For private limited companies: How to correct the balance in the Business Tax Return

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Private limited companies cannot submit a Business Tax Return if the balance sheet is not reconciled. It is often the equity that is wrong. For recently started businesses, establishment expenses, share capital and other contributions must be double-checked. The Norwegian Tax Administration assumes that the accounts have been prepared and reconciled when you start the reporting process. If the figures contain errors, we will not be able to calculate the correct amount of tax for your enterprise.

What is a balance sheet? 

A balance sheet is a summary of assets, equity and liabilities. When the sum of assets equals the sum of equity and liabilities, the accounts are considered to be reconciled.  The Accounting Act states that private limited companies must include such a summary in their accounts.

Ten things to check if your balance sheet is not reconciled

  1. Check all the amounts that you have entered, make sure that they correspond with the accounts and that you have written the totals in the correct fields.
  2. Check that you have entered correct values as of the date 31 December 2016 (not a different date), e.g. for bank deposits and liabilities.
  3. Check the equity* - have you entered the profit or loss for the year in this field, and have you included the value of equity as of 01.01?
  4. If you have recorded a profit, include amounts which have been set aside as a provision for dividends and payable tax as liabilities in the balance sheet.
  5. If your customers have not paid all the invoices that you sent out between 1 January 2016 and 31 December 2016enter the amount as an “outstanding receivable” in the balance sheet.
  6. If you have traded goods , you should have prepared an inventory and entered the correct value for stock. You should also check that you have calculated the cost of goods correctly (stock as of 1 January 2016, plus goods purchased, minus the value of goods as of 31 December 2016.).
  7. If you have made purchases which had not been paid for as of 31 December 2016, check that these have been entered as “trade creditors”.
  8. Is there a discrepancy between the accounting and fiscal values? Check that it is the accounting values that are specified in the balance sheet.
  9. If you required to pay VAT, check that all figures have been entered exclusive of VAT.
  10. Was the company established during 2016?
    If so, check that you have included establishment expenses in the equity reconciliation* and not under “office expenses”.
    Cash contributions of NOK 30,000 or more must be entered in the equity reconciliation as share capital.

*What is equity?

Equity is the difference between assets and liabilities. Equity consists of share capital and money which the business has earned or lost. A private limited company must have share capital of at least NOK 30,000 in order to start trading. On the day you establish the company, the equity will be equal to the share capital. If you have paid in more to the company than the share capital, add this amount to the equity. This amount is called the ‘premium’.

*What are establishment expenses?

The amount you paid to the Brønnøysund Register Centre in connection with the establishment of the company and any invoices from your auditor for establishment documents.

*What is an equity reconciliation?

A reconciliation is a calculation of the equity you have set up in the balance sheet. It documents the change in the enterprise’s equity from the start to the end of the year. A surplus will increase the equity and a deficit will reduce the equity. The total equity as of 1 January 2016 forms the starting point for the calculation. The amount that the company earns will be added to the equity unless you pay out dividends. You must include withdrawals or deposits in the statement. A deficit will reduce the equity.

 

How to calculate equity

 

Prefix

Value

Amount

 

Equity as at 1 January 2016

30,000

+

Deposits

2,000

+

Profit before tax

100,000

-

Tax

25,000

-

Dividend

10,000

=

Reconciled equity as of 31 December 2016

97,000

Reconciled equity must correspond to the equity you set up in the balance sheet.

Seek professional assistance

Other common sources of errors include calculation errors or a lack of understanding of relevant terms. Keeping accounts is a separate subject area in itself. If you are struggling to reconcile your balance sheet and you do not have a basic understanding of accounting practices, you should ask an accountant or auditor for help.

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