On 30 January 2025, the Norwegian Ministry of Finance (MoF) proposed changes to the tax rules applicable to unit-linked life insurance policies. Under the proposal, the tax exemption method would no longer apply to companies’ investments through unit-linked life insurance policies. Following strong push back to the proposal from several stakeholders, the MoF issued a letter on 24 March 2025, acknowledging a need to revise the proposal.
Since the last tax reform in 2019, Norwegian policyholders with policies that have a low insurance element (below 50%) have been taxed on accrued gains within the policy at the time of a withdrawal or surrender, based on the equity-to-bond ratio within the policy.
Current Taxation Rules
Norway follows an 80/20 rule, whereby the equity-to-bond ratio is tracked throughout the life of the policy:
- If equity investments exceed 80% of the total investments, all net income is regarded as equity income;
- If the equity investments are below 20%, all net income is treated as bond income;
- If the equity portion is between 20% and 80%, net income is proportionally divided between equity and bond income.
Currently, corporate policyholders benefit from tax exemption on the equity portion, whereby only gains that are considered bond income are taxed upon a withdrawal or surrender.
Proposed Changes
The MoF’s proposal, set to take effect on 1 January 2026, would make all distributions and gains taxable, including those related to the equity portion that currently benefit from tax exemption. The MoF further proposes that these changes apply retroactively, covering all accrued unrealised gains as of 30 January 2025. The proposal is currently under consultation until 30 April 2025.
Implications for Corporate Policyholders
If implemented in its current form, corporate policyholders would lose the tax exemption but would still benefit from tax deferral until a payment out from the policy. Additionally, Norwegian policies would continue to offer other advantages, such as flexible asset management, simplified administration, and easy reporting. No changes to the taxation of policies held by individuals are foreseen.
Stakeholder Feedback and MoF Response
Several stakeholders, including Finans Norge, have already submitted feedback to the proposal, highlighting that unit-linked policies are also used by corporate investors and that the proposed changes may be too broad. In light of this, they have questioned whether the removal of the exemption is appropriate in its current form.
In a response letter to Finans Norge dated 24 March 2025, the MoF clarified that the proposal was developed on the assumption that unit-linked policies are designed primarily for individual investors. It also noted that, under current rules, certain non-equity investments within these policies could benefit from the exemption method – a treatment not available if companies had invested directly.
The MoF has confirmed it will reassess the proposal in light of the feedback received. While no revised draft or updated timeline has been provided, this response indicates a more considered and consultative approach going forward.