As cross-border business activities continue to expand, understanding when a foreign enterprise becomes subject to taxation in another jurisdiction is increasingly important. In Norway, this question is largely governed by the concept of Permanent Establishment (PE), which plays a decisive role in determining whether a foreign company is liable to Norwegian corporate tax. This article explores how Permanent Establishment is defined, the requirements for a PE to arise and tax consequences of a PE.
Permanent Establishment (PE) is a concept in that determines when a foreign company becomes liable to corporate tax in Norway. The concept is not codified in Norwegian internal tax law but derives from the tax treaties concluded between Norway and other states, which are largely based on the OECD Model Tax Convention. In those treaties, a PE is typically defined as “a fixed place of business through which the business of an enterprise is wholly or partly carried on.”
If a company is considered to have a PE in Norway, it becomes subject to Norwegian corporate income tax on the profits attributable to that establishment. In cross-border projects, the assessment of whether activities constitute a PE is therefore often decisive for whether a foreign company must register with the Norwegian tax authorities, file tax returns, and pay corporate tax in Norway.
If no PE exists, Norway normally does not have a right to imposing corporate income tax on the foreign company. However, depending on the circumstances, Norway may still levy other type of taxes, Value Added Tax (VAT), payroll withholding tax, and employer’s social security contributions.
Also read: OECD 2025 update: New guidance on home office PE risk
The concept of Permanent Establishment (PE) is not exhaustively defined in tax treaties. However, the treaties typically list a number of examples that will normally constitute a PE, including:
a place of management;
a branch;
an office;
a factory;
a workshop, and
a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.
In addition, tax treaties usually specify that a building site or a construction, installation or assembly project may constitute a PE, provided that it exceeds a certain duration threshold.
However, these examples do not operate independently. The general definition of a PE — “a fixed place of business through which the business of an enterprise is wholly or partly carried on” — must still be met.
This means that for a PE to exist:
there must be a place of business;
the place of business must be fixed in terms of location
the place of business must be fixed in terms of time; and
the business of the enterprise must be carried on through that place.
Requirement 2 and 3 are often decisive. As a rule of thumb, projects lasting less than six months (and in many tax treaties twelve months for construction and installation projects) will normally not constitute a PE, whereas projects exceeding those thresholds will.
In some cases, the requirement that the place of business must be fixed in terms of location prevent a PE from arising even if the overall period of activity in Norway is lengthy. This can occur where several projects do not form a coherent whole from both a business and a geographical perspective. In such situations, the projects must be assessed separately, and the duration threshold must be met for each individual project rather than for the aggregate of activities.
Also read: What does it mean when a home office is used as a place of business
A Permanent Establishment (PE) may also arise if an agent is authorized to conclude contracts on behalf of the enterprise . This typically occurs when a company conducts business in a state through a representative, even if the requirement of a “fixed place of business” is not met.
To trigger a PE in this scenario, the following conditions must generally be met:
The agent must have, and regularly exercise, the authority to conclude contracts that are binding on the enterprise.
The agent must be dependent on the enterprise (i.e., not an independent agent). Independent agents acting in the ordinary course of their business generally do not create a PE for the enterprise.
A PE may also exist e.g. if the foreign enterprise: is engaged in petroleum related business activities on the Norwegian continental shelf for more than in the aggregate of e.g. 30 days.
In addition, depending on the circumstances, home office arrangements may also trigger a PE.
In situations where a Permanent Establishment (PE) is triggered, it is typically necessary to consider how international double taxation can be avoided, since the enterprise that triggers the PE and becomes taxable in Norway is usually also subject to tax in its home country.
A common first step is to ensure proper allocation of profits to Norway. Only profits— not gross revenues — are subject to Norwegian corporate tax. These profits must be attributable to the permanent establishment (PE), meaning the PE is taxed as if it were an independent business. Only the profits that the PE would earn in a normal, market-based transaction are allocated to Norway. The amount of attributable profits is typically determined using methods such as the cost-plus method or the completed contract method, depending on the nature of the business activities.
Subsequently, the foreign enterprise may need to liaise with the tax authorities in its home country. In many cases, double taxation can be mitigated through a tax credit under the applicable tax treaty with Norway, ensuring that profits taxed in Norway are not taxed again to the extent allowed under the treaty.
In summary, a Permanent Establishment (PE) in Norway occurs when a foreign company carries out business through a fixed place of business or a dependent agent authorized to conclude contracts. Typical examples include offices, branches, workshops, or construction sites exceeding the treaty threshold. Only profits attributable to the PE are subject to Norwegian corporate tax, calculated as if the PE were an independent entity, often using cost-plus or completed contract methods. Other taxes, such as VAT or payroll contributions, may also apply. Double taxation can usually be mitigated under applicable tax treaties. Professional guidance is essential to ensure compliance.
Our legal team has extensive experience in tax law and has assisted numerous foreign companies with establishing and operating in Norway. Because failure to comply with the Permanent Establishment rules can be costly, we strongly recommend seeking professional guidance before entering the Norwegian market. Early planning helps identify PE risks in advance, avoid unnecessary tax exposure, and prevent costly mistakes and project delays.