The Business Commitment of a Norwegian Company in Germany : An Examination from a Tax Perspective

Abstract

The German market is large and of great economic importance for Norway. A detailed understanding of the German tax system and the cross-national regulations between Germany and Norway are necessary for Norwegian companies who assess investment projects in Germany. This thesis aims to provide this information. It may also serve as an introduction to the topic for civil servants in the Norwegian Tax Administration who deal with companies that have German affiliates. The results are achieved by conducting a comparative examination of the different investment alternatives from a tax perspective. The underlying analysis is initially defining significant tax aspects of investment decision as a common frame of references. Subsequently, the thesis provides an overview of the various legal forms. Given this framework, a legal model is applied that allows the comparison of the different investment alternatives. In this way, the tax consequences within the significant aspects are highlighted for different investment approaches. The findings of this analysis indicate that in case a Norwegian individual person is planning a long-term investment in Germany and expects positive returns which shall be reinvested in Germany, a subsidiary in form of a corporation has advantages in regard to current taxation. If a Norwegian corporation intends to generate a capital gain through the subsequent disposal of its German operations, the investment alternative of a corporation leads to zero taxation. Yet, the examination shows also that the choice of the investment alternative has in some instances no significant tax effects. Thus, also aspects other than taxation should be considered. This thesis provides valuable insights for the choice of an appropriate investment alternative in Germany. However, due to the different characteristics of a Norwegian company and its German business venture, the results are not universal applicable and should be evaluated in consideration of the individual situation.