What are the logistics and taxation ramifications of working remotely for a US company while living in Norway?

Question

It seems like every expat scenario is little different. Here's mine. My husband and I are both US citizens and have never lived outside of the US. I have a 3 year full time position with the Norwegian government through a University starting in July. We do not need Visas. We will get resident cards when we get there. The process will be easy since I have been offered a job in Norway and my husband will easily obtain resident status at the same time. Insurance is covered by the government for residents so we will have health insurance coverage.

My husband currently has a remote job with a US company and would like to take it with him when we move. He is considered a full time employee and not a contractor. We have not broached the subject with his company yet for fear that he would be terminated.

When in Norway, will he be paying taxes to the US or to Norway? I know the US has a taxation treaty with Norway but I can't figure out his situation. (I understand my taxation situation.)

What will his employer have to do to keep him on as an employee? We'd like to make this as painless as possible for them so that they have no reason to let him go.

Answer 1

I'm not an expert on this subject, but from what I understand there are generally two ways to do this.

1. Have the company establish a subsidiary company in the foreign country and make your husband an employee of that subsidiary
2. Your husband establishes his own company in foreign country and operates as an independent contractor.

This interesting article talks about this issue and mentions a few countries that have some other options, although Norway is not mentioned: https://www.shrm.org/resourcesandtools/hr-topics/global-hr/pages/paying-employees-abroad.aspx.

Considering how Norway offers strong employee protections, my guess is that some sort of Norwegian corporation or self-employment setup is required.

Option 1 is a major pain for the employing company. Most companies probably would not bother unless they really value the employee or they were planning for a presence in that country anyway.

Option 2 is a major pain for you. Setting up a company in Norway is likely to be complex and expensive. You'd also have to set up a business to business relationship with the company in the US rather than an employer-employee relationship. Your husband's company would have to be getting a much higher income, since it would have to pay taxes, pay for healthcare, and all the other benefits required by Norwegian law. On the other hand, the former employer wouldn't have to pay taxes and benefits anymore.

An independent contractor means that the company they are working with cannot dictate things like vacation or benefits, but it does mean that they can do work for multiple clients. In fact, I believe that some places require that there be multiple clients to keep companies from cheaply hiring employees as independent contractors, but I have no idea how it works in Norway.

So unless Norway has rules I'm not aware of, something is likely going to have to change. I recommend contacting an expert in Norway to get a better idea of what is possible and the specifics of Norwegian law. I'm also pretty sure there are businesses to help your husband set up his own company if you go that route.

As for taxation, taxes are usually paid to the country of residence almost everywhere. Most countries, Norway included, would not look kindly on undeclared income.

The United States is unusual in that it taxes citizens who don't live or work in the United States. However, since the first 90k of income is usually excluded, there's a tax treaty between the US and Norway, and Norway has higher taxes, it's very unlikely you'd have to pay anything to the IRS. US tax law is aimed mainly at wealthy US citizens who live in low-tax countries. You will have to file a tax return though.