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MONEY

How to opt out of Norway’s PAYE scheme for foreign workers

Most foreign workers are put into Norway’s PAYE scheme automatically. However, it may be better to opt out of the scheme - something you can do up to three years after being put into it.

Published: 15 April 2024 15:30 CEST
Pictured is a calculator on a desk.
Some foreigners in Norway may wish to opt out of the PAYE scheme. Pictured is a calculator on a desk. Photo by Jakub Żerdzicki on Unsplash

Norway has a tax scheme for new arrivals. Most new foreign workers are sorted into the PAYE (Pay As You Earn) tax scheme by default.

The scheme has a flat tax rate of 25 percent and aims to simplify the process for new arrivals.

READ MORE: What foreigners need to know about Norway’s PAYE tax system

This scheme is instead of Norway’s typical tax for employees, which encompasses a flat rate for 22 percent for everyone and then a progressive tax based on earnings.

The progressive portion, called the bracket tax, ranges between 1.7 and 17.5 percent. Those in the PAYE scheme do not pay bracket tax.

Therefore, in some cases, you will pay less tax than if you were in the regular scheme.

As the PAYE scheme is voluntary, you can opt out of it.

There are several reasons why someone would wish to opt out of the scheme. For starters, while it may seem that you are paying less tax than if you were paying a mix of bracket and flat income tax, this might not be the case.

This is because employees in Norway are also deducted social security contributions from their salary.

That means that in some cases, once social security is added to the mix, you pay more tax as a member of the PAYE system.

The Norwegian Tax Administration uses figures on its website to illustrate different tax schemes.

If you were to have a salary of 120,000 kroner after six months in Norway you will have paid 30,000 including social security contributions under the PAYE scheme compared to 17,920 kroner under the regular scheme.

Were you to earn 240,000 kroner you will have paid 60,000 kroner in tax, including national insurance contributions, under the PAYE scheme compared to 58,399 under the general income tax rules, plus national insurance contributions.

Those who are set to earn 270,000 kroner over six months would pay 67,500 kroner under the PAYE scheme, compared to 68,599 through the regular tax and national insurance scheme.

Therefore, there are some cases where choosing to be taxed under the general rules will result in lower tax payments.

The Norwegian Tax Administration has an online calculator that lets people work out how much tax they will pay. This allows you to determine whether it will be better for you to be in the general scheme or the PAYE scheme.

Some workers, such as those who earn more than 670,001 kroner, must pay tax under the general tax rules and are not eligible for the PAYE scheme.

Another factor could be potential deductions. You cannot make deductions for things such as childcare, interest paid on loans, union membership, or charitable donations on the PAYE scheme.

This means that you may be better off under the general tax scheme when you account for deductions.

How to opt out of the PAYE scheme

You can opt out of the PAYE scheme up to three years after you entered it. Therefore, if you were in the scheme in 2024, you can opt out by the end of 2027, and your tax contributions will then be recalculated.

The reason why you will have three years is because tax reutrns in Norway can be edited up to three years later.

To opt out of the PAYE scheme, you will need to log in electronically. For this, you will need an electronic ID, such as BankID or Commfides.

It is also possible to send in the form on paper. You must download and complete the RF-1209 form and send it to the tax administration.

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For members

TAXES

Taxes: Everything you need to know about Norway’s commuter deductions

Norway has a tax deduction that those who commute to work can claim. However, it must be added manually to tax returns, meaning many miss out. 

Published: 26 April 2024 12:46 CEST
Taxes: Everything you need to know about Norway's commuter deductions

There are plenty of advantages to commuting to and from work, whether it be cheaper rent or property prices, being closer to nature, or being able to live closer to your children’s school. 

The obvious downside, apart from making the journey, is the cost. Thankfully, commuters in Norway can claim some of this cost back as a tax deduction. 

Furthermore, you can change tax returns up to three years after they have been submitted. If you have missed out on a deduction, you can log into the Norwegian Tax Administration portal and update the information. 

READ ALSO: Five things to do when you get your Norwegian tax return

Norway’s commuter deductions cover several categories. Firstly, those who spend nights away from home can claim additional expenses such as food and accommodation, you can also make deductions for travel between work and home. 

The Norwegian Tax Administration has a wizard on its website which tells workers whether they are classified as commuters and, therefore, eligible for deductions on its website. 

As a technical point, you can be ineligible for a commuter deduction, but you can also deduct daily travel to and from work. 

Those who travel round trips of more than 37 kilometres between work and home are eligible for the travel deduction. This deduction is calculated based on several factors, such as the length of the journey, whether toll roads and ferries significantly reduce the journey time, and the number of days of the year you work. 

The traveller’s deduction can be claimed for up to 230 days of the year. The low threshold for roundtrips means that journeys between Oslo and nearby towns such as Ski or Lillestrøm become tax deductible.

For example, if you commute 45 kilometres per day for 230 days of the year, you could deduct as much as 702 kroner from your taxes. 

Those who commute up to 100 kilometres per day and don’t use toll roads or ferries to shorten their journeys could deduct around 5,000 kroner from their taxes. 

This is based on the rules for 2023 and commutes from Oslo to nearby towns and cities. The Norwegian Tax Administration has a calculator on its website that can tell you how much you can deduct for your daily travel. 

If you want to try and add deductions for previous years, be aware that the thresholds for journey length were previously higher. The minimum distance for previous years was a daily round trip of 67 kilometres. 

Under these rules, travel between Oslo and some surrounding towns may not be deductible. Still, you can log in and check whether you can add deductions for previous years. 

How to add these to your tax return

When checking your tax return, you can choose to add information.

There is a section marked “Would you like to provide any other information?”. From there, if you go to the bottom of the list, there should be an option for “work and travel” (when using the English version of the portal). 

From there, you can input your information, making the process relatively straightforward. 

Below you can see some pictures on where to add any travel deductions. 

Pictured is a form from the Norwegian Tax Administration.

You can add the deductions under work/ travel. Photo: Screenshot / The Local.
 
Pictured is the commuter deduction form.

Those who travel for work, or to get to work have a number of potential deductions. Photo: Screenshot / The Local
 
The travel deduction form.

Here you can see where you input your daily travel information. Photo: The Screenshot / The Local.
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