The Norwegian Tax Administration will carry out an overall discretionary assessment of the taxpayer’s financial position in order to determine whether the taxpayer’s income is sufficiently low for tax limitation to be granted. 'Low income' means income that is insufficient to provide a necessary, moderate standard of subsistence for the taxpayer him/herself and those for whom he or she is obliged to provide. In the overall assessment, emphasis will be placed on what the taxpayer or others in the household have in terms of disposable income and wealth besides the primary dwelling. Consideration will also be given to inheritance, gifts, gains and other types of temporary income. Social security benefits will not be considered. No consideration will also be given to repaid tax or underpaid tax.
A strict assessment is carried out. On page 253 of Utv. 1997, the Parliamentary Ombudsman stated that it would appear natural to accord the income limit in Section 17-1 some guiding importance in the assessment of tax limitation under Section 17-4. If the actual situation is such that the taxpayer has no more funds available to them than groups that are covered by Section 17-1 over time, this would provide grounds for granting tax limitation.
Calculation basis and maximum tax
A calculation basis shall be arrived at for the assessment. Item 3.6 is used as a basis. Additions are made for:
- special allowance
- deductible risk-free return
- tax-exempt benefits such as child maintenance, inheritances, gifts, child benefit, scholarships, lottery winnings etc.
- tax-free gains and other income, such as tax-free rental income in residential property treated as exempt
- expenses for which a deduction has been granted in the tax assessment, but that are not necessary for subsistence purposes.
The list is not exhaustive.
If the calculation basis is below or equal to the threshold amount, the tax and National Insurance contributions payable will be zero. The maximum tax rate payable on the amount that exceeds the threshold amount is 55 percent of the surplus amount. The amount threshold (2016 income year) under Section 17-1 is NOK 139,400 for single taxpayers and NOK 256,300 for married couples and spouse-equivalent cohabitants.
Exceptions which do not give entitlement to tax limitation
Tax limitations are not usually granted to taxpayers who:
- have been entitled to a loan from the Norwegian State Educational Loan Fund (Lånekassen) for much of the year
- have had their income and wealth stipulated through a discretionary judgement
- experience a temporary fall in income (that does not last more than two to three years). This may be the case if the taxpayer receives temporary work assessment allowance
- have had a lower income as a result of part-time work (e.g. due to education), short-term residence in Norway, etc.
- have voluntarily waived the opportunity to receive income
Spouses, cohabitants and household members
Account will also be taken of the spouse’s income. The income of both spouses is considered jointly, regardless of whether they are assessed separately or jointly. The same applies to registered partners and spouse-equivalent cohabitants. Spouses’ income shall also be considered jointly for the year in which they married, even if they are assessed separately. Spouses who are separated are classified as single persons with effect from the year of separation. The tax reduction is allocated between the spouses in proportion to each spouse’s share of the tax before the reduction. The income of children who are assessed together with the taxpayer is added to the taxpayer’s income. The same applies to the income of any other members of the household over and above the amount estimated to be necessary for their own subsistence.
If you believe that you are entitled to a tax limitation on this basis, set out your claim under item 5.0.
(Additional information) in the tax return. If you meet the requirements for both tax limitation on low general income, tax limitation due to inability to pay tax and a tax deduction for pension income in the same income year, your tax will be stipulated on the basis of the rule that results in the lowest tax.