Has your business idea energized you since its conception, and now waiting any further to realize it into a hardcore venture seems absurd? Launching a business is truly an enthralling adventure, and the entrepreneur has to play with risks and exhibit remarkable commitment. However, apart from the dedication and hard work, it also takes awareness to take it to covetable heights.
Norway is one of the world’s most powerful economies globally, with a population of over five million people. The country leads in communication, maritime, technology, energy, and innovation businesses. The country’s economic growth can be credited in part to government policies that render it conducive to setting up a business in Norway.
Furthermore, the country has also shown dynamism and remarkable activity in adopting sustainable business practices to reduce its carbon footprint. Thanks to the high rank of the country in the Ease of Doing Business Index, which is 9, according to the World Bank, among 190 other countries, Norway features a business-friendly environment. Around 35,000 new businesses are registered in Norway each year. Setting up a business in the country is straightforward and enterprise friendly.
Kicking off a business in Norway requires some basic paperwork to register the business. Employers need to hire employees, pick a name for the business, study the regulations, etc. This is seemingly enough to one’s mind!
Nonetheless, creating a proper plan to advance in an organized manner can facilitate and streamline the journey. Furthermore, abiding by the rules and regulations specified for your Business in Norway is also critical to get it done hassle-free. Here is a thorough guide on starting a business in Norway that covers all the elements and procedures you should know.
Norway already offers an enterprise-friendly ambiance. The World Bank report has acquired an impressive position in the Ease of Doing Business Index and has maintained the rank for years. Instituting a business in the country should be started by familiarizing yourself with the legal obligations that oversee the operation of your business niche. Furthermore, you will have to develop a business, register the firm, procure Norwegian D-number, comprehend the tax system, etc.
The Norwegian government laid forth several information resources and directives to support business owners and entrepreneurs to facilitate business setup. Due to simple business launching policies and procedures, expanding your Business in Norway is a safe and excellent choice.
Process of setting up a business in Norway
Starting a business can be a profitable proposition in Norway. However, you need to observe several rules and regulations to start it smoothly. For instance, you need to know the organizational forms and ownership types, peruse VAT and other taxes, business registration, open bank accounts, and more. Here are the important steps you need to go through for setting up a business in Norway, a country with a healthy, wealthy, and rich economy: –
- Understand Norwegian business culture: Scandinavian work values characterize the business culture of Norway, where the value of equality is focused on highly. Thus, informal communication, flat structures, and a tad hierarchy would be noticeable. The tripartite model of Norwegian business involves cooperation between the government, Employer organizations, and Employee Federations. Furthermore, other values prioritized are trust, gender equality, risk willingness, and balance between private and work life.
- Invent a business idea: Coming up with a practical and profitable business idea is a critical step and seed of your business. Conduct in-depth primary and secondary research to estimate the existing demand and supply of the services or products your business would offer, competitors, market size, etc. The better your research, the better your understanding of the domain will get. And then comes the need to register a business, plan, raise funds, and comply with legal regulations.
- Register a business: If you are a foreign national seeking to start a business in Norway, you need to get D-number first, which fortunately can be procured online, post number and city, and a Norwegian firm with a postal address. Moreover, business registration in Norway is also accompanied by VAT registration, depending upon the type of business. Documents required to launch a business vary for different organizational structures.
- Develop a business plan: A business plan entails financial planning, executive summary, marketing strategy, budget, and products and services offered by the business. The investors solicit a comprehensive business plan, individuals wanting to associate with your business, and new interested partners. Furthermore, it also becomes a roadmap for a company as it clarifies the business’s objectives.
- Pick your business type: While registering a business in Norway, you can and need to choose from three types of companies, namely, Private Limited (AS), Norwegian Branch of a Foreign Company (NUF), and Sole Proprietorship. Here, AS is opted for by international businesses, NUF is chosen by businesses that already operate in other countries and want to extend in Norway. Finally, Sole Proprietorship is elected by those who work alone, for which you don’t have to be a citizen of Norway.
- Complete the legal work: As you start a business in Norway, getting familiar with the legal responsibilities and obligations is crucial. For instance, knowing the labor laws, employment laws, taxation laws, etc., is necessary to operate a business efficiently. Before hiring employees, registration at the Directorate of Labor Inspection and the local National Insurance Office is required. Tax differs according to the business structure you have chosen.
