The term “taxable person” is not defined in the VAT legislation. However, it is presupposed that the term denotes any person who, as opposed to an employee, supplies taxable goods or services in the course or furtherance of his business and whose annual turnover is above a given threshold (normally NOK 50,000 – see Section 10 “VAT registration”).
The obligation to calculate VAT applies whether the activity is conducted by a single person, several persons(general partnership), a limited company or a limited partnership.
A continuing problem is the question of whether a business is being conducted, or whether an employee relationship exists. The main difference between a self-employed person and an employee is that a self-employed person takes upon himself the performance of specific tasks on his own account and at his own risk, whereas an employee places his labour at the disposal of an employer. How the parties themselves describe the relationship is not binding on the tax authorities. The decisive factor is the real and effective relationship between the parties. An objective and comprehensive evaluation must be undertaken, taking a number of different factors into account.
In addition, it may be necessary to draw a distinction between those activities regarded as hobbies and those which are businesses. In such cases it is also necessary to carry out an evaluation of various factors. To be regarded as a business it is necessary that the activities are liable to make a profit. In practice as a rule, the business must make a profit in the course of a four to five year period.
Persons carrying on activities other than in the course or furtherance of their business are generally not taxable persons. Similarly, persons carrying on exempt activities (see Section 5) are not treated as taxable persons.
If there is any doubt as to whether a business is being conducted, the Tax Office should be contacted in order to clarify the matter.
Hereafter, the term “taxable person” or “registered person” will be used to indicate “persons liable to tax” or “enterprises liable for registration/persons engaged in trade or business and liable to registration” which are the terms used in the English translation of the VAT Act and regulations established on the basis of the VAT Act.
Charitable and non-profit institutions and organisations are regarded as taxable persons and must register in respect of their business activities in the same way as any other person. The question of whether or not the supply is intended to finance the charitable activities has no bearing on the liability to pay VAT. However, a special registration threshold of NOK 140,000 applies to these institutions.
As a general rule, liability to pay VAT is not linked to the question of who runs the business, but rather to the nature of the goods and/or services supplied.
If an agent concludes agreements in the name of and for the account of another person, he will be deemed to have supplied a service. His commission will therefore be liable to VAT.
3.4 Commission agents
Sales on commission means sales in one’s own name, but for the account of another person. The commission agent undertakes to supply goods or services in his own name, but on behalf of and for the account of a principal. Supplies of goods and services on commission are regarded for VAT purposes as taxable both for the principal and for the commission agent. The commission agent is obliged to collect the VAT from the customer.
Sale by auction entails an obligation on the part of the auctioneer to calculate and pay VAT. However, sale by enforced auction is not regarded as supply and is therefore not liable to VAT. Nor shall VAT be calculated on the sale by auction of
- lost property,
- the estates of deceased persons, or
- jointly-owned property,
provided that such sales are conducted in accordance with the regulations governing enforced sales.
2.6 National, regional and local authorities
The State, county councils and municipalities, and institutions that are owned or run by them, are regarded as taxable persons when they supply goods and services that are liable to pay VAT. The aforementioned are liable to VAT even if the goods and services are not supplied as part of a business.
Some government institutions engage in activities whose only or main (80 per cent) objective is to take care of their own requirements. Such institutions are only liable for VAT on their supplies to others, but are, on the other hand, only entitled to deductions for input tax on purchases relating to their supplies of goods and services to others.
Government institutions that only supply services to other government institutions are not liable to VAT in so far as they are not engaged in economic activities.
2.7 Estates in bankruptcy, estates of deceased persons
In the event of bankruptcy or death, the estate becomes liable for VAT on supply and withdrawals after the initiation of bankruptcy proceedings or death, provided the debtor or deceased person would otherwise have been taxable. The most important aspect of these regulations is that it is irrelevant whether or not the estate carries on a business, or whether or not the estate’s own supplies are below the minimum threshold for VAT registration. It is sufficient that the debtor or the deceased fulfilled these conditions.
2.8 Fiscal unity/group registration
If a single owner, person or company runs several businesses, these are regarded as a single taxable entity for the purposes of VAT, provided they are not established as separate legal entities. Such businesses shall therefore, as a general rule, be registered as a single taxable person in the VAT register – see Section 10. It is also possible, however, for each business to register separately. The person in question must apply for such registration, and it is a requirement that separate accounts are kept for businesses that request separate registration.
Collaborating companies may, at their own request, be regarded as a single taxable entity. There is a condition that at least 85 per cent of the capital in each company is owned by one or more of the collaborating companies, and that the companies are registered as one entity. Goods and services may then be transferred between the companies without charging VAT. The companies also become jointly and severally liable for the payment of VAT.
Whether or not it is possible to register in this way is determined by the structure of capital ownership in the co-operating companies.
2.9 Foreign businesses
Foreign businesses that only supply goods or services from abroad to recipients in Norway, are not liable for VAT in Norway. However, the importation of goods is a taxable event and VAT is payable at the time of importation by the owner of the goods – see sub-section 4.5.1. For matters concerning the importation of services, please see the relevant text in sub-section 4.5.2.
Foreign businesses that are established or resident in Norway are liable for VAT according to the same regulations as Norwegian businesses and shall be registered for VAT if the conditions for registration are met. See Section 10 “VAT registration”.
If the foreign business supplying goods and services is neither established nor resident in Norway, the business shall be registered for VAT through a representative. By registering in this way, the foreign business has the same rights and obligations that a normal registration for VAT would have entailed. See Section 9 “Foreign non-established businesses”.