The issue of tax domicile in the taxation treaty between Norway and Sweden is resolved in accordance with the OECD model agreement.

A Swedish limited company, authorized as a credit market company by the Swedish FSA and part of a Norwegian group of companies, has made a change in its operational management, whereby the effective management of the company has moved to Norway, thus making the company liable to pay tax in Norway rather than in Sweden.

The Swedish Tax authority now challenges the company’s status as a Norwegian tax subject, on the grounds of, inter alia, that a credit market company is compelled by law to have its headquarters in the state where it is authorised and thus cannot move its effective management to another state.

The company agrees that it is required by law to have its headquarters in the state where it is authorized, but argues that this legal requirement must be construed in view of its purpose, which is to enable the FSA in each state to maintain an efficient supervision of the companies authorised by them.

Whereas there are quite extensive sources which may be used to establish the meaning of effective management according to the OECD model agreement , both in the form of comments and other official and unofficial statements from the bodies of the organization and case law, the question whether a mandatory requirement for headquarters in the authorizing state for credit market companies and other companies under FSA supervision may impact the interpretation of the effective management concept in the tie breaker rule in subsection 3 of article 4 of the OECD model agreement, has not been addressed in available case law or otherwise.

Given the fact that the purpose of the requirement for credit market companies to have their headquarters in the state in which they are authorized is only to secure that the supervision may be maintained in an efficient and adequate manner, it would seem unlikely that the issue will impact the interpretation of the place of effective management concept, where the decisive elements would rather be the actual location of the top management and the place where the key strategic decisions are made. The tie breaker rule of article 4 subsection 3 should also be applied with consideration of all circumstances and substance should have priority before form.