U.S.-Norway Agreement Minimizes Withholding Tax for U.S. RICs

In November 2024, the Kingdom of Norway and the U.S. entered a Competent Authority Arrangement (CAA), which allows U.S. Regulated Investment Companies (RICs) to claim tax benefits under the U.S.-Norway Double Tax Treaty (DTT). This agreement reduces the dividend withholding tax rate for qualifying RICs from 25% to 15%.

Background

The CAA follows a landmark decision by the Norwegian Tax Appeal board. In finalizing this agreement, it reversed a decision that denied RICs treaty eligibility, stating they are precluded from its benefits under Article 20.

The CAA clarifies that U.S. RICs qualifying under Internal Revenue Code 851 and 852 are not subject to Article 20 of the DTT, which restricts treaty benefits for certain investment and holding companies. This clarification ensures RICs can, in fact, claim a reduced withholding tax rate on dividends from Norwegian companies.

How RICs Can Claim Norwegian Withholding Tax Benefits

The guidance below can help your RIC apply for the reduced withholding rate, whether proactively or retroactively:

• Preapproval Applications. Qualifying RICs can apply for preapproval from Norwegian tax authorities to secure the reduced 15% withholding rate on future dividends.
• Retroactive Refund Claims. It is not completely clear whether refunds for prior years can be obtained; however, the Norwegian Tax Appeal board decision related to 2013, 2015 and 2016, suggesting that retroactive refund claims may be permitted. Therefore, review your past Norwegian dividend withholdings and consider filing refund claims for eligible years. The general statute of limitations for dividend withholding refund claims in Norway is five years after the tax year in which the withholding was made.

Contact James Augustine or a member of your service team to discuss this topic further.

Cohen & Co is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.