Odfjell Drilling is set to recover approximately $37m after Norway's Supreme Court declined to hear an appeal by the Norwegian Tax Authority, bringing a years-long tax dispute involving former group company Odfjell Offshore to a close.

The Supreme Court's appeals committee refused to admit the tax authority's challenge to an April ruling by the Gulating Court of Appeal. That unanimous decision in favour of Odfjell Offshore is now final and legally binding. Norway's Supreme Court only admits a small share of appealed civil cases, so the appeals committee's refusal typically ends litigation without a further merits review.

The dispute centred on a tax deduction claimed after Odfjell Offshore realised its 40% stake in Deep Sea Metro in 2017. The company booked a tax loss of around NOK2.3bn, of which roughly NOK1.3bn was subsequently utilised through group contributions from other Norwegian entities within the then Odfjell Drilling group between 2017 and 2021. Group contributions allow Norwegian companies in the same tax-aligned group to transfer income and losses between them, a mechanism that has featured in several high-profile Norwegian tax disputes.

Norwegian tax authorities rejected the deduction in December 2022 under anti-avoidance rules. Odfjell Offshore initially lost its challenge when the Hordaland District Court sided with the authorities in January 2025, but that decision was overturned by the Gulating Court of Appeal in April this year. The tax authority appealed to the Supreme Court in May, and its refusal to take up the case leaves the appeals court ruling standing.

The financial benefit flows directly back to Odfjell Drilling due to arrangements put in place when Odfjell Technology was spun out of the group. Odfjell Offshore, now part of Odfjell Technology, paid NOK307m in tax and interest in February 2023 covering the 2017-2021 financial years. Odfjell Drilling funded that payment under a letter of indemnity signed in March 2022. It will now recover the NOK307m plus interest and certain costs, resulting in a total repayment of about $37m. For an offshore drilling contractor operating in a competitive rig market, the repayment represents a one-off cash inflow rather than an operational change to the business.

Odfjell Technology will also benefit separately. The company said it paid a further NOK137m in tax for 2022-2025 because the disputed losses had been disallowed. That amount, plus interest, will now be refunded, while the ruling also supports the use of another NOK70m of tax losses in 2026 and later years.

Source: Splash247