How do I find out if the company or entity is considered to be active or passive?

The company or entity is considered to be active if one of the following conditions is met:

  • Less than 50 per cent of the enterprise's gross income in the previous income year consisted of passive income and less than 50 per cent of the enterprise's assets in the previous income year consisted of passive assets;
  • The company's shares are traded regularly via an established securities market, or the company is an associated unit of such a company;
  • It is a government body;
  • The enterprise provides financial services to one or more subsidiaries that do not operate as a financial institution, except where the object is to acquire or finance companies and subsequently maintain ownership interests for investment purposes;
  • The enterprise is in a start-up phase and is investing capital in assets for the first 24 months to operate another enterprise other than a financial institution;
  • The enterprise is in the process of being wound-up or reorganising its assets when it has not operated as a financial institution for the past five years and will not operate as such an institution in the future;
  • The enterprise primarily provides financing or insurance transactions with or for associated entities that are not financial institutions, and provides non-financial or insurance services with respect to any entity that is not an associated entity, provided that the group comprising all such associated entities primarily does not operate as a financial institution;
  • The legal person is organised as a foundation (or similar person) that is operated purely for religious, charitable, scientific, artistic, cultural or educational purposes; and
    • The foundation is regulated and exempt from income tax in accordance with legislation in the country in which it is resident;
    • Legislation or deeds of foundation prevent withdrawals being made from the enterprise for any other purpose; and
    • In the event of liquidation, all assets will fall to another charitable organisation or public authority.

 

Passive income/assets are considered to be:

  • Dividends and other similar payments;
  • Interest income;
  • Rental income and royalties, with the exception of rental income and royalties from active enterprises wholly or partially operated by the enterprise's employees;
  • Annuities;
  • Net gains made in connection with the sale or exchange of financial instruments and other financial products giving rise to passive income corresponding to the income described above;
  • Net gains from transactions in financial instruments and other financial products (including futures, forwards, options and other similar transactions);
  • Net currency gains;
  • Net income from financial instruments that result in the payment of amounts from one party to another at given intervals, calculated on the basis of a specific index at a nominal value in exchange for a specified fee or a pledge to pay a corresponding amount (swap);
  • Amounts received from cash value insurance contracts.

The value of the assets must be assessed as the market value or book value in accordance with the enterprise's balance sheet.

 

Here are two examples:

Anne is a professional photographer and her enterprise is registered with the Brønnøysund Register Centre as Annes Foto AS. She owns all the shares herself. Last year, 70% of Annes Foto AS’ income originated from photography, and 30% was derived from interest and returns from bank deposits and shares, which collectively amounted to 25% of Annes Foto AS' assets. Annes Foto AS is considered to be an active company.

Lars is an ophthalmologist and his enterprise is registered with the Brønnøysund Register Centre as Øyelege AS.

He owns all the shares himself. Lars is preparing to retire and has cut back on the number of hours he works. Over 60% of Øyelege AS' income last year consisted of interest and other financial income, while 40% of the income was derived from consultations. Øyelege AS is considered to be a passive company, which means that financial institutions must record where Lars is resident for tax purposes, and report this information together with information concerning accounts held by Øyelege AS to the Norwegian Tax Administration annually.