Norway/Tax for foreign employees in Norway
I saw your post on tax in Norway and I also have similar question. Last year January i came to Norway and I opted for standard 10% deduction while applying tax card. My wife is not working and I've two kids. When I got tax card, I got 18% as tax percentage instead of tax table. I had a feeling that 18% is too low and i searched Internet more on this. During this i found your response where you mentioned about 18%, so I thought this was normal. My employer deducted tax only 18% and now when I got tax return, got a shock treatment :( it says i need to pay another 80000 nok as tax apart from 106000 Nok which already paid.
I know, I need to claim standard deduction 10% again while submitting the return, but this will not make that much huge difference in tax. Can you please help with your experience? Thank you.
ANSWER: Ops, that is bad. The 18% number was for a lower income than yours. When the income goes above 450K/year you very fast reach the standard tax rate of 27%.
But all hope is not yet out, remember your deductions.
Since you have never handed in a tax return form (selvangivelse) in norway, few of these have been preregistered yet.
1) Travel from home to work
You deduct the cost of travelling from home to work and back. 230 days multiplied with the number of km from home to work and back. Depending on the distance you commute - this can amount to something.
2) Interest on loans. You may have interest payments on loans that are not in a norwegian bank? Document and put in there. You don't pay tax on interest payments.
3) Standard deduction for foreign workers the two first years they are in norway. There's a tick box. Very important in your tax return paper. Up to 40k deduction on your gross income (that is a 10-12k tax reduction right there)
4) Expenses for childcare? Your kid stayed home with mum, but did you ever pay a babysitter? Did you pay for a ticket for grandma to come in the summer and babysit? These expenses are deductible (up to 7K I think, you'll have to check the numbers here)
5) What is your tax class? You should be tax class 2 since your wife is not working. (SKATTEKLASSE = tax class).
6) If you have other automatic deductions that are split automatically between you and the wife, remember to transfer them to you in the tax return.
Beyond that you'll have to start communicating with the tax office. They're normally very helpful with coming up with a payment plan for the back taxes. I had a similar situation that you have here a few years back, I got a severance package from a previous employer and suddenly my tax rate one year skyrocketed to 34%. A month and a half gross pay in back taxes. Had to split it up in monthtly installments over a year. And that was after I had squeezed all deductions to the max.
see the website
for tax information
---------- FOLLOW-UP ----------
QUESTION: Thank you for the response.
Regarding the point 1) Travel from home to work, I heard this is not possible when we use 10% standard deduction for foreign employees. We can use either one of these. Is that right?
5)My tax class is 2F since my wife is not working. It is mentioned in my tax return. Any idea how much this will save in tax?
Unfortunately tax office is not very helpful here, They were constantly telling me that 18% mentioned in my tax card for 2014 is correct and 22% for 2015 also correct. I do not have clue on how they came with these figures.
For eg., my tax card for 2015 says this,
22 % skattetrekk av dine inntekter.
Inntekt hittil i år 0
Skattetrekk hittil i år 0
Beregnet skatt for 2015 123 900
Inntekter Fradrag Formue og gjeld
Lønn m.v. 500 000 Minstefradrag 89 000
Trekkpl utg.godtgj. 147 700 Andre fradrag 40 000
Looking further into it I see that you are right, most deductions are included in the 10% default.
So you'll have to look into if claiming the 10% standard or detailing your deductions is better for you:
from the taxnorway.com website:
Here are some examples of deductions that cease to apply if you claim the standard deduction:
-the deduction for travel between your housing in Norway and your permanent workplace (travel to/from work)
-interest on debt
-payments made into individual pension agreements (IPS) pursuant to the Taxation Act
-deductions for donations to certain organisations
-special allowances for certain costs in connection with illness
-a deduction in tax for amounts saved in the young persons housing savings scheme (BSU)
If these deductions total more than 10% of your income, you should NOT claim 10% standard, but claim each deduction individually.
And the tax card information for 2015 you provide looks ok to me. If your salary is 500k/year and the family has no other income. The tax agency is required to calculate what is best for you to the best of their knowledge. It seems like they've got all the deductions there.
However, this card says that the tax you must pay is only 22% (124k) in 2015. It ought to be the same in 2014 then. But you say they claim 186K in taxes (80k in back tax) for 2014. Based on this I say that you should be able to fiddle with the deductions in 2014 so that the taxes owed falls down to the same level as projected 2015 tax.
Then you'd only owe 20K in back taxes, and that is not so bad.
Well, OK, Bad enough, But less bad.
You might want to instruct the payroll office to bump your tax deduction to 23 or 24% though, just to be on the safe side.