Resident in Norway? Here's What You Need to Know About Property Taxation Abroad

More Norwegian residents than ever are buying property abroad, either for vacations, leisure, or as an investment. However, purchasing property abroad comes with tax implications. What are these tax obligations, and what should you be aware of?

The key point to remember is that Tax Labilities Abroad depend on local laws, but in Norway, you are also required to declare any Foreign Assets and Property Tax (Eiendomskatt Utlandet).

If you've bought or are planning to buy your dream property abroad, we have compiled essential information regarding taxes if you're a tax resident of Norway, whether you're buying, selling, leasing, or renting property.

Read Also: GUIDANCE TO REAL ESTATE MARKET | HOW TO FINANCE HOME BUYING IN NORWAY?

Global Taxation Principle in Norway

As a Norwegian resident, you are subject to global taxation, meaning you must declare both income and wealth from properties abroad in Norway. In addition, several countries impose local taxes on income, wealth, and inheritance. Consequently, you must comply with the tax regulations of two countries, file reports, and meet tax obligations in both.

1. Residential Property (Primary Residence)

Wealth Tax (Formuesskatt): The market value of your property is included in your personal wealth, potentially increasing your wealth tax. For tax purposes, the value of residential properties is typically set at 25%-30% of the market value.

Rental Income Tax (Inntektskatt på utleie): If you rent out your property, rental income must be declared and is taxed at the standard rate.

2. Vacation Home (Fritidsbolig)

Wealth Tax (Formuesskatt): Vacation homes are included in wealth calculations, usually taxed at a higher rate (30%-40% of the market value).

Capital Gains Tax (Gevinstskatt): If you sell a vacation home for profit, a 22% capital gains tax applies. However, this can be avoided if the property has been owned for at least 5 years and used as a vacation home for 5 out of the last 8 years.

3. Foreign Property (Bolig i utlandet)

Wealth Tax (Formuesskatt): Foreign properties are also factored into Norwegian wealth tax, usually based on 100% of their market value.

Rental Income Tax: Rental income from foreign properties is taxable in Norway, though you can claim a tax credit for taxes paid abroad to avoid double taxation.

Avoiding Double Taxation

Fortunately, you don’t have to pay double taxes. Norway has tax treaties with around 90 countries to prevent double taxation. Most treaties allow for foreign tax credits against Norwegian taxes, while some exempt Norwegian residents from tax liabilities altogether.

Avoiding Double Taxation (Continued)

Norway has entered into tax agreements with numerous countries, including France, Spain, the UK, and Thailand, to prevent double taxation. Most treaties allow you to claim a foreign tax credit against Norwegian taxes (known as "credit agreements"). In contrast, some agreements, called "Exemption Agreements", completely exclude Norway from taxing certain assets. For example, Norway has signed exemption agreements with the USA, Croatia, and Italy.

Read Also: TAX ON INVESTMENTS AND CAPITAL GAINS IN NORWAY: A SHORT GUIDE

To claim a foreign tax credit, you need to include the taxes paid abroad in your Norwegian tax return. However, the credit cannot exceed the amount of Norwegian tax owed on the foreign income or property.

Important Considerations Before Buying a Vacation Home Abroad

1. Financing and Mortgage Deductions

In Norway, debt and interest on loans are fully deductible, regardless of whether the loan was taken in Norway or abroad. However, if the property is located outside the EEA and in a country with an exemption agreement, your deductions may be limited to the part of your wealth that is taxed in Norway.

2. Buying Through an Investment Company

In some countries, purchasing a vacation property through a company is advisable. However, Norwegian tax law requires that vacation properties intended for personal use be owned privately. If the property is owned by your company and available for personal or family use, you are required to pay the full market rent for its use, regardless of how often you actually use it.

Failure to pay market rent risks Norwegian taxation on both corporate benefits and dividends. Furthermore, you can only benefit from tax exemptions on future sales if the property is privately owned.

