When is an organisation tax-free?
The condition for exemption from tax liability is that the organisation “does not have a commercial purpose”. The question of whether or not an organisation or institution has a commercial purpose will be determined following a specific overall assessment of factors such as the nature of the activity, the purpose of the activity as set out in the articles of association, the provisions in the articles of association concerning the appropriation of profits and the use of profits in the event of dissolution, the structure of the organisation and the activity that is actually carried on. A key consideration is whether the organisation is aiming to accrue financial benefits for itself or others. If the organisation has subsidiaries, the activities of the subsidiaries will also be taken into account in the assessment. If the organisation has a number of purposes, it is the main purpose that will be decisive.
However, an otherwise tax-free organisation will still be taxable for its commercial activities which do not realise its non-commercial purposes. See more about this under the section “Commercial activity”.
The organisational form of the activity will generally not be decisive. However, if the activity is carried on through a limited company, this may be an indication that the company’s purpose is commercial in nature.
If the organisation’s operation is primarily based on membership fees, donations, collections and/or voluntary efforts, this will count in favour of the organisation being considered tax-free. If individuals or enterprises are entitled to receive a proportion of the surplus or to take over assets if the organisation is wound up, it is more likely that the organisation will be considered to have a commercial purpose and thus be liable to tax.
A generally accepted “benevolent” purpose is not necessary in order to be considered a tax-free organisation. A controversial purpose may also come under the provision provided that the organisation does not have a commercial purpose.
It is the tax office which decides whether or not an organisation is to be considered tax-free. Contact the tax office for an assessment if you are in any doubt.
Examples of institutions and organisations, etc. which following a specific assessment have been considered to be tax-free organisations:
- Rehabilitation businesses
- Parent-run day care centres
- Sports events
- Institutions which safeguard the general interests of an industrial or professional group, such as trade associations, the Confederation of Norwegian Enterprise, the Norwegian Agrarian Association, the Norwegian Medical Association, etc.
- Information organisations such as Folkeuniversitetet (open university) and Bygdefolkets studieforbund (rural adult education association)
- Political organisations and party-affiliated organisations
- Private schools
- Student welfare organisations
- Ungt entreprenørskap (young entrepreneurs’ association)
- Water treatment works which are owned privately or by members
Institutions and organisations, etc. which following a specific assessment have been considered to be tax-free and charitable/benevolent:
- Hobby associations, e.g. philatelist, bridge and chess associations
- Humanitarian and social organisations, such as Norwegian Red Cross, public health organisations, etc.
- Handicraft associations with the aim of promoting good Norwegian handicrafts culturally, financially and socially.
- Sports organisations and sports club
- Internationally oriented organisations, human rights organisations and solidarity organisations
- Women’s organisations and women’s issues associations
- Cultural organisations, cultural heritage organisations and nature, outdoor recreation and environmental protection organisations, e.g. marching bands, choirs, historical groups, handicraft associations, nature and trekking associations, hunting and fishing associations, scout movements, etc.
- Norges Bygdeungdomslag (“Norwegian Rural Youth”) with the object of bringing together all young people with an interest in promoting and safeguarding rural communities and the interests of young people
- Religious organisations and philosophical organisations, religious communities and parish councils.
- Spontaneous action groups, ad hoc movements
- Local residents’ associations, neighbourhood associations and local environmental organisations, such as rural youth groups
- Other associations and groups (Freemason lodges, Rotary, Lions, etc.)
For tax-free organisations, the following types of income are tax-free:
- member subscriptions
- start-up fees
- training fees
- ticket revenues from events
- state subsidies
- simple donations and grants
- income from members’ meetings (club evenings, meetings, functions)
- sales of supporters’ clothing and equipment