Opening a Branch vs. a Subsidiary in Norway - Updated for 2023
Opening a Branch vs. a Subsidiary in NorwayUpdated on Wednesday 15th March 2023
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Foreign companies which intend to extend their business operations in Norway should consider two main options: either opening a branch in Norway or a subsidiary. Each of these options provides advantages and drawbacks that you need to analyze in great detail before taking a decision of which business form is more suitable to your business objectives.
The difference between the two legal forms consists in the type of liability that they hold and in the degree of independence which they can have in relation with the parent company. Before initiating the registration procedure it is advisable to address to our law firm in Norway for professional counselling in these matters.
Our team of Norwegian lawyers can provide legal advice on the characteristics of each business form and can advise on why one of the two is more suitable for your business needs, depending on the investment plans, capital and liability the parent company wants to assume for the local office. Our lawyers can also assist with information on the documents that must be submitted during the registration procedure.
What are the steps for the establishment of subsidiaries in Norway in 2023?
The registration of a subsidiary is a choice for foreign investors who intend to extend their portfolio in this country. Subsidiaries can have an independent management because they have legal personality. Usually organized as limited liability companies, subsidiaries can take strategic decisions for which they bear responsibility.
Subsidiaries are often subject to tax incentives, which may help speed up their development on the Norwegian market. The parent company can own shares in the Norwegian subsidiary, and most of the capital of the subsidiary is owned by the foreign company; however, the newly organized legal form remains a separate legal entity. Concerning the legal structure for subsidiaries, you should know that most of them are registered as private or public limited liability companies.
A subsidiary can be established in the same industry as the one of the parent company or in a different one, depending on the marketing strategy adopted by the board of directors. A new bookkeeping must be created in order to keep record of the payments and taxes applied to the subsidiary in 2023.
Main aspects for registering a Norwegian subsidiary
The registration of a subsidiary in Norway must go through a series of steps, as stipulated by the national legislation available here. These steps are applicable to all types of business forms that are registered in Norway and our team of Norwegian lawyers can advise on each of the following:
- • finding a unique trading name, a requirement that is applicable to all Norwegian companies;
- • opening a bank account for the future subsidiary with a local bank situated in the city in which the company will operate;
- • depositing the minimum share capital, in accordance with the business form chosen for registration;
- • preparing the documentation for registration, which can be detailed by our lawyers;
- • apply for a VAT number, if the revenues of the subsidiary are above the amount of NOK 150,000.
If you are interested to find out more on the advantages of opening a subsidiary in Norway you can rely on our Norwegian lawyers, who remain at your disposal with updated information and who can offer advice on the residence permits that can be requested for businessmen relocating here. Citizens of Nordic nations interested in immigration to Norway will benefit from less restrictive conditions. Other European nationals, on the other hand, must adhere to a number of rules, but with our lawyers’ assistance, they can do so. This is also available for citizens of the United Kingdom who want to move here.
What are the steps for opening a branch office in Norway in 2023?
The branch is an entity which depends on the parent company. This is also why in Norway, the branch must have attached at the ending of its name the standard abbreviation NUF, which stands for ’Norwegian branch of foreign company’. Nevertheless, the company can employ its preferred currency and it remains entitled to the same legal treatment as the Norwegian enterprises.
This type of company is required to register with the Register of Business Enterprises. If the branch registered here will not develop commercial activities, the company will still be required to register as per the Norwegian legislation, and, in this sense, it is necessary to register with the Register of Legal Entities. A foreign company has to register with this institution if the planned activity will last longer than a period of 90 days and if the annual turnover reaches NOK 50,000.
It is also important to appoint a person who will act as a contact person for the branch office, but in this case, the legislation does not require him or her to have the residence here. However, the respective designated person has to own a Norwegian identification number.
At the same time, branch offices can be represented by persons who have a D number, which is especially designed for foreign nationals who do not own a Norwegian identification number. A D number can be obtained as long as the person will stay in Norway for a period of less than six months.
One of the main advantages of the branch office in Norway is that the company can start its business operations in a fast manner, as the legal entity can be registered in a period of one week. However, this period of time can increase, depending on various factors.
