Taxation of ECOM services (telephone, etc.)

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With effect from 1 January 2014, the rules concerning the taxation of employer-financed electronic communication services (telephone, broadband, etc.) changed. The new rules have the same scope as before. The tax rules concern the determination of the taxable amount for employees in connection with access to private use of employer's ECOM services outside normal work situations. An account is given below of how the taxable benefit is to be determined.

New rules apply from the 2014 income year onwards.

  • Employees who have their expenses relating to ECOM services covered by their employer have a maximum taxable benefit of NOK 4,392.
  • The maximum taxable amount remains the same regardless of how many ECOM services the employer covers the cost of.
  • The tax-free basic allowance of NOK 1,000 has been abolished.
  • The taxable benefit must not by reduced by any personal contribution from the employee.
  • Mobile data communication via the GSM and UMTS networks is now a full service which is no longer exempt from taxation.
  • For employees who receive a benefit calculated according to the ECOM rules, a tax-free amount of NOK 1,000 (per year) has been introduced for jointly invoiced goods and services, as well as additional services.

General information concerning determination of the benefit according to the standard rule

Employees who have expenses for one or more electronic communications services covered and who meet the conditions for standard taxation will have an annual addition to income of NOK 4,392. The standard amount is the same regardless of the number of services covered. The calculation of the taxable benefit varies depending on whether the employer is the subscriber (payment in kind) or whether the employee has the cost of their own subscription covered (expense allowance).

The employer is the subscriber (payment in kind)

If the employer covers the cost of one or more EC services as a payment in kind, the employee must have a fixed addition to income of NOK 4,392 per year. This applies regardless of the employer's actual expenses and regardless of whether or not the employee personally contributes anything to the cost of the EC service(s).

If an employee has the use of one or more employer-financed EC services for part of the year, the benefit taxation must be carried out proportionately to the number of full or part months during which the employee has had access to the service. More specifically, the taxable benefit amounts to NOK 366 per full or part month in which the employee has access to the service.

Example - Payment in kind

An employer covers the costs associated with the use of a mobile telephone and broadband (in a residential property) as a payment in kind (employer's subscription) during the period 1 January to 15 May 2014.

Calculation of taxable benefit:

January NOK 366
February NOK 366
March NOK 366
April NOK 366
May   NOK 366
Taxable benefit NOK 1,830 

The employee is reimbursed for his expenses for a personal subscription (expense allowance).

For employees who have their expenses for one or more electronic communication services covered through an expense allowance, the taxable benefit comprises the amount actually covered, limited to NOK 4,392 per annum. In the case of expense allowances, a special rule therefore applies according to which the taxable benefit must be limited to the amount that has been covered by the employer if the coverage is below the standard amount. Once the ceiling of NOK 4,392 has been reached, all coverage of EC services during the rest of the year will be exempt from any tax liability.

The benefit will be taxed in the year in which the employer actually covers/pays the allowance, regardless of the year that the invoice concerns. The coverage is considered to be an expense allowance (refund) if it is the employee's subscription. Whether the bill is sent to the employer directly is of no consequence.

Example - Expense allowance

An employer refunds the employee's mobile telephone bills in the amount of NOK 1,802 in April, NOK 1,953 in June and NOK 2,106 in October 2014.

Calculation of taxable benefit:

April  NOK 1,802
June NOK 1,953
October(NOK 2,106, max. NOK 4,392 per year) NOK 637
Taxable benefit NOK 4,392

Combination of payment in kind and expense allowance

Cases may arise where the employee's expenses for electronic communication are covered through a combination of payment in kind and an expense allowance, e.g. through the employer covering the cost of the telephone subscription as a payment in kind, but refunding the employee's expenses for his broadband subscription. In such cases, the taxable benefit according to the standard rule will still be limited to a maximum of NOK 4,392 per year. The taxable benefit in these cases will amount to NOK 366 per month for the payment in kind, in addition to the amount which the employer covered as an expense allowance. Once the ceiling of NOK 4,392 has been reached, all coverage of EC services during the rest of the year will be exempt from any tax liability.

Example - Combination of payment in kind and expense allowance

An employer covers the cost of mobile phone usage as a payment in kind (employer's subscription) throughout 2014. The employer refunds the employee's bills for broadband in the amount of NOK 1,347 in April, NOK 1,347 in July and NOK 1,347 in October.

Calculation of taxable benefit:

January NOK 366
February NOK 366
March NOK 366
April (NOK 366 + NOK 1,347) NOK 1,713
May NOK 366
June NOK 366
July (NOK 366 + NOK 1,347, max. NOK 4,392 per year) NOK 849
Taxable benefit NOK 4,392

Tax-free amount for jointly invoiced goods and services. as well as additional services.

There is a tax-free amount of NOK 1,000 for an employer's coverage of goods and services which are invoiced together with the electronic communication service (jointly invoiced goods and services). This applies for example to premium rate services, premium rate SMS/MMS, database services, software, downloading/streaming of TV broadcasts, music, films, games, etc.There may also be payments for goods, such as food and drink from vending machines. Other services which are jointly invoiced may also be included in the subscription price (additional services) For example, subscriptions are currently available which include free use of music or film services.

The rule means that employees who are taxed according to the standard rules can have their expenses for jointly invoiced goods and services, including additional services, covered up to a total value of NOK 1,000 without it being considered a taxable benefit; see Section 5-12-21 second paragraph of the FSFIN Regulations.

Under the tax exemption, the tax-free basic allowance is used up first. The employer may allow all coverage of such goods and services to be included in the tax-free amount without distinguishing between business and private use.

If the employer covers the costs for such goods and services by more than the threshold amount, the employer must assess the excess and determine what constitutes business and private use respectively. The part of the excess amount that relates to private use will be taxed as pay under the ordinary rules.

On the other hand, the costs associated with the coverage of jointly invoiced goods and services must be excluded from the total amount which forms the basis for calculating the standard addition to income in accordance with Section 5-12-21 first paragraph of the FSFIN Regulations.

Amounts relating to jointly invoiced goods and services can normally be distinguished from costs for actual access through an itemised bill. If the value of the jointly invoiced services cannot be distinguished from that of the EC service, the value of the additional service must be stipulated by discretionary judgement.

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