Find out how much tax you can expect to pay from your salary this year in Norway.
If there’s one topic that always kick-starts a debate here on Life in Norway and on all our social media channels, it’s Norwegian tax.
Many people contact me asking how much tax they should be paying. Without knowing their salary and a bunch of other personal information, it’s a difficult question to answer.
That’s because like many other countries, Norway operates a progressive system for income tax. That means the more you earn, the more tax you pay on a percentage basis. However, it's possible to work out your expected tax bill by doing a few calculations. There's plenty of online calculators to help you along the way, too.
How Norwegian income tax works
Income tax is deducted by the employer on behalf of the Norwegian state. The tax-year runs January-December and your estimated annual tax bill is worked out at the beginning of the year.
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From this, the monthly deductions are calculated. If you pay too much or little, the difference is settled on the personal tax return the following year.
If you know you’ll be earning more or less than estimated during the year, you are able to make changes to these figures. This helps prevent a big tax bill at tax return time.
Income tax is split into various elements, and the basis for these taxes is different. To fully understand your situation, you need to calculate these two figures:
Personal income: Your total income.
Tax basis: This basis for taxation is your personal income minus any deductions that you are entitled to. These vary. However, everyone receives a standard deduction (minstefradrag) equal to 45% of your gross employment income, up to a maximum of 104,450kr. Most employees also receive a personal deduction (personfradrag), which is 51,300kr for most people. Remember, these so-called deductions are simply a way of working out your taxable income.
Income tax rates in Norway in 2020
Income tax is split into a base rate and a step tax, to allow for progressive taxation.
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The base rate (fellesskatt) of income tax in Norway is 22%. Those who live in Finnmark or Nord-Troms will pay 18.5%. There is a then a so-called step tax (trinnskatt), sometimes called bracket tax. This is a progressive tax rate based on four levels, as follows.
For the first 180,800kr of your personal income, you will not pay any step tax. 1.9% step tax is owed on your personal income between 180,000kr and 254,500kr. Then, there is a 4.2% step tax for income between 254,500kr and 639,750kr. Over and above this amount, the step tax increases significantly.
You will pay 13.2% step tax on income between 639,750kr and 999,50kr. For this living in Finnmark and Nord-Troms, this level of step tax is reduced to 11.2%. For all income above this amount, a 16.2% step tax is charged.
Social security payments in Norway
One of the reasons income tax is often perceived as high is that social security or national insurance payments are taken from wages at the same time as income tax. In Norwegian, this is known as trygdeavgiften. Most employees see one big deduction on their payslip, but this deduction covers both taxes.
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As with step tax, national insurance contributions are calculated on your personal income. That’s your gross income before any deductions. Most people pay 8.2% contributions on their personal income.
How much income tax will I pay in Norway in 2020?
As I said before, the final amount you pay will be determined by many factors based on your personal circumstances. However, you have all the information you need on this page to get a rough estimate. Let’s look at some examples.
Firstly, let’s take a salary of 450,000kr. Assuming just the standard deductions, the breakdown is as follows:
Personal income: 450,000kr
Tax basis: 450,000 – 104,450 – 51,300 = 294,250
Base rate: 22% of 294,250 = 64,735
Step tax level 1: 1.9% of personal income (254,500 – 180,000) = 1,415.50
Step tax level 2: 4.2% of personal income (450,000 – 254,500) = 8,211
National insurance: 8.2% = 36,900
Total annual salary deductions: 111,261.50. That amounts to a total 24.7% over the course of the year. But you'll see a bigger percentage deduction on your payslip most months, because of the 10.5 month system Norway uses to collect income taxes. You'll likely see a 28% deduction on most month's payslip at this rate. Read the section below to understand why.
Here's another example on a higher salary of 700,000kr. This would result in a total tax payment of 202,669kr over the course of a year. That's about 29% over the course of a year, although you'll see a 33% deduction on most of your payslips.
A final example for those lucky enough to earn one million kroner. This would result in a total tax liability of 332,882kr. That's 33.3% over the year, with a 38% deduction on most payslips. Let's look at why you get a higher deduction on payslips.
Monthly tax payments in Norway
It’s relatively straightforward to calculate a rough estimate of your annual tax liability in Norway. However, that doesn’t mean your monthly tax liability will be 1/12 of that amount. Norway uses a 10.5 month system of taxation, rather than a 12 month one.
You pay half the normal monthly tax in December and zero tax in June. In fact, most employees don't receive normal salary in June. That month is when you receive the holiday pay accrued from the year before. That payment is not taxed, so typically you'll receive a higher monthly payment in June.
Holiday pay is a complex topic and outside the scope of this article. However, I will return to tackle the topic soon, as it's an area of Norwegian life that quickly confuses newcomers!
What if I'm paying too much tax?
At the beginning of every year, the tax authorities give a ‘tax card' to your employer to let them know how much to deduct each month. This code is based on your previous year's income. At the time of publishing this article, 2020 tax cards are available.
If you believe you're paying too much tax, you have two options. Firstly, you can log on to the Skatteetaten website and request a new tax card. You're able to see your expected annual income, expected yearly tax liability, plus how much you have paid to date. You're able to adjust your expected annual income so that your employer receives a correct tax card.
Alternatively, you can just wait! If you have indeed paid too much tax during the course of a year, you'll receive a rebate through the following year's tax return process.
An important note
Please understand, I am not a qualified accountant. This means I will not be able to answer any questions pertaining to your tax situation! I've simply written this article based on published facts and figures from Norway's tax authorities.
As your own personal tax rate, there are many other factors that could impact the final amount. Things such as whether you own a house or not, your level of pension contributions, and a whole range of other factors can all make a difference.
That being said, I hope this article helps you to understand the tax system a little better.