Have you discovered errors or omissions in your previous tax returns?

Each country has its own tax rules and deadlines for amending tax returns. In Norway, these rules can be especially complex for newcomers or those working here temporarily or part-time. Many individuals assume their tax return is correct and, as a result, miss out on valuable deductions. This often leads to paying more tax than necessary.

We also observe that many people accept the penalty tax (additional tax) imposed by the Tax Administration without question. Penalty tax can be a significant financial burden, so we recommend considering whether to object or appeal the decision if you believe it is incorrect.

Deadlines for changes

Norwegian tax law provides three main deadlines for amending previous tax returns: 3, 5, and 10 years.

• For the three most recent years, you may self-correct your tax assessments as often as needed, provided the Tax Administration has not already notified you of any changes.
• Generally, you can request corrections in your favor for up to five years after the relevant income year.
• The Tax Administration may correct your tax returns to your disadvantage (for example, if you owe more tax) for up to ten years.

Obligation to correct—risk of penalty tax Norway

If you realize that you have failed to report taxable assets and/or income, it is your duty to correct this as soon as you become aware of it. If the Tax Administration discovers your missing information before you correct it yourself, you risk being imposed penalty tax.

What is Norwegian penalty tax?

This is apenalty tax that can be imposed by the Tax Administration on both private individuals and companies.

You may receive a notice of such penalty tax if you have not provided correct and complete information in your tax return. It is assumed that the incorrect or incomplete information you have provided has given you a tax advantage. An example of this is failing to report taxable rental income in your tax return. In that case, you have not paid tax on that income.

Penalty tax comes in two degrees with different conditions: ordinary and aggravated.

It is acommon misconception that you cannot be penalized for honest mistakes in your tax return. In reality, intent is not required for ordinary penalty tax to be imposed.
Another misconception is that you are not responsible for errors if you used an accountant or other advisor. However, you remain personally responsible for all information submitted to the Tax Administration, regardless of who assisted you.

Penalty tax is calculated as a percentage of the tax benefit you received or could have received due to the error. For example, if you failed to report NOK 50,000 in taxable rental income, the tax benefit would be NOK 11,000 (assuming a 22% tax rate). The penalty tax is then calculated on this amount and can range from 20% to 60%, depending on the severity of the error. In this example, the penalty could be up to NOK 6,600, in addition to the original tax owed, resulting in a total bill of NOK 17,600 plus interest.

The Tax Administration’s case handlers are obliged to assess whether there are excusable reasons that mean penalty tax should not be imposed in your specific case.

Excusable reasons are partly based on clear circumstances specified in the Tax Administration Act and partly on a discretionary assessment of your case.

The Tax Administration must, even if you have not invoked specific exceptions to penalty tax, on its own initiative assess whether the circumstances fall under an exception.

The law refers to documented illness, old age, and inexperience as possible grounds for exemption from penalty tax.

Your rights in connection with penalty tax

Because penalty tax is a sanction, you have specific rights under Norwegian law and the European Convention on Human Rights (ECHR).

You are entitled to receive a written notice if the Tax Administration is considering imposing penalty tax. This notice must explain the reasons, how you can respond, the deadline for your response, and your rights under the ECHR.

If penalty tax is imposed, you have the right to appeal the decision. The penalty tax cannot be collected while your appeal is pending.

Do you need a tax advisor in Norway?

If you need assistance in responding to a penalty tax notice or appealing a decision, professional advice can be valuable. If your appeal is successful, you may also be entitled to reimbursement of documented legal costs from the Tax Administration.

We also recommend our previous article: Moving to Norway – What About Taxes?