On 14 December 2018, the Norwegian Directorate of Taxes published its proposal for changes to the air passenger duty rules that are applicable for domestic and international flights departing from Norway (in Norwegian; flypassasjeravgiften). The proposal has been circulated for comments until 1 February 2019. If passed, the changes are planned to take effect from 1 April 2019.

The current air passenger duty applies to the commercial air transport of passengers from airports in Norway and a single rate applies per passenger, irrespective of the flight distance covered. As of 1 January 2019, the applicable single rate will be NOK 84/per passenger.

Based on the proposed changes, the air passenger duty would be charged on the basis of two rates, depending on the flight distance covered. In addition, the changes are expected to affect transit and transfer journeys departing from Norway, as the rate will now be calculated based on the flights’ final destination.

The proposed changes

Airlines operating international flights departing from Norway or domestic flights within Norway must be aware of the following information regarding the proposed changes:

• It is proposed that two rates will be introduced for the calculation of the duty, depending on the final destination:
  • For flights departing from Norway to destinations within Europe, the proposed rate is NOK 75 per passenger. Destinations eligible for the lower rate shall be specifically identified in the Norwegian duty regulation.
  • For flights departing from Norway to destinations outside Europe, the proposed rate is NOK 200 per passenger.
• It is proposed that the first flight in a transit/transfer travel that is departing from Norway would be taxable depending on the journey’s final destination. All successive flights would (similar to the current status) be exempt from tax. For example:
  • Based on the current status, a journey from Oslo to Montreal with an intermediate stop in Copenhagen is subject to NOK 84 per passenger.
  • Based on the proposed changes, the same journey will be subject to NOK 200 per passenger, since the final destination of the whole journey is Canada, which is not included in the low-rate countries list.
• Further details of the duty will be available as soon as the consultation deadline expires.

Possible impact on the airline industry

The proposed changes to the air passenger duty are expected to affect costs and compliance for both domestic and international airlines. More specifically, we understand that:

• The cost of long haul flights departing from Norway may be increased.
• The cost of long haul transit and transfer journeys, departing from Norway may be increased.
• Given that duty liability arises when the flight departs (i.e., and not when the tickets are sold), airlines must review their ticket-pricing and terms of sale for flights departing from Norway after 1 April 2019 (i.e., the date when the changes are expected to enter into force).
• Finally, ERP/IT and ticketing systems should be adjusted to reflect the new rates, with liability being calculated with reference to the final destination of each flight.

EY Norway has a dedicated airline industry team with extensive experience with registration and reporting requirements Norway.

For additional information with respect to this Alert, please contact the following:

Ernst & Young AS, Oslo

• Øystein Arff Gulseth | oystein.arff.gulseth@no.ey.com
• Nikolaos Kratimenos | nikolaos.kratimenos@no.ey.com
• Andrea Hjorteset | andrea.hjorteset@no.ey.com

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