Proposed changes in the Norwegian taxation of aquaculture, wind power and hydropower

| Innsikt

Today the government presented its plan to introduce resource rent tax on aquaculture and wind power and an extraordinary tax on wind and hydropower, as well as an increase to the resource rent tax on hydropower. This newsletter summarizes the most important aspects of the proposals.

Resource rent tax on aquaculture
The government proposes to introduce a resource rent tax on aquaculture from 1st of January 2023. The proposal will be circulated for consultation today with a deadline of 3rd of January 2023.

The proposal includes a resource rent tax with an effective rate of 40% applicable to the production of salmon, trout, and rainbow trout. The proposal includes a tax-free allowance of between 4,000 and 5,000 tonnes.

The taxable revenue from salmon is proposed to be based on the commodity prices for salmon. Revenues from trout and rainbow trout are based on the actual sale prices.

Corporate tax is calculated before resource rent tax on aquaculture, and resource rent-related corporate tax is deducted from the basis for resource rent tax. An effective resource rent tax rate of 40% implies that the formal resource rent tax rate will be set at 51.30%. Including corporate tax, the total effective marginal tax is then 62 %.

Resource rent tax on onshore wind power
The government proposes to introduce a resource rent tax on onshore wind power from 1st of January 2023. The proposal will be sent out for consultation before the end of the year.

The proposal includes a resource rent tax with an effective rate of 40% which will apply to wind power plants that are subject to licensing. This includes wind power plants that have more than 5 turbines or installed capacity if 1 MW or more.

In principle the taxable revenue is based on spot marked prices. However, the proposal provides for an exemption on energy production sold through existing fixed-price agreements entered into before 28th of September 2022. In these instances, the energy production will be valued at the contract price.

Corporation tax is calculated before resource rent tax, and resource rent-related corporation tax is deducted from the basis for resource rent tax. An effective resource rent tax rate of 40% implies that the formal resource rent tax rate will be set at 51.30%. Including corporate tax, the total effective marginal tax is 62%.

Resource rent tax on hydropower
The government proposes to increase the resource rent tax on hydropower from an effective rate of 37% to 45%. The increase would be effective from the fiscal year 2022. The government also proposes that revenue from the sale of guarantees of origin be included in the resource rent tax basis from the fiscal year 2023.

The proposal includes a contract exception with regards to the basis of the resource rent tax. The exception entails that the resource rent tax for electricity sold through fixed-price agreements to a larger extent than previously is based on the actual price and not the spot price. It is assumed that electricity suppliers should be able to offer standardised fixed-price agreements for periods of 3, 5 and 7 years.

Corporate tax is calculated before resource rent tax on hydropower, and resource rent-related corporate tax is deducted from the basis for resource rent tax. An effective resource rent tax rate of 45% implies that the formal resource rent tax rate is set at 57.70%. Including corporate tax, the total effective marginal tax is 67 %.

High-price contribution on wind power and hydropower
The government proposes to introduce a high-price contribution on wind power and hydropower.

The high-price contribution is designed as an excise duty and has a rate set at 23% of the electricity price in excess of NOK 0.70 per kWh.

The high-price contribution will apply from 28th of September 2022 to hydropower stations with generators with a total rated output of 10,000 kVA or more.

For wind power plants, the tax obligation is applicable from 1st of January 2023 to wind power plants that are subject to licencing. This includes wind power plants that have more than 5 turbines or installed capacity of 1 MW or more.

The tax will be calculated hourly for each price area. The tax basis is limited to revenues from power generation.

The tax is calculated separately for

  • power valued at the spot market price
  • own power,
  • licence power and power in accordance with withdrawal rights
  • total other contracts (e.g. bilateral agreements and financial contracts).

The proposal entails that the high-price contribution will not be deductible from corporate tax. As the high-price contribution is not considered an operating expense that regularly derives from power generation, it is assumed that the high-price contribution also will not be deductible in resource rent tax and property tax.