Norway challenged by EFTA on VAT Representatives

Norway, along with Lichtenstein, Iceland and Switzerland are part of the European Free Trade Association known simply as EFTA. While Switzerland made its own bi-lateral agreement with the EU, the other three, including Norway, contracted to being part of the European Economic Area (EEA) which includes the EU.

EFTA’s Surveillance Authority (SA) has formally opined that Norway’s requirements for non-resident businesses to appoint VAT fiscal representatives in Norway is a breach of the EEA agreement. Currently, non-Norwegian companies who, because of the nature of their trading operations in Norway, are required to VAT register, declare and pay Norwegian VAT there, are required to appoint a VAT representative. The VAT representative is jointly liable for the payment of VAT.

Within the EU, EU businesses do not require to appoint VAT Representatives in other EU countries where they are liable to VAT report and where they are non-resident. In the event of non-compliance in terms, say, of VAT payment obligations, non-resident EU taxable entities can be pursued through the EU’s mutual co-operation agreement.

According to the SA, Norway has already agreed mutual assistance with EEA countries in the field of information exchange and VAT recovery, thus making its demands for fiscal representation unnecessary. The SA considers the requirement to appoint a Representative is a barrier to trade.

As it stands, appointing a fiscal representative in Norway can be a costly exercise for a foreign undertaking. First, an indemnity in the form of a bank guarantee or deposit related to annual sales turnover is usual to safeguard the Representative in view of the joint liability. Second, according to the regulations, the whole process of invoicing has to be supervised by the representative. Each invoice issued by the foreign business should be processed by the Representative, who calculates and adds the VAT to each document before stamping and signing it off.

Following the delivery of the opinion by the SA, Norway now has two months to respond in terms of agreement to comply or alternatively prepare to face proceedings be raised by the EFTA Court.