Entering the Norwegian Market
Norway is one of the most prosperous nations in the world with a highly developed social services and healthcare system and the added attractions of stunning landscapes of fjords, lakes, mountains, and forests.
Economically, Norway ranked as the 28th ‘freest’ economy in the world in 2021 and 15th out of 45 countries on the European continent. Norway was placed 32nd in the world with nominal Gross Domestic Product (GDP) of 445 billion US dollars, with predicted growth of 4.2% into 2022.
These factors underline the potential for foreign companies targeting Norway for international expansion. Hiring staff from overseas, however, can be hit and miss. Taking the major step of setting up a subsidiary as a route into the market poses different, but equally demanding issues.
Starting a business in Norway
Foreign companies starting a business in Norway usually prefer the option of a private limited liability company, known as an ‘aksjeselskap’ or AS. The private subsidiary is a legal entity entirely independent of the parent company and is incorporated in Norway as a local company under the Private Limited Liability Companies Act.
The necessary stages for starting the business include:
- Begin registration process through the Brønnøysund Register Center to confirm the choice of company name is unique in Norway
- Open a bank account and deposit share capital – a minimum of NOK 30,000 (€2,887, US$3,266)
- An independent auditor confirms the balance is in the account in order for company to obtain the bank’s deed of deposit
- Complete the ‘Foundation of a private limited company’ form
- Employers must be registered on the Central Coordinating Register for Legal Entities, to receive a unique organization number
- Log necessary documents with the Norwegian Register of Business Enterprises online (fee NOK 5,570, €536, US$606) or via post (fee NOK 6,797, €654, US$740)
- Register for Value Added Tax (VAT) if annual turnover is expected to exceed NOK 50,000 (€4,811, US$5,433)
- Register for mandatory workers’ injury insurance and occupational pension plan
- Register with the Tax Administration and the Labor and Welfare Administration (NAV) to remit deductions for tax and social insurance
- The Register for Business Enterprises must be notified no later than three months after the company is founded, or the process will be cancelled and need re-starting
Expanding Business into Norway
Located on the northwestern corner of Europe in Scandinavia, Norway is a key player in Europe’s single market as a member of the European Economic Area (EEA), which gives its businesses open access to all 27 nations of the European Union (EU).
The employment market is extremely competitive, with demand for highly skilled professionals in key sectors such as IT and healthcare, hospitality, engineering, and tourism as well as their ‘powerhouse’ sectors of oil and petroleum, shipping, minerals and fisheries.
Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?
Drawing up an expansion blueprint is not enough. Your business plan will have to answer all these questions.
Norway welcomes foreign investment, but the employment market is complicated by its mix of laws, collective and trade union agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?
Norway Business Facts
- Capital – Oslo
- Population – 5.48 Million
- Counties – 11 counties: Agder; Innlandet; Mare og Romsdal; Nordland; Oslo; Rogaland; Vestfold of Telemark; Troms og Finnmark; Trønelag; Vestland; Viken
- Official Language – Norwegian
- Economy and world ranking – GDP US$445 billion; 32nd
- Leading sectors by GDP – Service sector (60.5%); industry (25.9%); agriculture (2%); including oil and petroleum; hydropower; fish, forestry and minerals
- Main exports – Crude petroleum and gas; fish; refined petroleum; raw aluminum and minerals; machinery including computers
- Main imports – Machinery including computer; vehicles; refined petroleum; broadcasting equipment; petroleum gas; crude petroleum
- Main trading partners – UK, Sweden, Germany, Netherlands, France, China
- Government – Constitutional monarchy, unitary state and parliamentary system
- Currency – Krone
Advantages and Challenges of the Norwegian Market
Advantages of expanding into the Norway market include:
- Economy: Oil, gas, petroleum and fisheries revenue underwrites the strength of Norway’s economy for years to come
- Strengths: Low unemployment and high productivity create a high standard of living for the relatively small population of around five million
- Consumerism: High spending power, especially from the growing percentage of young people in the population
- Workforce: Well, educated, highly skilled and motivated
- Global: Ranked the 28th freest economy in the world, receptive to foreign investment and with over 30 preferential trade agreements with other nations
- Taxation: Corporate taxation at 22% is among the lowest in Europe, although some companies in the financial sector are liable for 25%
- Links: Although not a member of the European Union, Norway’s membership of the European Economic Area allows freedom of movement throughout the EU with access to its 450 million consumers
Challenges of operating in the Norway economy:
- Expenditure: High wages and labor costs
- Local Logistics: Most employees live outside the cities and depend on transport into work
- Business Operations: Companies used to a structured business environment can find the lack of hierarchy frustrating
- Recruitment: Finding high quality staff can be difficult as low unemployment creates an ‘employees market’ with jobseekers expecting high salaries
- International Finance: Transferring funds out of the country above NOK 25,000 (€2,460, US$2,777) must be approved in advance by Norwegian Customs and transferred through a bank
Limited Company / Subsidiary or Branch in Norway?
International companies targeting Norway for expansion will generally choose a private limited liability subsidiary, known as an ‘aksjeselskap’ or by the suffix AS. They have independent legal status from the parent company, which is generally free from responsibility for any debts or liabilities of the subsidiary. Subsidiaries can have a different name from the parent company, pursue different business activities and form their own contracts.
Branches, in comparison, are an extension of the parent company and are not a separate legal entity. Subsidiaries and branches have differences in how they are registered and operate.