Promoting R&D activities in Norway

R&D activities that enhance performance are crucial for the development of the oil and gas sector. However, performing these activities entails financial and technical challenges. Therefore, the Norwegian government designed a successful support scheme to promote R&D.

SkatteFUNN was established in 2002 as a tax reduction scheme to motivate small and medium-sized enterprises (SMEs) from Norway to increase their research and development efforts when developing new products, processes, and services. The tax incentive scheme is made to be neutral and available to all industries involved with product, process, and service innovations.

The criteria to qualify for support for dedicated R&D projects were formally structured by the Norwegian Research Council and have not changed since the introduction of the scheme. Each enterprise is entitled to receive 18-20% of the total project cost credited on their yearly tax payment or paid out in cash for companies with deficit results.

This scheme has proven to be very successful since the threshold to obtain funding is quite low compared to other R&D incentive programs. As a result, SkatteFUNN’s activities have been growing rapidly and today the tax system supports the industry with approximately NOK 3.5 billion a year.”

Eirk Furseth, Senior Advisor at SkatteFUNN Oil & Gas

However, the escalating costs of the Norwegian oil and gas industry made it necessary to establish caps to keep them under control; currently, it is NOK 25 million for internal costs. Today, the maximum hourly rate for in-house personnel is NOK 600.

Norway has proven to be an attractive market for high-tech R&D activities; the costs are similar and the wages of R&D employees are competitive when compared to western competitors in the oil and gas sector. “The Norwegian workforce is highly competent and used to working in flat organizations,” says E. Furseth. “It can be quite appealing to larger international companies to perform R&D activities in Norway since 20% of the costs are covered by SkatteFUNN.”

The prerequisites are for the project to be managed in Norway and to provide clear economic benefits to the Norwegian entity. The magnitude of SkatteFUNN’s support has surprised many international companies. As a result, in 2016, SkatteFUNN funded 796 ongoing projects in the O&G sector with an estimated tax credit of NOK 450 million.

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