Ongoing Taxation

Wealth Tax (Formuesskatt): Vacation properties abroad are subject to Norwegian wealth tax, which is assessed according to Norwegian rules. At first valuation, the property is typically set at a maximum of 30% of its market value.

Rental Income: If you plan to rent out the property, rental income is usually taxed locally. Keep in mind that local tax regulations and reporting requirements may be complicated and time-consuming. In Norway, rental income below NOK 10,000 per year is tax-free. Any rental income exceeding that is taxed at 22% on 85% of the amount.

Additional Local Taxes and Fees

Countries like France and Spain may impose wealth taxes if the value of local assets (including vacation properties) exceeds a certain threshold. In addition, property taxes are common in many countries, even in places where wealth tax is also imposed. Norwegian residents can claim deductions for foreign property taxes when calculating rental income but not for wealth tax purposes.

Selling or Transferring Property Abroad

Property Sales: Gains from selling property are exempt from Norwegian taxes if you’ve used the property as your own vacation home for at least 5 of the last 8 years. Otherwise, capital gains tax of 22% applies.

Inheritance or Transfer of Property: Some countries, such as France, Spain, and Italy, impose inheritance or gift taxes. This is usually calculated on the net value of the property, including personal assets. To minimize inheritance taxes abroad, you might consider gifting the property to your children ahead of time. In some countries, such as France, transferring property while retaining full usage rights can reduce the tax base for inheritance taxes.

Read Also: BUYING PROPERTY IN SPAIN AND PORTUGAL: EXPERT MORTGAGE GUIDANCE

In countries like Spain, inheritance tax is levied even between spouses. If you're married and want your spouse to inherit your property tax-free, consider setting up an inheritance plan, such as writing a will in the local language and registering it with the appropriate authority.

Cross-Border Taxation Is Complex

Tax regulations vary by country and change frequently, making cross-border real estate taxation complex. We recommend consulting with local legal or tax professionals before purchasing or managing property abroad.

1. Rental Income Taxation in Norway

Foreign rental income is taxable in Norway, but you can claim tax credits for taxes paid abroad to avoid double taxation. The current Norwegian tax rate is 22%.

In Norway, you can also deduct expenses related to the rental, such as maintenance, repairs, and property management fees, which reduce the taxable base.

2. Rental Income Tax in Specific Countries

Sweden: Rental income is taxed at 30%. You can deduct 20% of total rental income as standard costs without needing receipts.

Spain: Non-residents are taxed at 24% on rental income (19% for EU/EEA residents). EU/EEA residents may also deduct costs related to the rental.

Poland: Rental income is taxed at 8.5% on earnings up to PLN 100,000 and 12.5% on the excess.

Read Also: NORWEGIAN GOVERNMENT INCREASES PERSONAL TAX-FREE ALLOWANCE UP TO 100,000 NOK

Example of Tax Differences by the Country:

Let’s assume a rental income of NOK 120,000 per year.

Sweden: Tax would be 30%, or NOK 36,000. No additional tax in Norway since the Swedish tax exceeds the Norwegian rate.

Spain: Tax at 24% would be NOK 28,800, compared to NOK 26,400 in Norway. The higher Spanish tax applies, with no additional tax due in Norway.

Poland: Tax is 8.5%, or NOK 10,200. In Norway, you would still owe NOK 16,200 after deducting the Polish tax.

Poland offers lower tax rates but, due to Norway’s tax credit rules, you’ll still need to pay the difference to match Norway’s 22% rate.

Final Thoughts:

We've covered several aspects of owning property abroad, including taxes, financing, and rental income. If you're considering purchasing real estate abroad or relocating, feel free to contact one of our Wealth Advisors for personalized advice.

Want to Learn More?

Contact us or our partners at SJØLYST INVESTORS or B2 CAPITAL for more details, to schedule a meeting in Oslo, or to receive advice via phone.