The tax that foreign shareholders pay on dividend received from shares owned in Norwegian companies, withholding tax, amounts to several billion Norwegian kroner in annual income to the state. But there are actors who do not follow the regulations for paying withholding tax.

–  The Norwegian Tax Administration and several other Nordic tax authorities have decided to collaborate on joint audits and information measures within this field. That is how we want to stop Norwegian and foreign actors who do not report correctly, who do not report at all, or who facilitate an avoidance of tax regulations, says Odd Woxholt, division director of the Norwegian Tax Administration.

The state loses large sums of money

In 2023, Norway’s withholding tax income from dividend on shares amounted to NOK 11.2 billion. This withholding tax can be exploited internationally through tax-motivated share trading if a foreign shareholder, who is about to receive dividends on shares, tries to avoid tax through so-called dividend stripping.

– Dividend stripping happens when a foreign shareholder, who owns shares in a Norwegian listed company, lends shares to an actor who pays a lower withholding tax rate or no withholding tax at all ahead of ex-dividend dates, thereby avoiding withholding tax, says Woxholt.

The shares are then returned shortly after a dividend has been paid, and the borrower thereby acts as a sort of short-term parking space.  In this way, the dividend goes to the temporary owner (the borrower) so the original owner (the lender) completely or partly avoids withholding tax.

–  Our analysis indicates that this adds up to about NOK 1 billion in lost revenue every year, and we consider dividend stripping as harmful tax planning, which we take very seriously. Those who engage in this, risk incurring interest costs, commission costs to the borrower, loss of their clients’ trust and loss of trust from the market.

The Norwegian Tax Administration increases its efforts to combat dividend stripping

The Norwegian Tax Administration and other Nordic tax authorities will perform audits to identify how share lending is practised in the Nordic market, and one area that will be investigated is securities lending where the owner temporarily lends their shares to minimise withholding tax.

The Norwegian Tax Administration already participates in the Organisation for Economic Co-operation and Development (OECD) Dividend Stripping initiatives.

– International co-operation is important to achieve an overall overview of the facts, such as company structures and business models across country borders.  Sharing experience and knowledge between collaborating partners makes insight into complicated cases possible, as well as opening up possibilities for sharing information, explains Odd Woxholt.

In those cases where we discover dividend stripping, the share lender may have to pay full withholding tax on the whole dividend. They will also have to pay interest on the tax claim from the time when the tax should have been paid. Additionally, the commission that is paid from the lender to the borrower will not reduce the tax basis, and will therefore, in reality, come in addition to ordinary tax.

Facts about withholding tax

Withholding tax is a tax that foreign persons pay on, among other things, dividend paid on shares in companies that are domiciled in Norway.

The withholding tax for the dividend on shares is normally 25 percent of the paid amount, but may be reduced through double taxation treaties Norway has entered into with other countries. The withholding tax is then normally 15 percent. Some shareholders within the EEA area may also be exempt from withholding tax in accordance with the Norwegian tax exemption method.

Learn more about withholding tax on skatteetaten.no:

• Reduced withholding tax on share dividends for foreign shareholders - the Norwegian Tax Administration
• Dividends from Norwegian companies to foreign shareholders - the Norwegian Tax Administration