(Bloomberg) — Norway is introducing stricter rules to tax expatriates amid reports that more of the country’s billionaires have moved abroad or consider leaving.
A five-year time limit on exit tax on unrealized gains on shares and other assets will be abolished and the rules are extended “to apply to the transfer of shares to close family members living abroad,” with immediate effect, the ruling Labor and Center parties agreed with their budget partner the Socialist Left on Tuesday.
The left-leaning government has been increasing taxes on Norway’s richest since it came to power last year, similarly to policies flagged since the pandemic in other countries including Spain and Colombia. There’s growing evidence that the Nordic nation’s wealthiest are taking steps to avoid the higher burden.
“I’ve experienced a substantial increase in the requests for emigration advice from wealthy people,” Bettina Banoun, partner with law firm Wiersholm, said in a phone interview. “The number of billionaires that are considering to relocate is alarming and there’s a great increase in the number of people who have already emigrated,” she said, referring to people whose net worth exceeds 1 billion Norwegian kroner ($100 million).
Local media has reported that several wealthy Norwegians, such as Bjorn Daehlie, the multiple Olympic and world champion in cross-country skiing, have relocated since the 2021 government change. Billionaire Kjell Inge Rokke, the country’s fourth-wealthiest according to the Bloomberg Billionaires Index, has moved to Lugano, Switzerland, newspaper Dagens Naeringsliv reported in September, citing a letter to shareholders and co-workers.
The government will also be tasked to look into changes to ensure that “unrealized gains accrued in Norway up to the time of expatriation are actually taxed here,” according to the published agreement. While the Socialist Left also sought to raise the state wealth tax and to remove any valuation discount on shares, the deal didn’t mention such plans. The Nordic nation is among the few in Europe that has a wealth tax.
Coalition members had already agreed on raising the effective tax rate on dividends and capital gains on shares to 37.8%, which would be a 6 percentage point rise from two years ago.
Some of Norway’s wealthiest also appear to have exhausted the options that allowed them for years to pay no dividend tax by writing down equity in their companies to the legal minimum, according to Guttorm Schjelderup, a professor at the Norwegian School of Economics. Norway doesn’t tax payments to shareholders that are considered a repayment of paid-in share capital.
“Fifteen-twenty years ago, nobody in Norway would even want to compare the income distribution and inequality with the UK because there were just such stark differences between the two countries,” Schjelderup said. “But the recent studies on the 1% richest show that Norway and the UK are essentially almost on par. And this is probably why the government is tightening the noose.”
(Updates with details, comments from fourth paragraph.)