Until recently it seemed like a walk in the park for Norway’s wealthy to relocate (mainly to Switzerland) for tax reasons. An exit tax on assets existed, however if an asset remained unsold five years after you left the country — you didn’t have to pay.
But in the last week, a furore has kicked off among the Norwegian tech scene on social media over the latest iteration of that law — a proposed 37.8% exit tax on unrealised assets over €43k that have been accumulated in Norway. If you leave after seeing a big spike in your ‘paper’ wealth, you now have three options: pay the exit tax immediately, pay in interest-free instalments over 12 years or with interest after the 12 years have elapsed.
As Norwegian founder Alex Svanevik (long gone to Singapore) puts it, imagine the startup you founded hits a $10m valuation at its latest fundraise and you own 30% of the company. If you then decide to move to a different country for global expansion — Norway’s five million-strong population is hardly a big enough test market — you’d have to pay 37.8% of your ‘paper’ wealth of $3m in exit tax. Bye-bye $1m. “As a consequence, you’ll be kept hostage as a founder in Norway,” Svanevik writes.
That also counts even if you don’t see a penny of your wealth realised, so for heaven’s sake, don’t fail.
“This latest stroke of genius from the government is frightening not only because it is a particularly bad tax solution cooked up to correct the failed effect of the previous one, but because it shows a total lack of will to understand what it means for the business community,” writes We are Human founding partner Johan Brand.
If you decide to move back to Norway within those 12 years, by the way, the tax requirement is waived and you get back what you’ve paid.
Looking at it from a European perspective, Norway is hardly alone in having an exit tax on unrealised wealth. Other EU countries including Spain, Estonia, Denmark, France and Germany all have an exit tax, though they’re not as steep as 37.8%.
Let’s take Germany, which the Norwegian government has supposedly been influenced by when proposing the stricter law. The exit tax there is about 27% (plus church fees) and the shareholder can apply to pay over seven instalments with a security payment upfront (Norway is leaner in this respect).
Tech folk from outside Norway’s tech scene have also pitched in with their thoughts.
“Norway, this is dumb,” deeptech investor Michael Jackson wrote on LinkedIn in response to Svanevik. “I know you're not the only country in Europe that has done this, but that doesn't make it smart or right. Honestly, the fact that Germany does something similar should be evidence enough that it's not a good policy for startups.”
When it comes to the startup scene in Norway, it’s a shame that such regulatory developments are taking the spotlight. In the last couple of years, lots of interesting startups have come out of the country, such as OpenAI-backed robotics startup 1X, fintech Two and energy tech startup Photoncycle. Whether or not founders and foreign investors will shy away from Norway because of the exit tax waits to be seen. My hopes of Norway leaving the ‘up-and-coming’ stage to become a proper startup hub have, however, moved to pending.
So, readers, what do you think? What will this do to Norway’s tech scene? And where’s the best place to incorporate in Europe? Let me know your thoughts.
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