Liabilities of private individuals regarding cash purchases – Section 16-50 of the Tax Act

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Private individuals who pay for purchases for services from self-employed persons with over NOK 10,000 in cash may be held jointly liable for the seller's avoidance of tax, national insurance contributions and value added tax. 

The same applies if the delivery covers the provision of goods together with services. As a purchaser, you will be held liable even if you did not know that the person you purchased the service from had intended to avoid tax, national insurance contributions or value added tax. In order to avoid becoming jointly liable in this way, you must pay for purchases of services via a bank.

You will be jointly liable when:

  • As a private individual, you purchase the service from a self-employed person
  • The self-employed person avoids tax, national insurance contributions and value added tax
  • You pay more than NOK 10,000 in cash directly to the seller
  • The total fee for delivery of the service amounts to more than NOK 10,000.

You will avoid joint liability when:

  • You pay via a bank to the recipient's account (e.g. card, online banking, giro or similar).

What does the rule cover?

Liability for services can encompass everything from the purchase of services from tradesmen, childcare and cleaning in your home to the purchase of hairdresser and beauty treatments and car repairs outside the home. The provision also applies to the purchase of goods combined with services. This could for example be the case with the purchase of services from tradesmen or car repairs where the service also includes a share of materials or parts.

Also applies to ongoing services

The limit of NOK 10,000 does not just apply to individual purchases, but also collectively over time if a number of goods or services can be considered to constitute a combined delivery. It is therefore not possible to break down an invoice into a number of smaller invoices so that each invoice is below the limit. The statutory provision also applies to regular, ongoing services, such as cleaning or childminding. If you have someone who cleans your house each week for a few hundred kroner, you should therefore make sure that you pay them via your bank.

Pay via a bank - not in cash

To avoid becoming jointly liable, and thereby also having to pay for any tax and duty avoidance on the part of the service provider, there is only one thing that you as a purchaser need to remember: pay via your bank – not in cash!

What do you risk?

Because as purchaser you are directly and jointly and severally liable for the self-employed person's avoidance of tax and duty, tax and duty on the amount you have paid in cash may be collected from you. The new law will only lead to joint liability if the self-employed person fails to declare the purchase sum concerned for taxation or to report value added tax on it. The purchaser's liability will generally be limited to the tax and value added tax that should have been paid on the purchase sum concerned. 

Buying from the black market is expensive

Buying or offering services on the black market is illegal in Norway, regardless of whether you pay in cash or via your bank. If it can be proven that the purchaser has consciously contributed to the avoidance of tax and duties, the purchaser can be penalised for contributing to illegal undeclared labour. In serious cases, both the person offering the service and the person purchasing the service on the black market risk being caught for breaches of penal provisions in the Tax Assessment Act, the Value Added Tax Act and the Penal Code. If you are caught contributing to illegal, undeclared labour, you could be sentenced to prison in the worst case.

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