In order to open a branch in Norway in 2023, there are several documents concerning the parent company which must be provided during the registration. These documents require most of the time professional notarization. The most important files that you will need to include in your application for registration are:
- • the articles of association of the parent company, providing information on the profile and objectives of the enterprise;
- • the board’s decision (the board of the parent company) to establish a branch in Norway;
- • the main business purposes of the branch, its name and address in Norway;
- • other documents required for the purpose of having evidence on the good standing of the parent company.
These documents need to be translated prior to the registration procedure. The company may choose to be represented instead of going itself directly through all the branch establishment procedures. A good choice would be to address to our lawyers in Norway and employ their legal services.
What are the obligations for Norwegian employers?
When opening a branch office or a subsidiary in Norway in 2023, or any other type of business form prescribed under the national legislation, it is necessary to know several aspects concerning the obligations the company has towards its employees. Any person employed in a company operating in Norway has to be registered with the local institutions.
It is necessary to know that local employers have the obligation of paying 100% sick-pay from the first day of absence due to a sickness. The company is responsible for paying this for the first 16 days of sickness of the employee. When opening a branch office in Norway, it is also important to know that the company’s employees are entitled to unemployment benefits that are prescribed under the Norwegian legislation; our team of lawyers in Norway can offer an in-depth presentation on the main rules of law regarding employment in this country.
What are the tax considerations for Norwegian branch offices?
The taxation of a branch office operating in Norway is determined based on the place of residence of its management. Thus, in the case in which a local business decides to open a branch office and expand its business activities across the Norwegian territory, the company and its branches will be liable for taxation in Norway for its overall income in 2023.
In the case in which the branch office in Norway is set up by a foreign company, which has its place of management in another jurisdiction, the taxation system will be determined following a different model, in the sense that Norway will impose taxes only for the income obtained on the country’s territory, which means that only the local branch will be liable for taxation here.
What are the regulations when employing foreign workforce in Norway?
As a foreign company will expand on a market outside its territory, through a branch office or a subsidiary (or other business structure), it may also want to employ its workforce, by relocating a part of the employees. Prior to do so, it is necessary to know if the respective employees are allowed to work in Norway; the conditions regarding this matter can be verified with the Directorate of Immigration’s Employer Service.
As a general rule, this right will depend upon the nationality of the future employees, as for example, in the case of persons from Sweden, Denmark, Iceland or Finland, they are not required to register with the local authorities upon their arrival in Norway.
In the case of citizens from the European Union (EU) or the European Economic Area (EEA), it is compulsory to register in eight days after the arrival in the country, provided that they will live here for a period longer than six months. In the case of those outside these regions, it is compulsory to follow the same requirement as it is applicable for EU-EEA citizens, but it is also necessary to obtain a residence permit.
What are the accounting requirements for Norwegian branches?
As mentioned earlier in this article, the Norwegian branch has the advantage of a simpler registration procedure; this is also applicable in the case of its accounting requirements, which are much simpler than in the case of a subsidiary. In the case of a branch of a foreign company, it is necessary to keep the annual accounts and to submit such documents with the Register of Company Accounts.
This requirement is available for branches that are liable for taxation in this country; it is necessary to know that in the situation in which the annual turnover of the branch office in Norway is above NOK 5 million, the company will be responsible of conducting an audit.
What are the main advantages of a Norwegian branch?
One of the main advantages when starting a business in Norway through a branch office is that the company does not need any minimum share capital. At the same time, in certain cases, the branch office can be exempted from paying certain corporate taxes, including the withholding tax on dividends or royalties.
It is also necessary to know that this business form can benefit from the provisions of the double tax treaties signed by Norway, in the situation in which the parent company is a tax resident of one of the contracting states. Our team of lawyers in Norway can provide more information on the tax considerations applicable to a branch office, but our attorneys can also assist with advice on the taxes applicable to local subsidiaries.
In order to reach its objective of decreasing emissions to 55% by 2030, Norway is switching from power production fueled by fossil fuels and nuclear energy to renewable energy as part of its Climate Action Plan for 2021–2030. The nation that ranks 13th in the world on oil production is asking a lot of this.
Don’t hesitate to contact our law firm in Norway in order to prepare in good time the establishment of a branch or subsidiary in this country. Our attorneys can offer further information regarding the taxation of these structures and the tax deductions they can be entitled to.