NORWAY - Repeal of the tax-free limit on import of goods from 1 January 2020
Under Norwegian law, import of goods from abroad is free of duties and VAT, provided the value of the goods is less than NOK 350 including freight and insurance costs. This tax-free scheme is not available with respect to alcoholic beverages and tobacco products.
As a result of negotiations within the new governing coalition, this tax scheme will be repealed as from 1 January 2020. The repeal of the NOK 350 tax-free limit will probably increase annual revenue by as much as NOK 750 million.
The main consequence of the repeal will be that Norwegian importers of goods must pay relevant duties and VAT on all imports of goods. This will increase the price of the products and trigger an extra cost for customs clearing.
Norwegian retail businesses are welcoming the new restriction, as foreign internet-based companies are growing in the Norwegian market by shipping low value goods from abroad. In 2018, the Norwegian post office handled over 15 million shipments of low value packages, almost all of them with a value under NOK 100. As of 1 January 2020, such packages will be subject to VAT and other customs duties.
Sweden took similar action a year ago and the result was that due to the extra costs and duties, approximately 400,000 low value packages were not picked up by customers and they were returned by the transport companies.
The new Norwegian legislation may result in foreign companies changing their delivery terms so that the supply of the goods for VAT purposes will be in Norway. This will normally trigger an obligation for the foreign companies to customs clear the goods, to register for VAT in Norway, and to charge Norwegian output VAT on invoices to the customers.
We recommend foreign companies supplying goods to the Norwegian market assess how their activities should be structured as from 2020.