Whether the let part of your own home is used for commercial, residential or commercial purposes is of no significance in the assessment of whether or not the rental income from the property is taxable.
In order for a housing unit to be characterised as a family apartment, the housing unit must normally be suitable for use as a permanent home for a family with two adults and one child.
If a building is divided into owner sections, each section must be assessed separately as regards whether or not it qualifies for tax-exempt assessment.
Detached house with let part
A detached house only consists of one family apartment. In addition, the building can consist of one or more dependent/independent bedsits.
Is the rental income tax-free or taxable?
If the rental value of the part that the owner uses themselves is equal to or greater than that of the part that is let, the rental income will be tax-free. If the rental value of the part that the owner uses themselves is less than that of the part that is let, the rental income will generally be taxable.
A semi-detached dwelling is a dwelling which consists of two family apartments (if the apartments are divided into sections, they will be considered as detached dwellings). If a property contains three family apartments or two family apartments and one or more independent bedsits, it will be considered a multi-unit house. See further down concerning what is considered to be a dependent/independent bedsit.
Will I have to pay tax on the rental income?
The rules concerning the tax-free letting of semi-detached dwellings are the same as for other dwellings:
Rental income from semi-detached houses is tax-free when
- you use at least half of the semi-detached house calculated according to rental value
- all or a high proportion of the semi-detached property is let for up to NOK 20,000 during the income year.
Example – a small part of an apartment is let
Knut Fiske owns a dwelling with two family apartments (semi-detached dwelling). He uses one apartment himself and lets the other one.
The rental value of the part of the apartment he uses himself is NOK 80,000, while that of the let part of the apartment is NOK 30,000 per year. All rental income is tax-free.
Multi-unit houses often have three or more family apartments. Properties with two family apartments and one or more independent bedsits are considered multi-unit houses.
If you/your household uses several housing units jointly for your own home, these units will be considered a single housing unit when assessing whether the housing consists of a detached house, semi-detached house, multi-unit house, etc. For example, a building with three family apartments where the owner uses two of the apartments as a single unit for their own home will be considered a semi-detached house.
Is the rental income tax-free or taxable?
Rental income from multi-unit houses is always taxable. This applies even if you use at least half of the property as your own home.
Knut Fiske owns a building which consists of two family apartments and a bedsit. He lives in one family apartment himself. In addition, he lets a bedsit which has its own toilet and lockable entrance door. The property is considered a multi-unit house. The rental income will therefore be taxable.
If the bedsit had had a shared toilet and/or entrance door with Knut Fiske's apartment, it would have been taxable as a semi-detached house, and the rental income could therefore have been tax-free.
When is a property considered to be independent?
An independent bedsit must have its own entrance and toilet. The housing unit need not have its own entrance to the building. If it has a shared stairway or similar with other housing units, it will still be considered to be independent if the bedsit has its own lockable door.
When is a bedsit considered to be independent?
A bedsit that has a shared entrance/toilet with another housing unit is independent.
If there are a number of free-standing buildings in a residential property, they will generally be assessed individually as regards whether or not the conditions for full or partial tax exemption for rental income are met.
Free-standing buildings must however be assessed jointly with the residential property if, by their nature, the buildings perform a more or less essential service function for the dwelling. This could for example apply in the case of a shed, boathouse or garage.
If the free-standing building performs a service function for the building, it will be assessed jointly with the main building, regardless of whether the dwelling is detached, semi-detached or multi-unit.
Buildings that were originally erected to perform a service function for the dwelling (often a garage) may lose their service function in respect of the residential building if the building is actually used for non-residential purposes. In such cases, if the building is to be assessed jointly with the residential property, the building must also actually be used for residential purposes. Exceptions from this rule apply in cases where the building is only temporary and is used for non-residential purposes on a short-term basis. If the building is used for both residential and non-residential purposes, including commercial purposes, an overall assessment must be carried out of the overall use of the building.
In a Supreme Court ruling, the court concluded that an original garage building which had subsequently been extended by one floor and equipped with office, kitchen and WC/shower facilities had ceased to perform a service function with respect to the residential building. The reason was that the use of the building for commercial purposes was dominant compared with the use of the building for residential purposes.
A detached dwelling has a free-standing garage with an extension. Both the garage and the extension are let. The building will generally be assessed jointly with the detached dwelling if the building is used for residential purposes. If the building is also let for commercial purposes, an overall assessment must be made of whether the building performs a service function with respect to the detached dwelling.
If your ordinary garage needs are met in part of the residential property and/or there are a number of free-standing garages on the property, letting of the garage building could result in the building not being considered as performing a service function with respect to the dwelling. This will apply even if the letting is for residential purposes, including garage use.
In a sectioned building, each section is considered to be a separate property. Communal areas such as garages or areas with storerooms for example which are used by the residents in a sectioned, jointly owned residential property perform a service function with respect to the apartments in the jointly owned property and will be included in the taxpayer's residential and recreational property. Income that one joint owner receives from letting his own garage space or storeroom in such a jointly owned property will be covered by the tax exemption for rental income.
Letting of secondary dwellings
Income from the letting of housing which you do not live in yourself will generally be taxable from the first krone.
In the case of ordinary rental circumstances, where the parents receive payment from their tenants in the property, the rental income will be taxable for the parents and the property must be subject to accounts-based assessment.
If the apartment is owned by the parents and the child will live there free of charge (without covering any running costs) or pay rent that is below the market rate, the benefit will be taxable for the child.
Two parents own an apartment which could have been let for NOK 10,000 per month. If the child lives in the apartment free of charge, the child will be taxed for a benefit corresponding to NOK 10,000 per month.
The child must declare the benefit of NOK 10,000 per month in their tax return themselves. The tax rate for 2016 is 25 percent, and tax amounting to NOK 2,500 per month will therefore generally be calculated on free housing.
Although the parents will receive rental income in such a case, the apartment will be subject to accounts-based assessment. The parents must complete form RF-1189, in which running costs and all maintenance costs, etc. will generally be deductible. The form must be enclosed with the parents’ tax return. The parents can therefore have a deductible loss through the child having the use of the property free of charge.
However, if the child covers all ongoing running costs associated with the property, the child's use may be considered tax-free through what is known as ‘the associate rule’. In order to be covered by this exception, the child must cover all running costs, such as shared costs for the jointly owned property/housing association, maintenance costs, electricity, etc. In such cases, the property will be subject to tax-exempt assessment, and no incomes or costs linked to the property should be declared in the tax return.
Insofar as the child’s use is tax-free under the associate rule, the child can also let up to half of the apartment (calculated according to rental value) tax-free, as if the child actually owned the apartment. The child could therefore let a room in the apartment to a friend on a permanent or short-term basis, without having to declare the income in their tax return - but only if it is the child that actually receives the rental income. However, the rental value calculation may vary depending on the type of letting concerned, e.g. short-term letting versus letting on a more permanent basis.
The child can also let the whole apartment or a high proportion of the apartment tax-free, if the rental income does not exceed NOK 20,000 during the income year.