FORMS OF BUSINESS ORGANISATION IN NORWAY
[Infographics] [TYPES OF BUSINESS ORGANISATION IN NORWAY:
sole proprietorship (ENK - Enkeltpersonforetak),
joint stock company (AS - Aksjeselskap, ASA - Allmennaksjeselskap - limited liability company, DA - Delt Ansvar / ANS - Ansvarlig Selskap - general partnership),
subsidiary of a foreign company (NUF - Norskregistrert utenlandsk foretak)].
Enkeltpersonforetak is the most common form of business in Norway - it is chosen by new entrepreneurs who cannot predict the company's profits and have little funds. The owner is liable for any liabilities of the company with all his/her assets - the owner's assets are also the assets of the company.
Partnerships are another popular form of business in Norway - especially AS (Aksjeselskap). A limitation of this type of company is the need for a financial contribution - the share capital must be a minimum of NOK 30 000, but this can be used to set up the company and start the business. The owner is not liable for the company's liabilities - any liabilities are collected up to the amount of the share capital.
NUF (Norskregistrert utenlandsk foretak) is a subsidiary of a foreign company - the company is based in Poland, but operates in Norway. Financial liability is incurred in both countries, so the extent of tax liability in Norway (double taxation agreement) should be carefully analysed, which depends on the nature of the activity and its duration.
COMPANY TAX IN NORWAY
In 2021, there have been several changes to the Norwegian tax rules - personal and company income tax is still 22%.
The amount of tax may increase depending on what income has been earned - the actual tax payable is calculated using the tax thresholds set by the authority each year, which indicate how excess income is taxed.
Tax thresholds for 2021:
- first (184 800 - 260 100 NOK - taxation on the excess is 1.7%),
- second (260 100 - 651 250 NOK - taxation of the excess is 4%),
- third (651 250 - 1 021 550 NOK - taxation of surplus is 13.2%),
- fourth (more than NOK 1 021 550 - taxation of surplus is 16.2%).
[Infographics] NORWAY'S TAX PROGRESSES FOR 2020.
I THRESHOLD (+1.9%) 180 800 NOK
II THRESHOLD (+4.2%) 254 500 NOK
III THRESHOLD (+13.2%) 639 750 NOK
IV THRESHOLD (+16.2%) 999 550 NOK]
The amount of tax due must be paid within the prescribed deadlines - depending on the type of business.
Owners of sole proprietorships in Norway should pay tax in advance in four instalments:
- 15 March,
- 15 June,
- 15 September,
- 15 December.
[Infographic] [INCOME TAX ADVANCE PAYMENTS IN A ONE MAN COMPANY MUST BE PAID BY:
An entrepreneur in Norway at the beginning of the business or at the beginning of the year declares through Altinn.no
the company's expected profit for the next year, the so-called overskudd (form RF-1102). In subsequent years, the authority calculates advance income tax payments based on the company's profit in past years
If the actual income was higher than that declared, the amount due must be paid up - by 31 May of the following year - otherwise interest will be added to the arrears.
Owners of AS (Aksjeselskap) companies in Norway should pay tax in two instalments:
An AS company receives advance income tax payments calculated by the office (based on the company's income from previous years) in January of the following tax year.
VAT is a tax on goods and services - companies whose income has exceeded NOK 50,000 in a consecutive 12-month period are obliged to register for VAT in Norway.
VAT rates in Norway:
- 25% (standard rate),
- 15% (reduced rate: food, beverages),
- 12% (low rate: TV, radio, cinema).
[Infographics] [VAT DECLARATION
The VAT return must be submitted every two months - electronically via Altinn.no - by the deadlines:
10 April (for January, February),
10 June (for March, April),
31 August (for May, June),
10 October (for July, August)
10 December (for September, October),
10 February (for November, December)].
Invoices in Norway
It is worth remembering to keep your invoices correct, because if a customer does not pay for goods or services and there is an error on the invoice, the debt collection company may refuse to help you collect the debt.
