The most significant impact on the effective tax rate in 2022 was the recognition of a gain on a bargain purchase of Grupa LOTOS and Grupa PGNIG, the effect of which was offset by the income tax paid by the subsidiary PGNiG Upstream Norway AS and LOTOS Upstream NORGE AS.

For Norwegian companies, the tax rate is at the rate of 78%. Activities in the Norwegian Continental Shelf in 2022 were subject to taxation under two separate tax regimes:

• income tax system (tax rate of 22%);
• the petroleum tax regime (additional effective tax rate of 56%).

Such a high tax rate in Norway is associated with a number of investment reliefs and additional deductions. Basic discounts apply to:

• the possibility of applying accelerated depreciation on investment expenditures. In the year in which the expenditure was incurred, the company is entitled to full annual depreciation, regardless of the date of the expenditure;
• in the case of projects approved for implementation before the end of 2022, the possibility of applying an investment relief. The relief applies to investment expenditures on the Norwegian Continental Shelf (except exploration costs) and amounted to 17.69% of expenditure in 2022 (in 2021, the relief amounted to 24% of expenditure). This relief is only deducted from the petroleum tax base and does not apply to income tax. If the value of the relief exceeds the amount of income in a given year, it may be used in subsequent years;
• possibility of full tax consolidation of implemented projects. As a result, the company may reduce its tax payable on the extraction of hydrocarbons from developed fields by spending capital expenditure on new fields, which are immediately depreciated;
• the possibility of deducting all expenditure on exploration from the revenue;
• the possibility of deducting financial costs in both tax systems.

From 1 January 2022, the Norwegian Ministry of Finance introduced changes to the taxation of mining activities. The most important changes concern:

• the six-year tax depreciation and four-year investment relief used before 2020 were replaced with the immediate recognition of the entire investment as tax deductible (immediate depreciation);
• the liquidation of the investment relief does not apply to projects subject to the temporary tax regime introduced in 2020. All currently implemented development projects by PGNiG Upstream Norway are subject to temporary rules. The only change under the temporary rules concerns the reduction of the investment relief from 24% in 2021 to 17.69% in 2022 and 12.4% in following years;
• the rate of the special tax on hydrocarbons was raised to 71.8%, and at the same time the ordinary income tax is tax deductible under the special tax on hydrocarbons. Together, these changes keep the marginal tax rate unchanged at 78%;
• the tax value of the loss recognised under the special tax on hydrocarbons is fully offset in cash in the following year;
• all ordinary income tax losses transferred between years were deprived of the hitherto accrued interest increasing the tax shield as part of transferred losses.

Changes in the Norwegian tax system significantly affect the profitability of investment projects implemented in Norway and significantly accelerated the return on invested funds.
These changes also encourage the implementation of new investment projects in Norway. In accordance with the recent changes in regulations, favorable rules regarding immediate depreciation and simultaneous application of the investment relief apply to all projects launched between 2020 and 2022. With regard to these projects, the favorable rules will apply until production is launched from these projects.