The proposal involves the introduction of a share savings account where capital gains can be reinvested without being taxed on an ongoing basis. An interim solution for the year 2017 will guarantee that a transfer of shares and mutual funds from the existing account to the new share savings account will not be considered as a sale and will consequently not trigger a tax payment.
The government will submit its proposal for consultation, and it remains to see how the final version of the scheme will be. The proposal prepares for listed shares and mutual funds to be included in the savings scheme. Which mutual funds that should be included has not yet been decided, but mutual funds with a stake of over 80% shares should be included in the scheme, as distributions from these mutual funds are taxed as dividends at shareholder level. This limitation is proposed in order to simplify the scheme, and avoid having to split the return on shares and interests.
Furthermore, the government proposes that the scheme should only apply to capital gains and not dividends. The reason for this limitation include challenges related to the fact that Norwegian and foreign EEA shareholders should be handled in the same way. Norway may in accordance with tax treaties, as a general rule, deduct withholding tax on dividends, which is not the case for capital gains on equity instruments. In order to simplify the scheme, the government has proposed that for example cash held in the account or capital gains awaiting reinvestments will not be interest bearing.
The new tax reform also proposes to reduce the corporate tax to the same level of equivalent countries to improve the competitiveness of Norwegian corporates. Since the 1992 tax reform, the tax rate for ordinary income for individuals and corporates has been the same, something that will be pursued also in the future. The government believes that the total tax on equity income as well as the corporate tax should remain at current levels, which means that tax on equity income will rise from the current 28.5% to approximately 31%. Different tax on capital gains and ordinary income is challenging. Tax on income from rent, gains from the sale of housing, bank savings and bonds is estimated to be 8% lower than tax on capital gains and dividends that are owned directly by the investor.
VPS will, in collaboration with our clients, investigate how the abovementioned share savings account can be made available to investors.