Tax | Resource Rent Tax On Onshore Wind Power

• Published date: 11 January 2024
• Subject Matter: Tax, Income Tax, Corporate Tax
• Law Firm: BAHR
• Author: Mr Joachim Bjerke and Julian Davidsen

Headlines

The government has presented its proposal in Prop. 2 LS (2023'2024) of a resource rent tax on onshore wind power. The proposal is based on a cash flow model, but with the important difference that any deficit must be carried forward at a risk-free rate (as in aquaculture) instead of being disbursed from the state (as in petroleum and hydropower).

The proposed effective tax rate is 35 % (compared to 40 % in the consultation paper). The resource rent tax will cover wind farms subject to public licenses that consist of more than five turbines or have a total installed capacity of 1 MW or higher. The rules are proposed to be effective from the fiscal year 2024.

The Government's proposal follows up on the consultation paper of 16 December 2022, but also involves important changes in line with input from the consultation round.

Tax rate

The Government proposes an effective resource rent tax rate of 35 %. In total, the proposal entails that wind power companies covered by the proposal will be subject to an effective tax rate of 57 % (including the corporate tax rate of 22 %). As with the other resource rent regimes, corporate tax is deductible in the resource rent tax basis. Thus, the formal resource rent tax rate is 44.9%.

Experience from the resource rent tax on aquaculture shows that the resource rent tax rate may be subject to negotiation. The government also proposed a 35 % effective tax rate for aquaculture, but the rate was reduced to 25 % after negotiations in the Parliament.

Treatment of deficits

Rather than an annual disbursement of the tax value of deficits'corresponding to the scheme that applies in the resource rent regimes for petroleum and hydropower'the Government maintains its position that deficits in the resource rent tax must be carried forward at a risk-free interest rate against revenues in subsequent years. In contrast to the rules for hydropower plants, it is currently proposed that there should be no possibility of coordination of deficits between different wind power plants or within a group (i.e., ring fencing). The Government justify these differences with a desire to check that the tax functions as intended before such schemes are introduced.

Upon cessation, the tax value of any uncovered deficits will be reimbursed from the state. Such payment shall be made after clean-up and repatriations of the wind power site has been completed.

Determination of revenue

When calculating the basis for the resource rent tax, revenues from...