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Newsletter - Amendments to the Nordic tax treaty

The Nordic countries signed on 29 August 2018 a protocol amending the Nordic Tax Treaty. The amendments carry out some of OECDs recommendations against tax evasion.

The protocol includes a provision against the abuse of the Nordic Tax Treaty. Benefits following of the tax treaty will not be admitted if one of the primary purposes of a transaction or an arrangement was to obtain that benefit (the so called “Prinicpal Purpose Test”). The second amendment is an adjustment to the mutual agreement procedure (“MAP”), allowing a taxpayer subject to double taxation to request for such procedure in both countries that have taxed him. According to the current rule this is only available in the country of residence. It is common practice for Norway to include this provision in their new treaties.

These two amendments constitute the minimum standards the OECD countries have committed to.

Quite surprisingly, the Nordic Countries have not included the elective dispute resolution provision if the countries do not come to an agreement for taxation through the mutual agreement procedure. Norway has already a dispute resolution provision with United Kingdom, the Netherlands and Switzerland. A dispute resolution provision would strengthen the legal protection of the taxpayers, in the meaning that the countries involved would seek to come to an agreement to avoid that the distribution of taxation between the two states is decided by a court of arbitration.

In line with the recommendation from OECD, the purpose of the Nordic Tax treaty is amended with the intention not to provide for non-taxation or reduced taxation through tax evasion.

The Government sent on 7 September 2018 a proposition to the Parliament for the ratification of the amendments in the protocol. It is expected that the amendments will enter into force on 1 January 2019.