The Norwegian government proposes special taxation regime for sea farming and wind power, combined with increased taxation on electricity production

On 28 September, the Norwegian government published a proposal to introduce a special taxation regime on production of (salmon and trout) sea farming, as well as onshore wind farms. It is also proposed to increase the existing special tax rate for hydropower production. Finally, both hydro and wind powered production of electricity onshore shall be subject to a new duty calculated as 23% of electricity price in excess of NOK 0,7 per kWh. The duty shall not be tax deductible.

The proposals are motivated by increased profits created by these industries, in particular for energy production, a wish to compensate municipalities hosting these industries with environmental consequences and more generally increased public spending.

The proposed special tax rate for sea farming activities and onshore wind farms is 40%. The special taxation comes in addition to the ordinary 22% corporate income tax, resulting in a marginal tax rate of 62%. The special tax for hydro-electric energy production is proposed to increase from 37% to 45%, resulting in a marginal tax rate for such activities of 67%.

For sea farm activities, the proposal includes a standard deduction on the first 4 000 – 5 000 metric tons of sea farm production, to ensure that only large producers are subject to the special taxation.

Only wind farms operating more than five turbines will be subject to the new regime. For hydro-electric energy production, special taxation will only be applicable for businesses with a total production capacity exceeding 1 MW.

According to the proposal, the special taxation regime on sea farming and onshore wind energy production shall be effective from 1 January 2023, if finally submitted to and approved by the Parliament. The increase in special taxation of hydro-electric energy production is proposed be effective for the full income year 2022.

The proposal for special taxation for sea farming activities has been published for public hearing with the deadline being 3 January 2023. The technical proposal for special taxation of onshore wind farms is expected to be published for public hearing before the end of the year.