[Infographic] [ON THE REVENUE INVOICE - ISSUED TO CUSTOMERS FOR GOODS / SERVICES - INCLUDE:
the invoice number (at the top of the document, numbering is continuous from year to year),
the company organisation number (nine-digit number - VAT payers add the abbreviation MVA at the end),
date of issue of the invoice (to qualify the revenue for the period),
invoice payment date (important for cash flow management),
details of the seller (company name and address),
buyer details (name, surname, address),
bank account number (necessary to make the transfer for the service, goods),
description of the service / goods (detailed),
amount to be paid (for the goods / service)].
Revenue invoices should be posted to the specified accounts:
- 25% VAT on sales - 2700 (Utgående merverdiavgift, høy sats,
- clearing of accounts with customers - 1500 (Kundefordringer),
- revenue from sales subject to VAT - 3000 (Salgsinntekt varer, avgiftspliktig).
BUSINESS COSTS IN NORWAY
When running a business you have to reckon with costs, which vary depending on the type of business and the scope of services provided. It is worth remembering the need to prove the reasonableness of the costs incurred.
[Infographics] [FIXED COSTS ARE:
costs for renting premises (the premises should be declared as a place of business; if a dwelling is used for business purposes, a maximum of NOK 1700 can be deducted - without having invoices or a proportional value - depending on the area of the dwelling and the area used for business),
hiring employees (employees place a significant financial burden on the company - the employer
has many obligations towards them, so the profitability of hiring an employee must be recalculated),
depreciation and expenses related to the use of a car (cars are depreciated for several years in a row, all expenses related to the use of a car for business purposes are a cost for the company),
company telephone subscription (for a sole proprietorship, telephone deductions are partial - an amount of NOK 4392 is deducted from costs)."].
[Infographic] VARIABLE COSTS ARE:
materials / goods (necessary to generate revenue),
tools / equipment (purchases over NOK 15,000 are accounted for several years in a row - depreciation rate depends on the type of equipment),
travel expenses, per diems (expenses should be documented, working more than twelve hours a day means that NOK 89 per day can be deducted),
entertainment costs (in order that the office cannot question the deduction, it must be clearly stated on the bill for what purpose the meeting was held - VAT cannot be deducted on such costs),
advertising (business cards, internet or newspaper advertisements, flyers),
office supplies (computers, scanners, printers),
training, licensing and authorisation costs (training in the services provided, purchase of professional literature, fees for trade cards - Byggekort, Renholdskort].
In order to be able to calculate the costs that a company has incurred in Norway, cost invoices, i.e. invoices issued by suppliers and vendors, must be used - it is necessary to scrupulously check the correctness of the data, in particular the amounts (the amount of VAT charged and the gross amount - the sum of the net amount and VAT) and the company details of the entrepreneur. The invoice should clearly indicate the company of the buyer.
When accounting for an expense invoice, use:
- the account for settlements with suppliers from Norway - 2400 (Leverandørgjeld, innland),
- the cost account by type (depending on what the cost invoice relates to),
- account 2710 - Inngående merverdiavgift, høy sats (25% VAT on purchases).
Having a company car can sometimes be essential for running a business in Norway, but in addition to the possibility of deductions, it also means additional responsibilities. Expenses related to the use of a company car are very often a basic cost of running a business, and thus reduce the tax base.
There are two ways to recognise the car as a business expense:
- use the Kjørebok form (when a private car is used for business purposes)
- enter the car in the fixed asset register.
[Infographics] [FILL IN THE KJØREBOK FORM TO ENTER:
the date and purpose of the journey,
the number of kilometres travelled (the number of kilometres is calculated by Elektronisk Kjørebok), which is then multiplied by the corresponding rate (for 2017: NOK 3.5 per kilometre - when the car is used by the company owner, NOK 4.1 per kilometre - when the car is used by a company employee),
It is not necessary to collect invoices and receipts related to the use of the car - only the vehicle log book needs to be filled in.]
The choice of this form is advantageous when:
- the company uses the car infrequently (6,000 km per year can be deducted),
- the company uses a private car (the amounts spent on the use of the car have an impact on the tax benefits),
- the car is borrowed,
- the car is about to be sold (the sale of a private car is not company income).
Entering the car in the fixed asset register means that the costs associated with the use of the car should be allocated in the accounting software:
- repairs: 7020 (Vedlikehold) etc.
Attachments related to expenses and depreciation have to be attached to the tax return, which will reduce the tax.
The entry in the fixed asset register involves keeping receipts and invoices for expenses related to the use of the car.