- Get a D-number: If you have been thinking about how to start a business in Norway as a foreigner? Or what are the requirements? Here’s the answer. Norwegian D- the number is a must for the foreign nationals who want to launch a business in Norway and a Norwegian business address. With this ID, your access to diverse public services is unlocked. The application process for D-number is preferably done simultaneously with the business registration process.
- Comprehend the tax system: The corporate tax system of Norway isn’t a complicated thing to understand. The corporate tax is levied at a rate of 22 percent to the business’s overall sum of profits and capital gains. Furthermore, you need to consider VAT rates and the contribution of employers to the National Insurance Scheme at 14.1%. The rates may vary depending upon the location of a business.
- Fund a business: To start a business, you need funding. Norway provides diverse financial solutions to businesses in need of funding. The funding method you pick influences the operations and internal business structure. Every business requires different financial assistance owing to distinct requirements.
- Get a business bank account: To open a business in Norway, you need to become aware of the country’s bank account and tax system. Norway offers ease to new businesses with online bank account registration, which can be done along with the government registration process.
Hiring Employees in Norway
- Trial Period/Probation Period: Employment in Norway typically entails a probation period of 6 months. Following are the features of a probationary period in Norway:
- The new employees will receive essential guidance & the work will be evaluated.
- Termination of employment contract with a 1-month notice if the employee is unable to meet the company’s expectations regarding credibility or skills.
- The probation period is mentioned to the person before recruitment which the employee in writing shall confirm.
- In case the employees get absent during the probation phase, the duration of this period would be extended, corresponding to the number of leaves.
- The company may choose not to implement a probationary period.
- Leave and Holidays: Norway leave and holidays regulations entitle employees to the employer’s 16 days of fully-paid sick leave. With the advent of the 17th day, the employee gets a social security sickness benefit which is limited to 6 times the National Base Insurance amount, which was 99,8858 NOK in 2020.
However, to enjoy the perks of the policy, a person should be a member of the National Insurance Scheme and has been employed in the company for a minimum of four weeks with a minimum annual income of 49,929 Norwegian kroner (NOK).
For part-time employees, the leave quota depends on 6the number of working hours in a week. Furthermore, employees above the age of 60 receive 31 days of paid leave, and those below receive 25 days of paid leave every year. Moreover, 3 weeks of continuous off days are received by employees between June 1 and Sept 30. Holiday pay is equal to 10.2 percent of a person’s total salary, which is typically reimbursed in June. Those above 60 years of age receive 12.5% of the salary as holiday pay in June.
- Maternity Leave: Features of maternity leave in Norway are as follows, which you need to know for starting a business in Norway:
- Female employees of the company are authorized to leave up to 12 weeks before childbirth, followed by 6 weeks of maternity leave.
- Male employees get 2 weeks of unpaid paternity leave.
- A nursing mother working full-time in the company is entitled to paid leave from a maximum of 2 hours/ day job.
- A nursing mother working two-thirds of a full workday is authorized to take a leave of a maximum of 1 hour/ day.
- Suppose the employee requests a paid leave for breastfeeding the baby, 9 months after the childbirth. In that case, she should be allowed paid leave after confirmation from the employee’s clinician for breastfeeding the baby.
- Termination of Services: Termination of services in Norway is justified due to personal and economic reasons, where the court limits personal reasons to breach of employment contract such as consistent absence, disloyalty, etc. Dismissal of a person, though, is not determined by age, social considerations, gender, etc., but may influence the decision.
Termination of services on the grounds of pregnancy, sick leave, military service, trade union activities, and age (under 70) is deemed unfair. The notice of termination must be delivered to the employee through mail or in writing. When in the receipt of an employee, the termination notice comes into effect.
Furthermore, the notice period is determined by the service length and age of the employee. Typically, the notice period initiates on the first date of the month next to which the notice was provided. After receiving the notice, employees have two weeks to negotiate with the employer. In case of resignation, the employee needs to deliver the resignation letter personally or email it to the employer.
- Pension: The Public Service Pension Fund and NAV (Norwegian National Insurance Scheme) handle pensions in Norway. Pensions in Norway are of the following types: –
- Retirement pension: The pension assures a living from the age of 67 years. However, if an employee holds enough rights for pension, they may start withdrawing when they turn 62.
- Contractual early retirement scheme (AFP): The retirement scheme is exclusively for government teachers and employees. To get the scheme’s benefits, employees must have held membership in the public occupation schemes as they turn 50.
- Disability pension: If an employee’s position has been lowered to less than 100 percent, they can gain disability benefits from the Norwegian Public Service Pension Fund and the Norwegian Social Insurance Scheme. The disability pension is generally reimbursed only in case of sick leave of 1 year.
