Norway Court Upholds VAT on Cruises in Norwegian Waters

The District Court in Oslo ruled in a case on the application of the VAT on an international cruise, which both starts and ends outside Norway but makes stops in several countries, including Norway. In its decision, the District Court referred to the application of VAT to passenger transport, as well as to catering and any other taxable goods and services provided while the ship is in the Norwegian VAT area.

Impact on International Cruises and Passengers

With its decision, the District Court confirmed a ruling by the Tax Appeals Board that VAT must be applied to the part of an international cruise that takes place within Norwegian waters. Consequently, VAT is applicable on passenger transport, catering, and all other goods and services sold while the ship is operated within the Norwegian VAT area. 

The District Court added that for a cruise to qualify for a VAT exemption, it must only transit through the Norwegian VAT area. This is one of the determining factors, as well as the duration of the ship's stay in Norway, the number of Norwegian ports visited where passengers can disembark, and the time spent in Norway compared to the cruise’s total duration.

In the present case, the cruises departed from and returned to England and Germany, lasting between 10 and 14 days in total. During this time, between 4 and 11 days were spent within Norwegian waters, during which the ships docked at seven to ten different ports in Norway. Additionally, passengers were free to go ashore independently or take part in excursions and activities arranged by the cruise operator at each of these ports.

Conclusion

Although the ruling has been appealed and no date has yet been set for the Court of Appeal hearing, businesses operating in the cruise industry should assess their activities within the Norwegian VAT area and review key elements, including contracts, route planning, and invoicing practices.

Source: KPMG