Customs and taxation

The EU has established a customs union, which involves a common external tariff on goods entering the Union and free trade within the Union. Norway’s participation in the EU’s internal market means that it has tariff-free access in the EEA for all goods covered by the EEA Agreement. However, as Norway is not part of the EU Customs Union, Norway does not apply the EU’s common customs rules and tariffs on goods from third countries. The EEA Agreement does not contain provisions relating to the harmonisation of direct and indirect taxation.

EU Customs Policy
The EU Customs Code brings together most of the general rules on trade between EU and third countries. The EU’s internal market can only function properly if these rules are applied uniformly at the Customs Union’s external borders. EU customs authorities are also responsible for enforcing common rules relating to health, safety and the environment.

The modernisation of the EU’s Customs Code in recent years has involved the streamlining and simplification of customs rules and procedures. The work towards replacing paper format customs procedures with EU-wide electronic ones is an important part of this. The new Union Customs Code, adopted in autumn 2013, balances the need to increase customs controls to safeguard the EU’s interests with the need to promote legitimate trade. In order to balance these needs, it has been necessary to modernise customs procedures, make greater use of modern tools and technology and to ensure that the rules are applied uniformly in all EU countries. In order to strengthen the internal market, previous provisions that allowed individual countries to introduce simplifications to customs procedures at national level have been repealed and replaced by a simplified system that applies throughout the EU. New rules designed to reduce health and environmental hazards and combat terrorism have also been introduced.

EU tax policy
Tax policy is developed at the national level. Provided that they respect EU rules, EU member states are free to choose the tax systems that they consider most appropriate. However, in several areas harmonisation of tax rules has been necessary to ensure the proper functioning of the internal market. This applies in particular to indirect taxation (VAT and excise duties), and common rules have been introduced to ensure that taxes are not imposed on goods and services at borders between member states.

EU tax policy is designed to support the EU’s general policy objectives. Full harmonisation of national tax rules has not been considered necessary. However, some degree of coordination has been needed to ensure that national tax rules do not create obstacles to cross-border economic activity and to combat harmful tax competition in the internal market. Decisions relating to the harmonisation of tax rules are made by unanimous agreement. This has made it difficult to achieve the necessary level of tax policy coordination. The greatest degree of harmonisation has been achieved in the VAT and excise fields. A number of directives and regulations (secondary legislation) have been adopted.   

All EU member states are obliged to have a VAT system. These systems are harmonised to a large extent. However, the individual member states retain a certain degree of freedom, in particular as regards rates and decisions as to which goods and services should be subject to VAT. A number of directives have been adopted relating to excise duties on alcohol, tobacco and mineral oils (energy products), for example. Procedural rules for VAT and excise duties have also been harmonised. The aim is to ensure the proper functioning of the internal market and to remove tax obstacles to cross-border trade between the member states. Other rules apply to trade with third countries, including Norway. These are based on normal border controls and customs procedures for imports and exports.

The individual member states’ tax systems are required to comply with the basic principles set out in the EU treaties on free movement of goods, persons, services and capital, on freedom of establishment and on non-discrimination, regardless of whether secondary legislation has been adopted. Tax rules must also be in accordance with the rules on state aid. The European Commission is responsible for ensuring that the member states comply with the common rules. The European Commission may take legal action if the national legislation of a member state or its application in practice fails to comply with EU rules. A number of cases have been brought before the European Court of Justice, and the Court’s decisions have contributed to the development of legislation in this area.   

Association and cooperation with the EU through the EEA Agreement
Norway’s participation in the EU’s internal market means that it has tariff-free access for goods in the EEA with some exceptions; the agricultural and fisheries sectors, for example, are not covered by the EEA Agreement. As Norway is not part of the EU’s Customs Union, Norway does not apply the EU’s common customs rules and tariffs. Norway is, however, involved in the EU’s customs cooperation through Protocol 10 of the EEA Agreement.

In 2009, the EU introduced new security rules relating to trade between the EU and third countries, with a view to strengthening efforts to reduce health and environmental hazards and combat terrorism. Under the new rules, advance information on goods must be provided to customs authorities and risk assessments must be carried out for all imports and exports between the EU and countries outside the Union. Norway has signed a separate agreement with the EU in order to ensure that these rules do not hamper trade flows between Norway and the EU. The agreement waives the obligation to provide information for security purposes prior to the import or export of goods to the EU and requires Norway to apply customs security measures that are equivalent to those applied by the EU in its trade with third countries. This has involved mutual recognition of the Authorised Economic Operator (AEO) certification scheme and of systems of risk analysis and management. As a result of the agreement with the EU, Norway is invited to participate as an observer in several of the comitology committees under the EU’s Customs Policy Group.

Customs legislation in Norway, like the EU Customs Code, is to a large extent determined by multilateral agreements. The provisions of the WTO General Agreement on Tariffs and Trade, together with certain UN instruments, provides the framework for the development of customs legislation. The substance of the EU and Norwegian customs legislation is therefore largely the same. This does not apply to tariff rates and the level of protection, however. In these areas, there are considerable differences between Norwegian and EU policy, partly due to differences in customs and trade policy and partly due to agreements signed with third countries on tariff reductions and tariff preferences.   

The EEA Agreement does not contain provisions on the harmonisation of direct and indirect taxation. EU legislation in this area does not therefore affect Norwegian tax policy. Norway nevertheless follows developments in the EU in this area closely. 

Under the EEA Agreement, Norway is, however, required to implement EU legislation relating to the four freedoms, non-discrimination and state aid. This places restrictions on the development of the Norwegian tax system.

National experts
Contact information for all the Norwegian national experts can be found on the EFTA Secretariat’s website.