Norway vs Petrolia Noco AS, November 2019, Oslo Court -2019-48963 – UTV-2020-104

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In 2011, Petrolia SE established a wholly owned subsidiary in Norway – Petrolia Noco AS – to conduct oil exploration activities on the Norwegian shelf.

From the outset Petrolia Noco AS received a loan from the parent company Petrolia SE. The written loan agreement was first signed later on 15 May 2012.

The loan limit was originally MNOK 100 with an agreed interest rate of 3 months NIBOR with the addition of a margin of 2.25 percentage points. When the loan agreement was formalized in writing in 2012, the agreed interest rate was changed to 3 months NIBOR with the addition of an interest margin of 10 percentage points. The loan limit was increased to MNOK 150 in September 2012, and then to MNOK 330 in April 2013.

In the tax return for 2012 and 2013, Petrolia Noco AS demanded a full deduction for actual interest costs on the intra-group loan to the parent company Petrolia SE.

Following an audit for FY 2012 and 2013, the tax authorities concluded that parts of the intra-group loan should be reclassified from loan to equity due to thin capitalization. Thus, only a deduction was granted for part of the interest costs. Furthermore, the authorities reduced the interest rate from 10 per cent to 5 per cent. For the income years 2012 and 2013, this meant that the company’s interest costs for distribution between the continental shelf and land were reduced by NOK 2,499,551 and NOK 6,482,459, respectively, and financial expenses by NOK 1,925,963 and NOK 10,188,587,respectively.

The Court decided in favor of the Norwegian tax authorities.


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