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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

NORWAY EXPLAINED

What are the rules for taking annual leave in Norway?

If you've just started working in Norway or if you've been employed in the country for a while but need clarification on its annual leave rules, this is what you need to know.

Published: 15 May 2024 12:41 CEST
What are the rules for taking annual leave in Norway?

While annual leave isn’t among the top reasons people usually decide to move to Norway and work there, it is an important component of Norwegian work and social culture.

Compared to some other European countries, Norway has quite a generous annual leave policy, which ensures that workers have enough time to rest and recover from the stress of their jobs.

READ MORE: How to maximise Norway’s public holidays in 2024 – five essential tricks

The basic annual leave quota – and holiday pay

As an employee in Norway, you have both a right and a duty to take your annual holiday, and every employee in the country is entitled to at least 25 working days of annual leave each year.

This quota includes Saturdays as working days, which equates to approximately four weeks and one day of holiday per calendar year (Sundays and public holidays are not counted as working days).

When it comes to holiday pay, workers need to accumulate their holiday pay rights in their first year of employment.

Thus, as the amount of holiday pay you get is a collective monthly percentage of what you have made in the past year, you will not have earned holiday pay if you were not employed the previous year. 

However, you are still entitled to take leave days.

If you want to learn more about how holiday pay works in Norway, check out The Local’s explainer on the issue.

Collective agreements and additional holidays

While the minimum quota of 25 days of holidays is in place, employees can get even more holiday days than this legally required minimum.

Many workers in Norway are entitled to a five-week holiday through a collective agreement or separate agreements with their employer. This extra time off is often accompanied by an increased holiday pay rate.

Furthermore, if you’re nearing retirement, you’re in luck, as all employees aged 60 or over are entitled to an extra week of holidays.

Airport

You should discuss your holiday schedule with your employer well in advance – be sure to do so before booking a vacation outside of Norway. Photo by Hanna Kretsu on Unsplash

How to schedule and take leave in Norway

Per Norwegian laws, employers must ensure all employees take full annual leave.

It’s a good idea to have a chat with your boss about your holiday plans well in advance.

If you can’t agree on dates, your boss gets the final say on when you can take time off.

But don’t worry, in Norway, you’re guaranteed at least three weeks of continuous vacation time between June 1st and September 30th.

If you prefer, the rest of your holiday days can also be lumped together without any breaks.

Note that your boss can ask you to give them a heads-up about your vacation plans at least two months beforehand.

The relevant sections of the Norwegian Holiday Act, available here and here, provide more details on holiday scheduling and duration.

What you need to know about fellesferie 

The term fellesferie is used for the collective vacation period or general staff holiday period that many Norwegian companies stick to, typically occurring in July.

The concept of fellesferie is a tradition – companies aren’t legally obligated to adhere to it – but, in practice, you’ll find that may do. The Local has an entire article on how this tradition started and what makes it special.

How do holidays work if you’re ill – or on parental leave?

Of course, special situations and life events may also occur during or before your holidays.

If you fall ill before or during your leave, you may have a right to a new holiday – or to postpone your holiday.

Should you become sick before your holiday, you can ask your employer to postpone it until later in the holiday year.

You’ll need to get a medical certificate to prove that you’re ill and submit an official request for postponement by no later than the day before the holiday starts.

The right to defer or be granted a new holiday only applies to the statutory holiday period.

As an employee, you have the right, but not an obligation, to take statutory holidays during the period of leave when you receive parental benefit.

If you choose to defer it, the leave will be deferred by a period corresponding to your holiday.

Can I carry leave days forward – or take my leave in advance?

If you reach an agreement with your employer, you can also carry forward up to two weeks of the statutory holiday to the following year.

Similarly, you can also take up to two weeks of your holiday in advance.

However, make sure to check your employment contract (and collective agreement, if you fall under one), as the rules concerning the carrying forward of holiday and advance holiday may be set differently based on these contracts.

READ MORE: What is a Norwegian collective bargaining agreement?

If you have an agreement that allows you to have extra holiday days on top of the statutory holiday quota, you can also agree with your employer that these additional holidays can be carried forward to the following year.

If you’re changing jobs, know that if you do not take your holidays during the current year before your employment ceases and move to a new employer before September 30th of the same year, you will be entitled to take your remaining holiday with your new employer.

For more information on the specifics of the holiday rules in Norway, consult the Norwegian Holiday Act (available in English).

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