Rate-based deductions for the 2016 income year
(NB: The new rate for 2016 is NOK 3.05 per km where the lessee pays the fuel costs)
Costs incurred in connection with the car hire may be deducted from taxable rental income. As costs associated with the private use of the vehicle are not deductible, the costs must be allocated so that only the proportion of the costs linked to the hiring out of the vehicle will be deducted. To simplify the process, Section 1-3-20 of the Regulations on the valuation of capital, income and deduction items which must be assessed on a discretionary basis for 2016 (the 2016 valuation rules) lays down rules concerning deduction relating to the use of vehicles for business use. According to this provision, a “deduction is given for business use at the rate of NOK 3.80km (...) for a vehicle which is not taxed as a company car.” This deduction rate is based on the assumption that the taxpayer covers all costs associated with upkeep of the vehicle, including fuel. The rate does not apply in cases where the lessee covers fuel costs in addition to the rental charge.
The Directorate of Taxes has concluded that the rate may be used for the 2016 income year, but with a reduction in cases where the lessee pays the fuel costs himself. In these cases, the rate must be reduced to NOK 3.05 per km. The corresponding percentage reduction (i.e. 20%) of the ordinary rate must also be applied in cases involving the hiring out of other means of transport where the lessee covers the cost of fuel. Ordinary rates for other means of transport are given in the 2016 valuation rules, Section 1-2-6.
I own a classic Jeep Wrangler Sport from the late 90s with a soft top, bullbars and half-doors. I am of course aware that my vehicle is sought-after in the rental market, particularly in the summer, so I hired it out via an online marketplace for three weeks during the summer of the 2016 income year. I earned just over NOK 20,000 from the rental after the online marketplace had taken its share. The lessees covered the cost of fuel, road tolls and probably some parking fines too. Do I have to pay tax on my rental income? If so, what incomes and deductions do I have to enter in my tax return?
You must declare your rental income in your tax return if the gross rental income exceeds NOK 10,000, which applies in your case. Enter the gross rental income under item 3.1.12 of your tax return. You are also entitled to certain deductions, which must be entered under item 3.3.7 of your tax return. You can for example enter the online marketplace’s share as a deduction. As regards deductions for vehicle costs, deductions should be entered using the relevant rate, unless the vehicle is considered to be a company car. As your lessees covered the cost of fuel, you should use a rate of NOK 3.05 per km that the lessees have driven your vehicle. For example, if your vehicle was driven 1,000km while it was being rented, your deduction would be NOK 3,050 (1,000km x 3.05). Tax at the rate of 25% is calculated on your net income, i.e. rental income minus deductions.