Norway Risks Outflow of Startups Dismayed by Harsher Exit Tax

(Bloomberg) -- Norway’s planned changes to a so-called exit tax threaten to trigger a wave of departures by startup founders and companies, according to a lobby group.

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The Norwegian government in March announced its latest step to close tax loopholes for wealthy expatriates by setting a deadline for the payment of an exit tax on unrealized changes in the value of their assets, or their transfer. That plan follows increases in wealth and dividend taxes since 2022 that have prompted dozens of the country’s richest to relocate, mainly to Switzerland.

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A majority of about 150 early stage entrepreneurs responding to a survey by the newly established Norwegian Alliance for Startup and Tech are considering leaving Norway after the latest tax plan, Board Chairman Anders Mjaset said in an interview. Most respondents also see the new rules making it “a lot harder” to attract international talent and to raise venture capital, he said.

While the wealth tax increases over last two years would only be affecting the most highly valued early stage companies, the startup sector’s key concern regarding the exit tax is linked to taxing unrealized gains, according to the lobby.

The exit tax changes aren’t directed at startup entrepreneurs and foreigners contributing to Norwegian startups don’t necessarily have to assume tax-residency in Norway, Finance Minister Trygve Slagsvold Vedum wrote in an opinion piece in Dagens Naeringsliv newspaper on Wednesday, criticizing opposition for what he said was disinformation that’s deterring foreign entrepreneurs.

The amended exit tax, which is still due to be approved by the parliament, would have to be paid in 12 years after leaving, whereas currently it is possible to keep deferring it.

Norway, western Europe’s biggest oil and gas producer, needs to find new sources of economic growth and to ensure it doesn’t endanger new business that’s being born in the country, said Alexander Woxen, former chief executive of the Oslo-based Startuplab, in an interview.

“As long as we pump oil, it doesn’t really matter for this generation, but in the longer term, if we really want to have a more diverse industry composition in Norway, we need to also cater for that,” Woxen said. “We expect this to be counterproductive while the current government shrug their shoulders and is not willing to debate this. The problem is that once it has unfolded far enough, it’s harder to rewind because they created the notion that that these awkward kind of tax schemes come and go and reduce the ability to raise money in Norwegian startups.”

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