Analytical info

Norm prices

• The act provides a legal basis to determine norm prices as a replacement for the actual sales income in the tax assessment. The norm price is set by the Petroleum Price Board and is supposed to correspond to the price the petroleum would have obtained, had it been sold between unrelated parties.

Depreciation

• The most important fixed assets in offshore activities, namely pipelines and production installations, can be deducted in their entirety in the taxation basis for special tax for the income year in which the expenses occurred. In the basis for the general income, these fixed assets can be depreciated on a straight-line basis over a period of six years. Other fixed assets are depreciated according to the general rules of the Taxation Act, both with regards to the taxation basis for the SPT and the basis for the CT.

Financial items

• There are rules that limit the right to make tax deductions for financial items related to offshore activities: Interest payments and currency items related to interest-bearing debts are deductible, but this is limited to a share corresponding to 50 percent of the ratio between depreciated offshore assets in the taxation basis for the SPT as at 31 December and the average interest-bearing debt. The average interest-bearing debt is calculated throughout the year and is subject to the use of average exchange rates in the case of a foreign currency debt. As a result of the introduction of the cash flow tax from 2022, the share of financial items allocated to offshore activities will be very small because the tax value of offshore assets in the SPT basis amounts to approximately zero. Financial items that are not allocated to offshore activities, are subject to a deduction in CT.

Transfer of ownership

• To avoid that tax rules act as incentive for or against restructuring, shares in production licences cannot be transferred without the Ministry of Finance consenting to the tax effects of the transaction. This is regulated under section 10 of the Petroleum Taxation Act.

Deficit and payment schemes

• Companies that are not in a tax position will receive payment of the tax value of their SPT deficit in the year following the income year. Ordinary CT deficit is carried forward without interest in the same way that applies to other industries onshore.

Tax instalments

• The ongoing tax payments (advance tax) are called tax instalments. The assessment of the tax instalments is based on information provided by the company regarding expected income for the fiscal year. There are six instalments through the year – respectively 1 August, 1 October, and 1 December in the fiscal year, and 1 February, 1 April, and 1 June in the following year. There is an option to make payments larger than the assessed amounts with the second and fifth instalments. When the final tax assessment is completed, the residual tax must be paid (and overpaid tax refunded) within three weeks.

Advance rulings

• The companies can request a binding advance ruling from the Oil Taxation Office regarding the fiscal consequences for a specific imminent disposition.

• 1,000 standard cubic metres (SCM) natural gas = 6.2898 barrels oil equivalent (boe)
• 1 SCM = 35.315 standard cubic feet (scf)
• 1 SCM = 40 megajoule (MJ)
• 1 SCM = 37,913 BTU
• 1 MMBTU = 1,000,000 BTU
• 1 megawatt-hour (MWh) = 3.6 MJ

Based on the Norwegian Petroleum Directorate’s conversion factors. Other conversion standards exist.