Entering a car in the fixed asset register is beneficial when:
- the company uses the car frequently,
- the car was bought on company credit or is leased,
- the car is of considerable value and will not be sold in the near future (the sale of a company car constitutes company income).
The amount of the annual car payment (Årsavgift
) depends on the type of car.
LAWS GOVERNING ACCOUNTING IN NORWAY
According to the Acts, transactions carried out by every Norwegian company should be recorded (e.g. in an accounting programme) and the related documents should be kept in accordance with current legislation - up to several years.
An annual tax return must be submitted each accounting year - the laws also regulate the profit and loss account, balance sheet and valuation. In Norway, the tax return should be submitted by 31 May of the following year - the company's income information (Skattemelding) is submitted via Altinn.no
(it is necessary to have MinID codes), and the office calculates the tax due (to be refunded or paid) within a few months - Skatteoppgjør.
You can do your company's bookkeeping in Norway yourself - there is no obligation to employ an accountant - but you must take careful care to meet deadlines and ensure that your calculations are correct, as errors in your accounts and failure to meet deadlines will result in frequent audits from the authorities.
Some companies in Norway are obliged to have their annual reports externally audited - a chartered accountant checks the balance sheet and annual reports of the business. Revisorloven is the Act on Auditors, which regulates the types of companies that are obliged to have this type of audit.
Failure to meet filing deadlines means that the Norwegian authority will charge a penalty - the penalty imposed (for each title and deadline) cannot, however, exceed NOK 52,450.
Penalties for failure to meet the deadline:
- VAT return: fine of NOK 524.50 for each day of delay,
- report for employees A01: fine of NOK 104.90 per employee for each day of delay,
- shareholder report: fine of NOK 2,098.00 for each day of delay,
- other statements (for example, Skattemelding): fine of NOK 524.50 for each day of delay.
The altinn.no portal
The portal Altinn.no
is Norway's electronic platform for submitting various types of applications, settlements, corrections and appeals, which can be used to submit documents relating to tax returns, VAT settlements, advance income tax payments or social security settlements.
In order to log in to Altinn
, you must have individual MinID codes - codes consisting of a set of five-digit passwords that can only be given to people with:
- personal number (fødselsnummer)
- a temporary number (D-nummer).
After registering on the website, the taxpayer receives the codes necessary to use the portal by post.
ENK (SOLE TRADER) ACCOUNTING
One of the advantages of running a sole trader business is that accounting is relatively uncomplicated - it is important to know the accounting laws and to book transactions correctly.
[Infographic] [ENK ACCOUNTING ACCOUNTS
2050 Annen egenkapita (equity)
2060 Privatuttak (private expenditure)
2070 Forskuddsskatt (advance payments of income tax)]
An entrepreneur in Norway should pay advances on income tax in four instalments (the amount of advances is determined by the authority on the basis of the income declaration) - the advances are included in account 2070 (Forskuddsskatt), the balance of which at the end of the year must correspond to the advances listed on the Skattemelding.
In contrast to AS companies, Enkeltpersonforetak allows company funds to be used for private purposes (transfers and cash withdrawals) - the account 2060 (Privatuttak) is used for this purpose. This account is also helpful if expense invoices go missing - the statement lists all payments from the company account.
At the close of the accounting year, the account balances (2060 and 2070) should equal zero.
The 2050 account (Annen egenkapital) calculates the equity, or Egenkapital, which must be shown on the annual tax return (Annex RF-1175 Næringsoppgave 1 must be attached).
A sole proprietorship is subject to audit if it meets certain conditions:
- turnover exceeds NOK 5 000,000,
- the balance sheet total is greater than NOK 20 000 000 or it has more than 20 employees (full-time).
Bookkeeping of a foreign company's subsidiary in Norway (based in Poland but operating in Norway) is quite complicated - it requires knowledge of accounting and import regulations. In addition, it very often involves the need for a representative to deal with the company's tax and other obligations.
A tax representative can be a company or a person who has a permanent address and lives or works in Norway.
Branches of foreign companies should submit:
- Skattemelding (by 31 May),
- Årsregnskap (by 31 July).
NUF has an audit obligation when the company's turnover exceeds NOK 5 000 000 - in which case the auditor should check the company's balance sheet and annual reports.
