When Danish companies perform assembly work in Norway, they must register for VAT there. If they deliver the goods they are assembling, often, the delivery is subject to VAT. The rules are enforced rigidly.
When a foreign company sends employees to Denmark to install or assemble a machine or a plant, Danish VAT registration is not required, as the transaction is subject to the rules on reverse charge. This means that the Danish company (the buyer) must pay VAT on the invoiced services.
When Danish companies send employees to Norway to perform a similar job, it is completely opposite. The Danish company must be registered for VAT in Norway, if the value of the assignment exceeds NOK 50,000, because Norway does not apply rules on reverse charge to assembly work.
The Norwegian VAT obligation is not necessarily limited to the assembly work
If a Danish company sells a plant, etc. to a Norwegian customer and also undertakes installation in Norway, often, VAT also applies to the goods. This means that invoicing of both goods and assembly work must be done via the Norwegian VAT number and with the application of Norwegian VAT.
The problem can be illustrated by a ruling from March 2017 from “Oslo Tingsret”. The case concerned a company based in the Netherlands, which delivered and mounted interior solutions to Norwegian restaurants and bars, etc. As the case concerned a single delivery, the court ruled that Norwegian VAT should be paid on the value of both the goods and the assembly work.
It is the assembly work that triggers the VAT obligation for both goods and assembly work. Foreign companies selling goods to Norwegian customers without being responsible for installation or assembly in Norway shall not pay Norwegian VAT.
The Norwegian tax authorities have a strict line with foreign companies and may demand payment of Norwegian VAT for the preceding 10 years. Often, payment of additional tax (fine) of up to 3 times the unpaid VAT is demanded - for example in the case of the Dutch company mentioned above.
Depositing of goods in Norway
In other situations, sales to Norway can also give rise to VAT challenges. Thus, we regularly see cases where Danish companies let a Norwegian customer process goods purchased in Denmark through customs. However, this may be inappropriate if ownership of the goods does not transfer until the assembly is completed. In this case, the customer cannot deduct import VAT, as this requires ownership at the time of customs clearance.
Registration of Danish employees in Norway
Danish companies sending employees on assembly work, etc. in Norway, should be aware that employees must be registered with the Norwegian authorities before commencing work.
The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge. Please sign up here.