- Work Hour Norms: A 37.5-hour workweek is customary in work hour norms in Norway, including holidays and holiday pay as per the provisions of the Holidays Act. Total work hours in a year are set to 1,695 hours.
Typically, employees work between 7 AM and 5 PM. The legit limit of per day work in Norway is 7.5 hours, while overtime is permitted solely in the cases of urgency for a limited duration. Overtime hours cannot exceed the 10 hours per week boundary during 25 hours in 4 weeks in a row and 200 hours in a year. Employees receive at least 140 percent of their typical hourly rates for overtime duty.
How easy is it to conduct business in Norway?
The World Bank report has positioned Norway in the top 10 countries in the Ease of Doing Business index, which has been maintained for years. This implies business-friendly regulations and procedures one has to go through when setting up a business there. The index, which ranks economies from 1 to 189, is prepared by considering several factors such as payroll management, permits, and licenses management, taxation, procuring credits, etc. Everything you need to know about the percentile rankings of the following elements that determine the Ease of Doing business in the country.
- Starting a Business: The country ranks 25 in the ease of starting a business which involves time, paid-in minimum capital requirement, cost, and several procedures for small to medium-sized liability companies, as demonstrated by the Doing Business report.
- Managing Permits: Permits and licenses are needed for building a company and warehouses. The component considered by Doing business looks into the time, cost, and procedures involved in completing the formalities required in the process. Furthermore, safety and control mechanisms are also regarded as ranking ind
icators here. Norway is positioned at 22 in the sub-index of permit management.
- Getting Electricity: This Ease of Doing Business Index component considers the cost, time, and several procedures involved in getting an electrical connection for a business. On top of this, transparency of tariffs and reliability of electrical supply are other elements counted. Norway ranks 44 in the Getting Electricity sub-index.
- Getting Credit: This is another dimension evaluated by Doing business to estimate the business-friendliness of countries’ regulations. It probes into the strength and effectiveness of credit reporting systems, bankruptcy laws, and collateral laws in supporting lending processes. Norway acquired 94th position in the subindex of Getting credit.
- Managing Payroll: Payroll management is necessary to prevent oneself from getting lost in the complicated records of remunerations, payments, taxes, and national insurance contributions of employers. Income is liable for taxation in Norwegian National Insurance and Norwegian Income Taxation. It is crucial to have an efficient and organized payroll management system to handle the payroll and tax-related operations while abiding by the laws. This is where the services of an experienced Payroll management partner like Zimyo come to the fore.
- Paying Taxes: Paying taxes sub-index used for ranking an economy in the Ease of Doing Business index involves total tax, the contribution rate for a company to abide by the tax rules, time, payments, and post-filing procedures. Norway has been ranked 34 as regards the procedures for paying filing taxes.
- Enforcing Contracts: The component is studied to gauge the cost and time involved in resolving commercial disputes and the efficiency of the court system and judiciary of the country. Having ranked 3, in the sub-index of enforcing contracts considered to evaluate Ease of Doing business in a specific economy, Norway has fairly qualitative and efficient judicial processes such as time taken to file the case, for trial, enforcing the verdict, and court costs, attorney costs, etc.
- Resolving Insolvency: To rank a country in the Ease of Doing business, the time, outcome, costs such as court fees, lawyer’s fees, etc., and processes involved in resolving insolvency are considered. Other variables estimated for the same are recovery rate, debt enforcement proceedings or liquidation, etc. Norway comes in the fifth position, thus, indicating considerable efficient procedures for insolvency resolution.
Norway poses several good reasons to start a business, such as its immense productivity, innovative culture, egalitarian values, high level of education, and the best part; it is one of the world’s strongest economies. The country focuses highly on technology, knowledge development, and sustainable businesses. Spearheading in the domains like maritime, seafood, oil and gas, and energy, Norway is a great hub for Medtech, Edtech, Fintech, and other tech-related sectors.
Furthermore, the country provides immense ease of setting up a business, as indicated by its rank in the Ease of Doing Business index 2021. Norway scored 82.6 in the overall Ease of Doing Business study 2020 and scored highest in across-the-border trading. The country was ranked lowest in the Getting Credit category.
Nonetheless, Norway holds a universe of opportunities for aspiring entrepreneurs and businesspeople. The benefits of starting a business in Norway are tremendous and awaiting you!
Zimyo is a leading HR and Payroll management services provider in Norway with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.