NUF → TURNOVER > NOK 5 000 000 → AUDIT
Note that there is no Privatuttak, or private expenditure account - 2060 - in the NUF chart of accounts.
AS COMPANY ACCOUNTING
Company accounting for a public limited company in Norway is very complicated and requires hiring a professional. A considerable disadvantage is the lack of free use of company funds - there is no private expense account - 2060 (Privatuttak) in the chart of accounts, and every expense and operation in the company's account must be registered and documented - shareholders cannot freely withdraw company funds.
Shareholders in the company are remunerated on the basis of:
- employment (as employees),
- shareholder remuneration (styrehonorar),
[Infographic] [REMUNERATION OF SHAREHOLDERS IN COMPANY AS
AS companies pay income tax in two equal instalments in the year following the tax year - the office calculates advances based on previous years' income.
Every AS company is subject to an audit obligation, but can be exempted from it if it meets certain conditions:
- there is an entry in the incorporation documents that the auditor is waived,
- the company's turnover does not exceed NOK 6,000,000,
- the company's balance sheet total does not exceed NOK 23,000,000,
- there are less than ten employees in the company (full time).
[Infographic] [COMPANY AS - AUDIT RESIGNATION
Turnover < NOK 6 000 000
Balance sheet total < NOK 23 000 000
Employees (full-time) < 10]
AS companies should submit certain documents:
- Aksjonærregisteroppgaven (by 31 January),
- Skattemelding for aksjeselskap (by 31 May),
- Årsregnskap (by 31 July).
Annex RF-1167 Næringsoppgave 2 must be attached to the tax return.
ACCOUNTING RULES IN NORWAY
It is good practice to set up a company bank account - bedriftskonto - and to separate private and business transactions. In order to set up a company account, it is necessary to present proof of business registration and a valid passport of the business owner to the bank.
A chart of accounts is necessary in order to be able to demonstrate to the authorities the economic events that have occurred in the company - the standard chart of accounts is NS4102, which indicates the scheme of qualification of a given economic event (it consists of several pages).
Accounting accounts consist of four digits - the first digit qualifies an account to a specific group of accounts:
- 1000 (Eiendeler) - company assets: all fixed assets,
- 2000 (Gjeld og Egenkapital) - debt and equity: accounts with suppliers, banks, authorities, etc,
- 3000 (Inntekter) - revenue: company revenue (net amounts from revenue invoices),
- 4000 (Varekjøp) - purchase: breakdown of purchases of materials, goods, domestic, foreign etc,
- 5000 (Lønnsutgifter) - costs related to employees: salaries, allowances, ferienpenger, etc.,,
- 6000 (Annen driftskostnad) - operating costs: depreciation, purchase of tools, work clothes, office supplies, etc., etc,
- 7000 (Annen driftskostnad) - operating costs: advertising costs, business trips, etc.,,
- 8000 (Finansinntekter og - kostnader, periodens resultat) - financial income and expenses: interest on loans, financial result for the year, etc.
[Infographics] [ACCOUNTING ACCOUNTS
1000 (Eiendeler) - company assets
2000 (Gjeld og Egenkapital) - debt, equity
3000 (Inntekter) - revenue
4000 (Varekjøp) - purchase
5000 (Lønnsutgifter) - employees
6000 (Annen driftskostnad) - operating costs I
7000 (Annen driftskostnad) - operating costs II
8000 (Finansinntekter og kostnader, periodens resultat) - financial income and expenses]
It is important to correctly match the business event to the relevant accounting account, as at the end of the accounting year the account balances are entered in the annual tax return.
Detailed information on the obligation of external audit of annual reports can be found in the Norwegian Act on Auditors - Revisorloven
In principle, all AS companies in Norway are subject to the audit obligation, but a company may be exempted from the obligation if it meets certain conditions:
- there is an entry in the founding documents that the auditor is waived,
- the company's turnover does not exceed NOK 6 000,000,
- the company's balance sheet total exceeds NOK 23 000,000,
- there are less than ten employees in the company (full time).
