All persons resident in Norway must pay wealth tax on their global net worth. Here's your complete guide to Norwegian wealth tax, updated for 2023.
The recent drama over a small municipality in northern Norway offering its residents a saving on wealth tax has highlighted this lesser-known tax to a much wider audience than before.
We'll look more at the situation in northern Norway's “tax haven” later, but first, let's dive into detail and discover everything there is to know about wealth tax in Norway.
A tax on global assets
Norway imposes several different kinds of tax on its residents. Taxes pay for a variety of public services including roads, education, healthcare, and pensions. They can also be used to encourage different behaviour, such as incentivising the switch to electric cars.
Income tax and social security are deducted from salaries for the employed, and paid in advance for the self-employed. But unlike many other countries, Norway also taxes a person's wealth.
Many business owners with significant assets pay themselves little or no salary, and therefore avoid any income tax. The wealth tax helps ensure that the wealthiest people in society still contribute.
Importantly, the tax is levied on an individual's global assets, regardless of where they are held. The only way to avoid paying wealth tax on significant assets is to leave Norway and become tax resident somewhere else.
How much is Norwegian wealth tax?
Norway's wealth tax is easy to understand, although it does change from time to time. The latest change was made in 2022 and the following numbers apply to 2023.
The total value of a person's worldwide net wealth above NOK 1.7 million (approx $170,000) is taxed at 1%.
To be clear, that means that if someone owns net assets worth NOK 2 million, they will pay 1% tax on NOK 300,000, not the full NOK 2 million.
Of the wealth tax take, 0.3% goes to the state, with the remaining 0.7% going to the municipality in which the individual lives.
When net wealth exceeds NOK 20 million, the marginal tax rate increases by 0.1%. Any additional revenue from this extra marginal rate goes to the state.
How is net wealth defined?
Net wealth is defined on the Norwegian tax return by the total value of assets minus total debt. So if you own a home worth NOK 5 million but are still paying off a mortgage, you won't be charged wealth tax on the full value of the house.
Read more: Cost of Living in Norway
But housing in itself is a special case. While housing wealth is included in the wealth tax calculations, there are favourable rules on the valuation of your primary dwelling. For wealth tax purposes, your primary dwelling is valued at 25% of its estimated market value. This means most homeowners don't a lot of wealth tax simply through owning a home in which they live.
There are also separate rules for how net wealth is calculated for married couples.
Norway wealth tax example
Say you own a house worth NOK 5 million, with additional assets worth NOK 1 million. Your house is paid off in full, and you have no other debt. This would mean a net wealth of NOK 6 million.
However, the property value is calculated at NOK 1.25 million for the purposes of the wealth tax. This assumes it's your primary dwelling and you don't own any other property, including overseas.
In this case, you net wealth would be NOK 2.25 million. This would result in a wealth tax bill of just NOK 5,500.
Where is northern Norway's tax haven?
The remote municipality Bø i Vesterålen has hit the headlines recently, with some Norwegian media calling it the ‘Monaco of Norway'. What has this tiny municipality home to a handful of villages with a population of little more than 2,500 done to earn this nickname?
Simply put, Bø's conservative mayor decided to decrease the amount of wealth tax it would charge its residents. The thought was that this would attract high net worth individuals, which would easily offset the loss in tax revenue.
The reality hasn't been that easy. While several wealthy Norwegians have indeed moved, Norway's little-known tax equalization laws mean that Bø will not earn as much tax revenue as they had anticipated. The conservative-led government has controversially agreed to plug the gap.
Elsewhere in Northern Norway, many residents of the rural parts of Troms og Finnmark county receive an extra deduction on their personal tax returns. But those residents still have to pay wealth tax at the regular rate.
What do you think of Norway’s wealth tax? Is it a fairer way to redistribute income, or a government tax grab? Let us know in the comments.