Resource rent taxation on aquaculture

The resource rent tax for aquaculture is controversial and there has been much criticism of the consultation memorandum that the Ministry of Finance presented in September 2022. In general, the Ministry of Finance has to some extent taken into consideration the input received in the consultation round. However, the bill published today essentially mirrors the consultation memorandum from last autumn. In this newsletter, we explain the most important points in the bill, including matters that are new from the consultation.

The key-features of the proposal

• The effective tax rate shall be set at 35 per cent for production of salmon, trout and rainbow. Including corporation tax, the marginal tax rate will be set at 57 per cent.
• The resource rent taxation applies to holders of ordinary fish farming licences. The resource rent taxation does not apply to land-based fish farming.
• Effective from 1 January 2023, although the bill has still not been passed at the end of March 2023.
• The tax will be structured as a cash-flow-tax cash flow tax, meaning that revenues and investments are taxed on an ongoing basis in the year in which they are earned/incurred.
• The gross revenues from the resource rent taxation will be determined based on the price when the fish are removed from the pen, multiplied by the slaughter volume. An independent price board will be established to determine the correct revenue. This board will be tasked with setting the market value when the fish are removed from the pen, and will apply for salmon, trout and rainbow trout from 2024. Regulations relating to the price board will be sent out for consultation. For 2023, the companies themselves will set the market values when fish are removed from the pen.
• Operating expenses connected to the production of salmon, trout and rainbow are deductible, assuming the incurred costs are connected to the resource rent taxable business in the sea phase of the production. Costs that are partly connected to the resource rent taxable business are deductible with a share corresponding to the benefit the cost is assumed to have for the business liable to resource rent taxation.
• Fixed assets acquired before the resource rent tax was introduced, i.e. before 1 January 2023, are deducted through depreciations on remaining tax values.
• No deductions will be granted for the value of fish farming licences, however a template deduction in revenue will be permitted for licences purchased at auction in 2018/2020 and allocated at fixed prices in 2020. The deduction is set at 40 per cent of the actual remuneration paid to the central government divided over five years, and is a change to what was stated in the consultation proposal.
• An annual standard deduction of NOK 70 million. The standard deduction is adopted for each income year by the Storting.
• Negative resource rent will be able to be carried forward with interest, and if the ground rent taxed business is ceased the tax value of the negative resource rent will be disbursed.

What is new from the consultation memorandum?

• In the consultation proposal, an effective tax rate of 40 per cent was proposed for the production of salmon, trout and rainbow. The tax rate proposed in the bill is 5 percentage points lower than in the consultation memorandum.
• The Government has moved away from the proposal of using norm prices (Nasdaq).
• The Government proposes to ease the transition to increased overall taxation through a valuation discount on aquaculture permits when determining the wealth tax.
• The natural resource tax proposed in the consultation memorandum will not be continued, but there will be a significant increase in the production tax from 40 øre to 90 øre pr kg. The proceeds from the production tax shall in its entirety be allocated to the host municipalities and counties.
• In the consultation memorandum, the standard deduction outlined was either NOK 54 million or NOK 67.5 million. The standard deduction is increased to NOK 70 million in the proposal.

Effective date; 1 January 2023

• The Government has proposed that the resource rent taxation should come into force with effect from 1 January 2023. This means that the law will be given retroactive effect, but the Government has assumed that this will not be in conflict with section 97 of the Constitution. However, there is a considerable disagreement regarding this, and our assessment is that introducing a completely new resource rent taxation for a selected industry with retroactive effect from 1 January 2023 is contrary to Section 97 of the Constitution.

What happens next?

• The Government has informed that the proposal will be presented to the King in Council today and the proposal will accordingly be presented to the Storting.
• Before the proposal can be passed, however, the proposal will be sent to the Finance Committee for discussion and further processing. Thereafter, the Committee will make a recommendation, with a proposal for a decision, to the Storting. The Committee's proposal for a legislative decision will then be considered in the Storting in plenary session. When the proposal is put to a vote in the Norwegian Parliament, it must be voted on twice.

If you have any questions or would like to discuss the proposal, please contact us (please find contact details below).