Income in private limited companies (AS)
See what counts as taxable income and the tax basis for a private limited company.
Does this apply to me?
This applies to you if you have a private limited company.
The company has its own tax liability, with its own tax return and tax assessment. When money and other assets are used privately or withdrawn from the company, it can affect the tax for both the company and you as a shareholder and/or salaried employee.
Remember, you should never mix the company's finances with your private finances or other private matters.
Different types of income
Income from ordinary operations, such as the sale of:
- goods (food, clothing, furniture, etc.)
- consulting, teaching, or health services (doctor, dentist, physiotherapist, etc.)
- tradesman services (plumber, carpenter, electrician, etc.)
If the company calculates output VAT, the income without VAT is entered in the business statement.
If the company sells goods or services to you as an employee, or to other employees, it can give a tax-free employee discount of NOK 8,000 per year to each employee. If the company gives larger discounts, the excess amount is taxable income for the company.
Taxable discount (employee discount)
The same applies to sales from the company to your close friends and family.
Renting out real property
Income from renting out real property, such as residential properties, retail spaces, office spaces, or land, is taxable income.
Other rental income
Income from renting out assets and income from subletting is taxable income. Subletting means that you rent out something you rent yourself. This applies, for example, to the renting out of premises, machinery, or parking spaces.
The income is taxable for the company if you, as the owner of the company, or your close friends and family:
- withdraw assets from the company. This also applies if the withdrawal is a gift.
- use the company's assets, such as a property. The same applies if you use the company's assets at a reduced price.
You must use the market value as a starting point to calculate the income.
If a sum has been paid, it's sales revenue for the company. The market value minus any payment is taxable income as withdrawals for the company.
Example:
If you, as the owner, pay NOK 150,000 for a car that has a sales value of NOK 200,000, the company must use NOK 200,000 as income on the sale of the car.
If the car was a depreciable fixed asset, the company can choose to enter all or part of NOK 200,000 as a reduction of the basis for depreciation instead of income.
Withdrawal of assets or services
Income from, for example, interest on bank deposits and dividends is capital income.
Income that’s not part of the business activity must also be counted as income.
Example:
A company that runs a medical practice has rental income from a cabin that the company owns. The income from the rental activity or the calculated benefit from private use is taxable income for the company.
Share dividends and share gains from investments in other private limited companies are exempt from tax for the part that falls under the exemption method.
If the company is a partner in a business assessed as a partnership (SDF), the private limited company must recognise its share of the taxable profit in the SDF as income.
If a private limited company receives distributions from an SDF, or makes a profit on the sale of shares in the SDF, this follows the exemption method.
The gain is taxable income. This applies whether the asset has been used in the company's activities or not.
Subsidies
Subsidies from the public sector to replace income or cover costs are taxable income. The grants will cover:
- loss of income (ordinary income).
- the company's costs – which are reduced by costs they cover. The rest of the subsidy is entered as income.
- the purchase of fixed assets – which reduces the company's purchase cost.
Examples of subsidies can be:
- apprenticeship subsidy, instructor subsidy
- exceptional subsidies such as interest rate subsidies, liquidity subsidies, investment subsidies
- subsidies from the Business Compensation Scheme
There are some exceptions to tax liability, such as some types of investment subsidies in rural areas.
Refunds
Remuneration from the public sector, in addition to what customers or patients pay, is taxable income. This can be, for example, refunds to a doctor, dentist, or physiotherapist for treatment.
Grants and subsidies for establishment
Grants or subsidies during the start-up phase are taxable income. This applies to subsidies from the public sector, and from private sources, for example, from a bank.
Income from percentages of sales made on behalf of others is taxable income. This could, for example, be:
- A travel agent receives a commission from an airline for airline tickets sold.
- A bookseller receives a commission from the publisher for books she has sold.
Income from licenses, patents, and royalties is taxable income, such as:
- payment from someone who has permission to use something the business owns or has developed, such as software or a trademark
- income from the rental or sale of a documented exclusive right to the company's invention
- payment from someone who uses intellectual property the company has produced, such as music, photography, or text
Foreign exchange gain is, for example, if the company receives an invoice in a foreign currency, and the value of the currency is lower when the invoice is paid. This gain is considered taxable income.
Financial income from, for example, fees and transactions is also taxable income.
The company's tax basis
The private limited company's tax basis is the net profit for tax purposes. That is, all income minus all expenses and deductions according to the Taxation Act.
Different rules in the Accounting Act and the Taxation Act
A private limited company calculates the annual profit in accordance with the rules in the Accounting Act. The Accounting Act and the Taxation Act have different ways of calculating values and determining income and deductions. These differences can be either permanent or temporary. When calculating the tax basis, you must adjust for these differences.
Adjusting from the result in the accounts to the business income for tax purposes
When you should recognise the income
All income must be included in the tax basis in the year it was earned, even if you're paid in another year.
Cash sales
If you sell goods or services, and the customer pays immediately with cash, a payment card, or a mobile payment solution (such as Vipps), it's a cash sale. You must enter the income in the accounts immediately.
Credit sales
If you sell goods or services on credit, you must enter the income in the accounts at the time the goods or services were sold. It does not matter when you get paid.
Example:
If the enterprise sells goods or performs a service in year 1, but does not receive payment until year 2, the enterprise must recognise the income and pay tax on it in year 1.
Sale of assets
Used in the company (fixed asset)
Fixed assets are assets, such as cars, machinery, or equipment, that are used in the company. A fixed asset is considered tangible when it has been purchased to have a useful life of at least three years, and it’s significant when the purchase price is above the threshold amount for purchases (acquisitions).
Amount limit
- up to and including the 2023 income year: NOK 15,000
- from and including the 2024 income year: NOK 30,000
When you sell tangible and significant fixed assets at a profit, you can choose to spread the income over several years.
