Example: Flatbread production

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Ole lives on a farm and has always enjoyed baking. He wants to set up a small flatbread bakery in the barn, which he hopes will become an income-generating enterprise. Here, you can see how he manages his expenses and income during the start-up years.

Ole refurnishes the barn and purchases the necessary equipment. To establish a customer base, he contacts the “Farmer's market” cooperative. He is encouraged to sell his products on market days, and when he shows off his flatbread at the market, they are in great demand.

During the first year, his income is good, even though he was only in full production during the final two months of the year. However, his substantial set-up costs meant that he made a significant deficit during the year. Although he expects production and sales to be considerably higher during the following year, he believes that his venture should not yet be considered taxable activity.
  
He therefore decides to document this year's income and costs by completing form RF-1298 Starting a business - Summary of vouchers and retain all vouchers. If his flatbread production proves to generate a profit within five years, he will (with the approval of the tax office) be able to have this year approved as the start-up year and have his tax assessment amended.
 

Year 1: Start of flatbread production

Date  

Voucher

What

Income 

Cost

 

1

Purchase of oven

 

25,000

 

2

Purchase of materials for barn

 

10,000

 

3

Purchase of miscellaneous equipment

 

10,000 

 

4

Ingredients 

 

6,000

 

5

Miscellaneous sales

30,000

 

 

6

Electricity, etc.

 

10,000

Year 2

Ole has an accident and is on sick leave for much of the year. He only manages very limited production and generates a small profit, but he does not give up and he hopes that next year will fulfil his expectations.

After two years of running his business, he realises that the condition that the enterprise is “likely to generate a profit over time” will probably not be met. He does not submit an income statement, but he retains his vouchers and fills in form RF-1298 for this year as well.

Date  

Voucher

What

Income 

Cost

 

1

Purchase of electricity, etc. 

 

5,000

 

2

Purchase of ingredients  

 

7,000

 

3

Miscellaneous sales 

 30,000

 

 

4

Marketing  

 

5,000

Year 3
This year sees growth in both production and sales, and Ole realises that the business is likely to generate a substantial profit. By the year-end, the business has generated gross income of NOK 250,000 and incurred NOK 75,000 in total costs.

Ole realises that he meets the conditions for being self-employed. He submits an income statement and transfers the result from the income statement to his tax return. Together with the income statement, he submits form RF-1298 “Starting a business - summary of vouchers” with an overview of vouchers for each of the two previous start-up years (as shown above).

The tax office will now firstly assess whether Ole meets the conditions for running a taxable activity. If so, they will then assess when the activity actually started, and whether there are any grounds for amending the tax assessment for the two start-up years.

If the conditions are met, Ole's tax assessment will be amended for the start-up years that are approved, with the changes to taxable income which the tax office deems relevant following an assessment of the submitted voucher summaries and any dialogue with Ole.

 

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