things to know about the Norway-US tax agreement:
1. Avoidance of Double Taxation
One of the main purposes of the tax agreement is to prevent double taxation of income that may arise from cross-border activities. This means that if you are a Norwegian resident earning income in the US or a US resident earning income in Norway, the tax agreement will ensure that you are not taxed twice on the same income.
2. Tax Treatments
The tax treaty outlines specific tax treatments for different types of income. For instance, it specifies that dividends, interest, and royalties are taxable in both countries but at different rates. The tax agreement also provides rules for determining the source of income, which is crucial for determining tax residency.
3. Capital Gains
The Norway-US tax agreement also outlines rules for taxing capital gains. Generally, capital gains from the sale of assets such as stocks, bonds, and real estate are taxable in the country where the seller is resident. However, the tax treaty provides exceptions for certain types of assets such as ships, aircraft, and personal property.
4. Tax Credits
The Norway-US tax agreement also allows for the use of tax credits to reduce the amount of tax owed. This means that if you pay tax on income in one country, you can use that tax paid to offset any tax owed in the other country.
5. Tax Residency
The tax agreement provides rules for determining tax residency. Generally, a person is considered a tax resident of the country where they have a permanent home. However, the tax treaty also considers other factors such as the location of personal and economic ties.
In conclusion, the Norway-US tax agreement is designed to prevent double taxation of income and provide clarity and consistency in tax rules for individuals and businesses that operate between the two countries. It is important to understand the implications of the tax treaty to ensure compliance with tax laws and avoid any penalties or legal issues.