You make the distribution using balance groups and declining-balance depreciation, or by using a profit and loss account.
When your company buys tangible and significant fixed assets, the company can spread the costs over several years (depreciation). In this way, the company can get a deduction from the income in the years to come, as the value of the fixed assets decreases.
You calculate the deduction that the company can receive for the costs by using declining-balance depreciation. In this case, you depreciate the fixed assets at a fixed percentage rate each year.
The different types of fixed assets are divided into different groups (balance groups). The balance groups have different depreciation rates, which indicate the percentage that you can deduct each year.
About balance groups and depreciation rates
Fixed assets in balance groups a to d are depreciated as a whole
for each group (grouping/aggregate balance). This means that there are
many fixed assets in the same balance group. The total sum
for the entire balance group is the basis for depreciation.
Fixed assets in balance groups e to i are entered on
separate balances for each fixed asset (individual/individual balance). For example,
if the company has several buildings, each individual building will have its own balance.
If the company has several buildings, there will be several balance groups h.
Fixed, technical installations that are part of group j are depreciated
on a summary balance for each building.
The company uses a profit and loss account to keep track of the distribution of income and deductions for the years ahead.
Both gains and losses must be recorded in a profit and loss account. Each sale should be recorded as a positive or negative amount, and the account has a balance that is the sum of all the amounts.
The company can only have one profit and loss account, except if the company conducts several different types of business activity, for example, if the company conducts business as a consultant and at the same time engages in agriculture.
When the company sells fixed assets that have previously been depreciated, the company can choose to recognise all or part of the sale price as income in the year of sale. The part that may not be recognised as income is recognised against the remaining depreciated value.
Recognising income for different fixed assets
When you sell or withdraw fixed assets that are depreciated
in balance groups a, c, d, or j, the company can choose to recognise the sales price
or the sales value in whole or in part in the year of sale. The depreciation of
the balance should continue as before.
The part of the sales price or sales value that the company does not
recognise in the year of sale shall be reduced (written down) on the balance of
the fixed asset.
If the balance is negative at the end of the income year for balance groups
a, c, d, and j, the company must recognise as income at least as large a share as it
could have depreciated the fixed asset by (corresponding to the group's depreciation rate).
Example:
Balance group d – Passenger cars – 20 percent (collective balance)
Passenger cars have an opening balance in year 1 of NOK 250,000 One of the passenger cars is sold in year 1 for NOK 700,000 Negative balance in year 1 NOK - 450,000 Total recognised income in year 1 (20% of 450,000) NOK 90,000 Negative balance as at 31 December – transferred to year 2 NOK -360,000
- up to and including the income year 2023: NOK 15,000
- from and including the income year 2024: NOK 30,000
If the negative balance at the end of the year is less than the amount limit for purchases, the entire amount must be recognised as income.
When you sell or withdraw fixed assets that are depreciated in balance groups e to i, you must calculate the gain and loss of the sale or withdrawal. This applies to individual fixed assets with larger values.
If the enterprise has a gain from the sale or withdrawal of major fixed assets in balance groups e to i, it’s taxable income. If the company sells or withdraws fixed assets at a loss, it can claim a deduction.
You can enter the entire gain as income in the year of sale, or you can choose to enter the income in the company’s profit and loss account so that you spread the gain over several years.
The enterprise uses a profit and loss account to keep track of the distribution of income and deductions for the years ahead.
Both gains and losses must be recorded in a profit and loss account. Each sale should be recorded as a positive or negative amount, and the account has a balance that is the sum of all the amounts.
You can only have one profit and loss account in your business, except if you have several different types of business activity, for example, if you're an independent consultant and also engage in agriculture.
If the balance in the profit and loss account is positive (positive balance), the enterprise must enter at least 20 percent of the amount as income. If the balance in the profit and loss account is negative (negative balance), the enterprise can claim a deduction for a maximum of 20 percent of the amount.
Since the amounts are calculated with percentages, both income and deductions will be largest in the first year, before gradually decreasing in the years to come.
If the balance is below the threshold amount for purchases, the entire amount must be entered as income or deductions for that income year.
- up to and including the income year 2023: NOK 15,000
- from and including the income year 2024: NOK 30,000
Example:
The enterprise sells a building in balance group h. The value
of the building was NOK 700,000 (depreciated value) and
the building was sold for NOK 1,000,000. The enterprise enters the gain of NOK 300,000 in a profit and loss account.
The gain to be recognised as income in the year of sale is NOK 60,000 (20 percent of NOK 300,000). For year 2, there is NOK 240,000 left in the account (NOK 300,000 – 60,000), and the enterprise recognises NOK 48,000 as income in year 2 (20 percent of NOK 240,000).
When the balance falls below the purchase limit, the remaining amount must be recognised as income.
Not used in the company
If you sell an asset that’s not part of the company's business, you must recognise the gain in the year of sale.
Deficit
If your company has a deficit one year, you can deduct this deficit in future years – when your company makes a profit. This is called a loss to carry forward. Note that you must use it as soon as you make a profit.
Example:
A company has a deficit in year 1 of NOK 300,000. In year 2, the profit is NOK 200,000. The profit in year 3 is NOK 250,000.
In year 1, the tax basis is NOK 0, and the loss to carry forward will be NOK 300,000.
In year 2, NOK 200,000 of the loss to carry forward is used. The tax basis will be NOK 0, and the remaining loss to carry forward will be NOK 100,000.
In year 3, the last NOK 100,000 of the loss to carry forward is used. The tax basis will be NOK 150,000. The loss to carry forward will be NOK 0.
Supporting documentation
You must keep your vouchers and other supporting documents, but you do not have to include any attachments in the tax return. If the Tax Administration needs more information, we’ll contact you.