Norway removes VAT exemption for low-value goods and introduces new obligation on foreign supplier

Norway removed its VAT exemption on importation of low-value goods (i.e. those with a value below NOK 350) on April 1, 2020. At the same time, the threshold for customs duties has been raised from NOK 350 to NOK 3000.

The VAT collection for goods valued below NOK 3000 is now the responsibility of foreign suppliers selling to Norwegian consumers and it is handled through Norway’s new VAT on E-Commerce (VOEC) scheme. The VAT and customs on the sale of cross-border goods valued at NOK 3000 and above will be collected from the Norwegian consumer by the postal service or express carrier.

A global trend

This VAT law change in Norway follows a trend of countries around the world removing thresholds on low-value goods and introducing new obligations on foreign suppliers. The new Norwegian system is similar to the approaches in Australia and New Zealand, as well as the E.U. VAT scheme for B2C imports of low-value goods due to be introduced in 2021.

Australia amended its Goods and Services Tax (GST) system on July 1, 2018, for packages valued at AUD$1,000 or below. By December 2019, New Zealand implemented a similar GST system change for goods valued at NZD$1,000 or below.

Compliance process

The new compliance process for foreign suppliers in Norway is similar to that for digital services. The sales turnover threshold that triggers registration obligations is NOK 50,000 (approx. EUR4,450, USD4,800, or GBP3,900 as of April 29, 2020). The filing frequency is also quarterly, similar to the frequency for the VAT on Electronic Services (VOES) system.

We expect that this trend will continue to develop in a similar fashion across the globe. The original exemptions for sales of cross-border goods were introduced to reduce the administrative burden of VAT collection at a time when such cross-border sales were low. With the exponential growth of online cross-border sales, VAT on these sales will represent a significant tax revenue boost for governments.

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