[Infographic] [COMPANY AS - RESIGNATION FROM AUDITING
Turnover < NOK 6 000 000
Balance sheet total < NOK 23 000 000
Employees (full-time) < 10]
The audit obligation does not apply to sole proprietorships in Norway, however, if a company has a turnover of more than NOK 5 000 000 and a balance sheet total of more than NOK 20 000 000 or has more than 20 employees (full-time) - an audit obligation for a sole proprietorship (ENK) arises.
The audit obligation applies to subsidiaries of foreign companies that pay income tax in Norway and have a turnover of more than NOK 5 000 000.
NUF → TURNOVER > NOK 5 000 000 → AUDIT
Hiring employees is sometimes necessary, but it is important to bear in mind the associated responsibilities and costs - fixed and variable.
Fixed costs amount to a total of 26.3% on the gross salary amount:
- employment levy (14.1% on gross salary),
- pension insurance (2% on gross salary),
- ferienpenger (10.2% on gross salary - employees up to 60 years of age, 12.5% on gross salary - employees over 60 years of age).
Variable costs are approximately 5% of gross salary, among others:
- sick pay,
- employee training,
- working clothes.
[Infographic] [EMPLOYEE IN THE COMPANY
An entrepreneur who intends to employ an employee should:
- make an entry in the Aa- register et (on the Samordnet registermelding del 1(BR-1010B), mark JA under 3.3 and send it to BRØNNØYSUNDREGISTRENE),
- open a bank account (Skattetrekkskonto) that will be used to secure advance income tax payments for the employee,
- sign a contract with the employee (in duplicate on paper - this may be in two languages; the rates in the contract may not be less than those set by the NAV office - it is worth monitoring these rates as they change every year),
- notify the employee to NAV (notification is made on form A-melding, this must be done by Friday of the week following the signing of the contract),
- pay compulsory pension insurance (OTP - Obligatorisk tjenestepensjon: for each employee with at least 3/4 time employment; this contribution is a minimum of 2% of the salary and is an employer expense - it is not deducted from the employee's paycheck),
- the employee is obliged to provide a Skattekort (otherwise a 50% advance on income tax may be charged) and a personal and bank account number (Norwegian law does not provide for payment in cash).
[Infographic] [EMPLOYEE EMPLOYMENT IN COMPANY
entry in AA-REGISTER ET
declaration to NAV
In addition, each employer is obliged to provide employees with the necessary training - depending on the nature and scope of the business - health and safety training, work clothing and identification badges - Byggekort
Documents related to the employment of employees:
- A-melding (the company is obliged to inform the authority of the employment status and payments - this must be done by the 5th of the following month),
- Lønnslipp (document showing gross salary, net salary and advance income tax),
- Sammenstillingsoppgave (information on income and income tax advances given to employees by 31 January of the following year),
- Timeliste (a printout showing the employee's working hours for the month - wages are paid on this basis if the employer accounts for working hours).
The employment of employees entails the payment of the indicated taxes:
- Arbeidsgiveravgift (employer's tax - the rate depends on zone membership),
- Forskuddstrekk (advance payment of the employee's income tax).
The employer is obliged to pay employment taxes by:
- by 15 March (for January, February),
- by 15 May (for March, April),
- by 15 July (for May, June),
- by 15 September (for July, August),
- by 15 November (for September, October),
- by 15 January (for November, December).
The foreign employee should have a personal number and a Skattekort - once the contract is signed, the employee should submit a corresponding application to the tax office. If the person is from a country outside the European Economic Area (EEA) he/she should have a valid residence permit in Norway.
SAFETY AT WORK
Occupational safety is particularly important when a company has employees - it is the entrepreneur's responsibility to ensure proper working conditions. Proper attention to safety is ensured by completing basic health and safety training (HMS training).
According to the Norwegian Labour Code, it is mandatory to complete a health and safety course:
- the owner of the company (when he/she employs at least one employee),
- the owner of the company (when subcontracting tasks),
- the manager (daglig leder - responsible for the safety and health of employees).
One-person companies are exempt from the obligation to conduct a health and safety course.
Some companies, due to the nature of the work, require special industry cards (badges) established in Norway - this includes cleaning services or construction work.
Norwegian law regulates 168 professions (list of professions) - people setting up a business that requires a permit should have a certificate proving the relevant qualifications (this applies to the medical industry, lawyers, accountants, drivers and massage therapists, among others).
