On February 28, 2024, the Norwegian Tax Administration published a binding preliminary declaration (BFU 1/2024) entitled Reorganization of aquaculture operations subject to land rent tax. According to him, the taxpayer was not retained.

The taxable person would transfer the aquaculture activity subject to land rent to two subsidiaries, one of which would receive the authorizations, etc. (food fishing licenses and associated biomass) while the other would obtain exploitation (operating assets and employees). This was to occur through two rolling fissions (fission into subsidiaries followed by a triangular merger with subsidiaries). The transferor company, which was subject to land rent tax before the reorganization, but not after the transfer of licenses, had benefited from a full deduction from land rental income for operating assets acquired before implementation of reorganization.

The most important of the BFU

• The starting point is that a demerger and merger constitutes a taxable realization for the company and the shareholders, unless the conditions of Chapter 11 of the tax law are met. A basic condition is that the split/merger is carried out with tax continuity, i.e. that the tax positions are transferred to the acquiring company (and to the counterpart shares). The rules on divisions and mergers also apply to aquaculture companies, in accordance with the declarations contained in the preparatory work.

• The problem in this case was that the transferor company had obtained a full deduction from the ground rent income for the costs of acquiring the operating assets. However, the company which was to take over the operating assets would not be subject to land rent tax, since the licenses had to be transferred to another company. This would mean that unrealized property income gains would not be taxed if the reorganization could be carried out tax-free. The Tax Department came to the conclusion that the main consideration behind the continuity condition was the deferred taxation and not the loss of the right to tax, which would be the consequence here, with reference to Utv 2003 p. 1282 (FIN notice) and Utv. . 2016 p, 427 point 1.2.3 (SFS BFU). The breach of the continuity requirement caused by the reorganization would be taxable.

• A current question is whether the Tax Department has gone a little too far, i.e. whether an intermediate solution can be considered. The split means that operating assets which were subject to land rent tax will no longer be. In accordance with article 19-5 (1) letter c of the tax law, the withdrawal of operating assets is also subject to land rent tax. If the rule is to be understood in the same way as the corresponding rule of the Petroleum Tax Law, the demerger will result in a withdrawal of operating assets from a company subject to the special tax (for comparison, see also premises 35 to 44 in HR-2014-496-A (Tange 7)). In BFU 28/14, the Tax Directorate concluded that a tax-free conversion did not prevent the taxation of expatriations (withdrawal of the counterpart shares from the Norwegian tax zone, cf. Tax Act § 9- 14). Cross-border mergers do not prevent the use of expatriation taxation either, cf. Tax Law § 11-11 (3). A possible intermediate solution could have consisted of taxing the transferor company while the reorganization as such could have been carried out tax-free.

The decision can be read here.