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The steps Americans in Norway can take to minimise or avoid double taxation

The US tax system is global, meaning Americans living overseas still need to file returns with the IRS even if they are a tax resident in another country. While most Americans are aware of this responsibility, Rune Andersen, partner and head of the tax department at Ræder Bing law firm, said that the issue of double taxation was a common challenge faced by Americans who moved to Norway. 'Taxation based on citizenship is not common. In general, most countries tax individuals when they become residents, and the taxation ceases when they move permanently, but this is different for Americans,' he said. Familiarise yourself with the tax treaty In principle double taxation is avoided through a tax treaty between Norway and the US. Americans who are tax residents in Norway can receive tax credits for the tax they pay overseas. Meanwhile, the US has the Foreign Earned Income Exclusion (FEIE) system, which allows Americans living overseas to exclude a portion of their foreign income from US taxation. Americans can also use Form 1116 to claim a credit for taxes paid to Norway. Seek the help of experts However, the tax treaty between the US and Norway can be quite complex, meaning the main step Americans living in Norway can take to avoid or minimise double tax is to seek the services of a professional. 'To avoid double taxation due to the US rules, it is, in most cases, necessary to involve a US tax advisor with international experience. In addition, the tax treaty between Norway and the US is very complex and old, so it is very important to involve tax experts to make sure the tax treaty is correctly applied,' Andersen said. Advertisement Furthermore, gaps exist in the tax treaty, meaning Americans can be taxed in the US and Norway. One such example is that some US Individual Retirement Accounts (IRA) end up being taxed in both Norway and the US as the account holder will be taxed by the US once the IRA is paid out, and the Norwegian authorities, who sometimes view this windfall as income. 'The Norwegian authorities have, in some cases, concluded that the IRA is savings, and accordingly, the underlying profits occurring within the account has been taxed as capital income despite the fact that no withdrawals have been made. This will lead to double taxation because Americans may be taxed in the US when the money is paid to the taxpayer at retirement. In my opinion, this is an incorrect treatment of Americans in Norway,' Andersen said. READ ALSO: Is it worth paying for professional help with taxes? Ensure any professionals you use are on the same page Ideally, those looking to try and minimise the prospect of dual taxation should have expert help with both the US and Norwegian tax systems and ensure that both experts are in contact with one another. 'Get Norwegian and US tax advisors that have experience with tax treaties. These advisors need to coordinate because it is necessary to make sure that tax credits are given,' Helene Aasland, a senior lawyer at Ræder Bing, told The Local. Advertisement Approach things on a case-by-case basis Another tip was to try and treat certain scenarios, such as trusts, on a case-by-case basis rather than take general advice to avoid paying unnecessary taxes. 'Taxpayers resident in Norway have to report their global income and wealth. We see misunderstandings related to trusts. A trust can be organised in different ways. If a beneficiary is a tax resident in Norway, the taxpayer may be deemed as owner of the assets in the trust and accordingly be liable to pay wealth tax on the assets, but there is not a clear answer to this. Each case needs to be considered separately,' Aasland said. Keep an eye on developments While there isn't a lot taxpayers can do to try and change policy themselves, keeping up to date with the latest developments can give Americans living in Norway a rough idea of how their tax liabilities could change in the future. Advertisement For example, the US could opt to abolish taxing citizens who live overseas . Furthermore, Norway's controversial wealth tax will likely be a key debate and policy point during the general election later this year and, as a result, be changed. "We see many Americans moving to Norway for personal reasons, business reasons or whatever, but they get into a wealth tax system that makes it too expensive to live here," Andersen said. Norway's wealth tax is applied to global wealth and is charged at a rate of between 0.525 and 1.1 percent of one's total net wealth above 1.7 million kroner.