THE GOVERNMENT'S PROPOSAL FOR THE STATE BUDGET FOR 2026 - TAXES AND FEES

1 Introduction

The government has presented its proposed state budget for 2026. Activity in the mainland economy is growing faster than in previous years, unemployment remains at a low level, inflation is expected to come down gradually and there are prospects of continued high real wage growth. The Labour Party government has assumed growth in the mainland economy of 2.0 per cent this year and 2.1 per cent next year.

In the budget, fund assets of NOK 579 billion are transferred, corresponding to 2.8 per cent of the value of the Government Pension Fund Global. This is lower than the expected real return for the fund and the fiscal rule of 3%.

It is important to note that the government is a minority government and therefore dependent on support from the co-operation parties. It is likely that there will be changes to the budget as a result of the negotiations.

2 Tax burden and corporate tax

The government is proposing to maintain the overall level of taxes for both individuals and businesses, and no increase in the corporate tax rate is planned. Moderate reductions in personal income tax are planned, while climate and environmental taxes will be increased.

3 Personal tax

The personal allowance is proposed to be increased to NOK 114,210 and social security contributions will be reduced by 0.1 percentage points for both salary income and business income. The step tax will continue with adjusted contribution points based on expected wage growth. The parental deduction will be reduced, while the trade union deduction and the deduction for individual pension savings (IPS) will be increased. A trial scheme is also being introduced with an earned income deduction for young people, whereby randomly selected people born between 1991 and 2006 will receive a deduction of up to NOK 125,000 in ordinary income for five years.

4 Capital gains tax

It is proposed that the basic deduction for wealth tax be increased to NOK 1.9 million. A new model for the valuation of housing is being introduced, based on Statistics Norway's revised statistical model. It is therefore assumed that people with expensive homes will have no overall effect of the increased basic deduction.

Furthermore, a permanent scheme is proposed for deferred payment of wealth tax for business assets, with an interest rate equivalent to Norges Bank's key interest rate plus 5 percentage points.

5 Business taxation

The housing cooperative model will be discontinued with immediate effect, but transitional rules will be introduced for ongoing projects. A new method is introduced for limiting interest deductions for financial institutions with operations abroad, so that deductions are only granted for debt related to operations in Norway. For mutual funds and fund accounts, it is proposed that interest income, share income and income from financial instruments in funds are taxed on the unitholder's behalf, with a standard tax rate of 1 per cent of dividends received in the fund. The changes will apply from 2026.

6 Value added tax

The VAT exemption for electric cars will be reduced from NOK 500,000 to NOK 300,000 from 2026 and discontinued completely from 2027. Stricter rules are also proposed for VAT on remotely delivered services purchased by foreign companies for use in Norway, with effect from 1 July 2026.

7 Excise duties and climate taxes

Excise duties on alcohol, tobacco and fuel will be adjusted in line with price increases, while climate and environmental taxes will be significantly increased to achieve long-term climate goals. The electricity tax will be reduced to 4.18 øre per kWh, providing relief for households and businesses. Changes are also proposed to the CO2 tax and other environment-related taxes.

8 Resource rent tax and natural resource tax

The government is proposing to reduce the lower limit for resource rent tax and natural resource tax for hydropower so that more medium-sized power plants are covered by the scheme. Adjustments to the resource rent tax on aquaculture are also announced, with the aim of ensuring fairer taxation of the industry.

9 Property tax

There will be no proposal for a national cap on property tax for ordinary homes and holiday homes, as this is considered difficult to implement fairly and practically. The municipalities thus retain the freedom to set property tax within current legislation.

10 Tax rules for student and youth enterprises

It is confirmed that student and youth enterprises are not normally subject to tax or duties, and no changes are proposed to the regulations in this area.

11 Changes related to paid-in capital and deductions for losses on receivables between related parties

The government is proposing a tightening of the right to recognise losses of VAT on claims between related parties, whereby the right to recognise losses will be limited to 24 months. If a claim between related parties is not settled within two years, it will no longer be possible to recognise the loss as a deduction for VAT. The purpose of this change is to counteract undesirable tax adjustments and ensure that the right to deduct losses on receivables between related companies is more limited and in line with the intention of the regulations. The change may have an impact on intra-group transactions and should be carefully considered when structuring such relationships in the future.

In the national budget for 2026, the government announced that the current rules on tax-paid capital for shareholders are too complex and difficult to practise, particularly because the tax position is linked to each individual share and not to the shareholder as a whole. This has created challenges for both taxpayers and authorities, especially when repaying capital and in transactions involving multiple shares over time. Therefore, no significant changes have been proposed to the rules on paid-up capital, but increased control and reporting requirements have been announced for transactions between related parties, particularly with regard to documentation of capital contributions and receivables.

However, the Ministry of Finance has issued a consultation paper with two alternative proposals for simplification. The first alternative entails that tax-free repayment of paid-up capital should only be possible up to the shareholder's own input value of the shares, so that no more can be paid out than the shareholder has actually invested.

The second alternative goes further and proposes that tax exemption on payments be linked to the shareholder's total input value, regardless of previously paid-in capital on the individual share. This will mean that the tax position «paid-in capital» will be discontinued, and that the input value will be the only relevant tax position for the shareholder. In the event of payments, the input value will be reduced accordingly, and the shareholder must claim tax exemption in the tax return.

In addition, consideration is being given to the introduction of negative ring-fencing, where negative ring-fencing shall be recognised as income, as well as the recognition of income on the transfer of shares with a negative input value. The Ministry has also allowed for the possibility of future reporting of paid-in capital to the shareholder register on a share-by-share basis, if this tax position is continued.

The changes are proposed to enter into force from 1 January 2027. The purpose of the proposal is to make the rules more transparent and practical, as well as to reduce the risk of errors and unintentional tax adjustments. It is recommended that affected shareholders and companies consider the consequences of the proposed changes, especially with regard to future capital structure and reporting

12 Other topics

The budget also proposes adjustments to the tax rules for earned income from abroad, changes to the rules for taxation of benefits in kind, and measures to counteract tax avoidance and ensure increased compliance. A number of administrative simplifications are also proposed, including digitisation of the tax return and improved information flow between public agencies.

13 Summarising

The proposed state budget for 2026 envisages a revenue-neutral tax and duty level with moderate relief for personal taxpayers and increased climate and environmental taxes. More changes may be made in the negotiations with the co-operative parties, and it is therefore important to follow developments closely. Advokatfirmaet Halvorsen is following the process closely.

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Our tax and corporate law department has extensive experience in advising on tax and duties, and continuously assists both Norwegian and international businesses in adapting to new regulations. Halvorsen offers strategic and practical guidance on the proposed changes in the national budget, and can advise on how the company can best handle changes in the tax rules. Feel free to contact us if you need an assessment of the consequences for your business, or for general advice on tax and duties.

THE GOVERNMENT'S PROPOSED STATE BUDGET FOR 2026 - TAXES AND DUTIES