The only institution that has the right to issue a Byggekort badge (for employees of construction companies) or Renholdskort (for employees of authorised cleaning companies) is Idemia Norway AS (in previous years it was Oberthur Technologies) (www.byggekort.no, www.renholdskort.no). The badges are valid for two years from the date of issue, and the cost of making the badges is always borne by the employer - a change of employment means that a new badge must be made.
[Infographics] [EVERY ID badge SHOULD HAVE THIS INFORMATION ON IT:
organisation number (organisasjonsnummer)
details of the owner of the badge (name, surname, date of birth, sex, signature)
data of the issuing person (name, surname, address)]
Deadlines for submission of industry documents:
- Renholdskort (immediately after registration of the company - owner, immediately after employment - employee),
- Byggekort (immediately after registration of the company - owner, immediately after employment - employee).
Companies dealing with foodstuffs, animals or cosmetics should have a permit from Mattilsynet
IMPORT AND EXPORT
All Norwegian and foreign companies and sole proprietorships that resell goods or have at least five employees are required to register with Foretaksregisteret - the Norwegian Register of Enterprises.
The exchange of goods between Poland and Norway is possible due to Norway's membership of the EEA, the European Economic Area.
For companies listed in the VAT register, the import of goods and services to Norway is exempt from VAT - however, the obligation to report goods and services from abroad in the tax return remains.
Specific goods are assigned customs rates and tariffs and are exempt from these duties and customs. The duty rates are set by the Norwegian Customs Service (www.toll.no).
The SAD contains all information about the goods - you must present it at the Norwegian border. The SAD is prepared by customs agencies that have up-to-date information on customs procedures and applicable fees. The SAD should be accompanied by an invoice for the purchase of the goods, because if an invoice with VAT is issued, the trader must send a confirmation of export of the goods and ask for the invoice to be corrected.
Sometimes customs procedures are completed by shipping companies and the buyer has access to a copy of the customs declaration through the portal Altinn.no
Imported goods should be credited to account 4001 (purchase of goods from abroad). Purchases below NOK 350 (including insurance and transport) are not subject to import declaration.
The MVA tax on imports is 25 per cent and 15 per cent - the following are not taxable:
- electric cars,
- ships and their parts,
- electric windmills (energy sources), etc.
It is possible to export goods abroad when the export requirements are met:
- one has an invoice,
- the goods are declared on the export declaration,
- you have an export certificate for the goods (attest for utførsel).
The export of services is exempt from VAT when the service is wholly intended for consumption abroad - otherwise the part of the service intended for use in Norway should be taxed accordingly.
Exchangeable services that are delivered electronically are also exempt from VAT - this includes advertising services, consulting services or legal services.
[Infographics] [Depending on the type of goods, their export may require the following authorisations:
food / food supplements (www.mattilsynet.no)
Sales of exported goods or services are recorded in account 3100.
COMPANY RECORD KEEPING
The retention time for documents related to the business conducted in Norway depends on their type and is 3.5 or 5 years from the closing date of the relevant accounting year.
Company documents should be stored in an archive located directly in the company or in a storage company (the storage entity is obliged to make the documents available in case of, for example, an inspection from the authorities).
At the end of the company's bankruptcy procedure, the trustee in charge of the case decides what should be done with the documents - it is the trustee who decides whether the documents should be destroyed or given to authorised persons.
Keeping documents in designated binders is helpful in maintaining clarity - it is worth creating special tabs, e.g. account statements, cost invoices or income invoices - in the event of an audit or the need to check information, such a solution will make the whole process much easier and faster. When hiring employees, you can separate a binder for employee documents - sick leave, employment contracts, etc.
Documentation is divided into:
[Infographics] [COMPANY DOCUMENTATION
register of accounts
correspondence concerning accounts
Primary documentation - i.e., inter alia, annual declarations, cost documents, register of accounts, VAT declarations, revenue documents, personnel documents, balance sheets, letters from the auditor, fixed asset specifications, accounts payable specifications - should be retained for 5 years from the closing of the accounting year.
Secondary documentation, i.e. any contracts, stock records, correspondence relating to accounting - should be kept for 3.5 years from the closing of the accounting year.
Depending on the type of business, documents such as customs declarations, loan documentation, accounting records should be kept for between 5 and 15 years.