Cross‑Border Tax Forecast 2026 in Norway

In the national budget for 2026, the Norwegian government resolved to phase out the so-called “cooperative housing tax model” (Borettslagsmodellen).

For housing development projects, certain opportunities remain available, subject to the specific conditions set out in the transitional rules.

The cooperative housing tax model allows a company to transfer land to a housing cooperative through a merger without triggering taxation on increase in value. This model will no longer apply unless a decision to merge for tax purposes was registered to the Norwegian Register of Business Enterprises before 15 October 2025.

For housing development projects, tax-free mergers may still be completed by 1 April 2026 if transitional conditions are met, e.g. plans for substantial residential development.

The abolition of the cooperative housing tax model will have major financial, tax and structural consequences for property developers, house builders etc. Practical implications of the amendments include:

• increased overall tax burden for property and housing projects
• earlier taxation of capital gains, which can weaken cash flow
• reduced project margins and lower incentives to invest.

• Review current project structures and the tax assumptions on which they are based
• Consider whether mergers that rely on the transitional rules can, and should, be completed before 1 April 2026
• Make sure that permits, pre-sales and concrete development plans are well documented
• Re-evaluate long-term strategies for property and housing development in light of the new tax situation

On 15 October 2025, the Ministry of Finance released a consultation paper proposing possible changes to the rules on tax-free repayment of paid-in capital from Norwegian companies to its shareholders.

The consultation paper presented two alternative solutions that were sent for public consultation on an equal footing. The consultation period ended on 15 January 2026, and the proposed changes are set to take effect from the 2027 income year.

The current rules will remain in force throughout 2026, making this a final transitional period for utilising established tax positions.

Under current rules, paid-in capital follows the share and is carried forward to new shareholders. The ability to withdraw previous owners’ contributions on the share tax free will be eliminated under the proposed new rules provided that paid-in capital exceeds current shareholder’s cost base. The proposed changes mainly affect Norwegian personal shareholders and certain foreign shareholders subject to witholding tax on dividends, while Norwegian corporate shareholders are generally less impacted due to the participation exemption method. Two solutions were proposed:

• Alternative 1 (minimum solution): tax-free repayment of paid-in capital is limited to the shareholder’s own cost base
• Alternative 2 (simplified solution, the Ministry’s preferred option): the tax position for paid-in capital is discontinued; instead, shareholders can receive tax-free distributions up to their cost base, regardless of historical paid-in amounts. 

The proposed changes will particularly affect shareholders whose paid-in capital on shares exceeds their cost base, as future tax-free repayments will be limited to the cost base.

For shareholders with paid-in capital exceeding their cost base:

• tax-free distributions will be limited to the shareholder’s actual cost base
• any excess paid-in capital above cost base will no longer be available for tax-free distribution
• this prevents future creation of negative cost bases on shares.

For shareholders with cost base exceeding their paid-in capital:

• under Alternative 1: no change from current situation
• under Alternative 2: increased opportunities for tax-free distributions up to their full cost base, even if paid-in capital is lower.

Shareholders can act in 2026 to avoid negative tax implications of the new rules.

Shareholders with paid-in capital exceeding their cost base should consider whether to utilise their current tax positions before the new rules take effect.
Key recommended actions include:

• Assess the relationship between paid-in capital and cost base/input value for their share portfolio
• Evaluate whether to make tax-free repayments in 2026
• Review planned distributions, reorganisations etc in light of the proposed changes
• Consider potential implications for foreign shareholders, including withholding tax

On 19 December 2025, the Norwegian government appointed a national Tax Commission with a mandate to develop recommendations for a comprehensive tax reform. The Tax Commission is scheduled to deliver its report by 1 July 2026.

The Tax Commission’s objective is to provide recommendations that promote a competitive level of taxation for domestic and international stakeholders.

The work of the Tax Commission is expected to be highly significant for households, national and international businesses and public finances.

Decision-makers should closely monitor the Tax Commission’s work in order to identify potential changes to taxes and duties that may be proposed. Both businesses and households should take the possible effects of its recommendations into account when planning investments, generational transfers etc.