Registered persons are entitled to deductions for input tax. This also includes taxable persons who are pre-registered, and those who have registered for VAT voluntarily (see Section 10 “VAT registration”).
In addition, the right to deductions applies to registered persons supplying goods and services that fall within the scope of the VAT Act, but are zero-rated, such as export sales.
Foreign taxable persons are entitled to a refund of VAT paid on goods and services bought in Norway – see sub-section 7.6.
Under certain circumstances, visitors from abroad (tourists) may recover Norwegian VAT paid on purchases made in Norway – see sub-section 7.7.
7.2 What can be deducted
The right to deductions for input tax applies, in principle, to VAT on goods (both goods for supply and business assets) and services purchased for use in business activities which are liable to VAT. It is a precondition that the vendor has charged VAT on the goods or services that are purchased. Input tax that cannot be verified by a sales document is not deductible. For more information regarding the sales document see Section 12 “Accounting regulations and duty of disclosure”.
7.3 What cannot be deducted
Deduction entitlement does not apply to purchases for personal use or for use in a business outside the scope of the VAT Act, such as the letting of hotel accommodation.
The VAT Act also contains regulations that exclude deduction entitlement on certain goods and services, even if these are for use in business activities which are liable to VAT. There is no deduction entitlement for input tax on:
- board and payments in kind for the proprietor or employees of a business
- work on, and the running of, real property which provides for housing, recreational, holiday or other welfare requirements (this does not apply to the construction and maintenance of company canteens.)
- entertainment of clients etc., including services connected with the serving of foodstuffs and the hiring of reception rooms
- gifts exceeding a certain value, including those distributed for the purposes of advertising
- works of art and antiques, providing these are not supply commodities in the business or
- the purchase, maintenance, use and operation of passenger vehicles. However input VAT can be deducted if the vehicle is used as a commodity, a vehicle used in commercial vehicle hire, or used for passenger transport in return for a remuneration.
7.4 Partial deduction entitlement
Certain registered persons also conduct business activities where the supply falls outside the scope of the VAT Act.
If purchases are not intended for a specific part of the business, but cover the whole business, the input tax shall be apportioned accordingly. The anticipated use of the goods/services at the time of purchase shall form the basis for the apportioning. The rules governing this apportioning are laid down in regulations.
The rules on proportionate apportioning do not apply to the acquisition of goods or services of the same type as those sold by the enterprise. If a computer company, in addition to selling computer equipment, also runs courses in the use of such equipment, a full deduction for input VAT must be made when acquiring computers. Output VAT must then be calculated for the computers to be used in the course activities. The ordinary market value for sale to others shall be used as the basis for the calculation of VAT on withdrawals.
7.5 Adjustment of input tax
General provisions have been adopted for the adjustment of input VAT on real property and other major operating assets (capital goods) on change in use during a ten-year period for real property and during a five-year period for other capital goods. In general terms, the provisions mean that the deduction for input VAT shall be adjusted up or down if the connection between capital goods and activities liable to VAT change during the above-mentioned periods following acquisition.
The adjustment provisions do not change the opportunity to deduct input VAT immediately on acquisition. The provisions apply to events taking place after the acquisition.
The adjustment provisions are applicable to so-called ’capital goods‘, which are defined in the Value Added Tax Act. Operating assets other than capital goods will be covered by the general provisions on withdrawals. The withdrawals provisions will take precedence over the adjustment provisions if capital goods are withdrawn for private use during the adjustment period.
Machinery, fixtures and fittings and other operating assets for which the input VAT on the cost price amounts to at least NOK 50,000 are deemed to be capital goods, with the exception of vehicles exempt from VAT on resale. This limit applies to each individual acquisition. Real property that has been subject to construction, extension or alteration for which the input VAT amounts to at least NOK 100,000 is also deemed to be capital goods. Hence, input VAT on costs relating to operation, maintenance and repairs to real property is not comprised by the scheme. If more than one construction project is carried out on a property in the same year, the costs of these projects shall be added up to determine whether the NOK 100,000 limit has been reached.
Sale and other transfer of capital goods trigger the adjustment obligation. The same applies when a change in the use of the capital goods results in the purpose no longer being VAT deductible. However, fire or demolition of premises do not result in adjustment. No adjustment shall be made if an enterprise not liable to VAT becomes liable to VAT as a result of a legislative amendment.
On transfer of real property as mentioned above, the property is deemed to have passed to non-deductible use, and the input VAT shall be reduced. Adjustments can be omitted if the party who takes over the real property also takes over the adjustment obligation. If the real property is sold before completion, let or in any other way used for purposes that fall outside the scope of the Act, then the deducted input VAT shall be returned. This return can be omitted if the party who takes over the capital goods also takes over the obligation to return input VAT.
An adjustment shall be made where capital goods are transferred as part of the transfer of an enterprise or part of an enterprise, since the latter is exempt from VAT and this is considered equivalent to transferring of capital goods to a non-deductible purpose. In this case too, adjustment can be omitted if the adjustment obligation is transferred.
7.6 Refunds to foreign taxable persons
Foreign businesses that are registered for VAT (through a representative in certain cases) are entitled to deductions for input tax in accordance with the general regulations – see above.
Foreign businesses that are not registered for VAT may, subject to certain conditions, be refunded the VAT they pay on the purchase of goods and services in Norway, or on the import of goods into Norway.
Certain conditions are stipulated for such refunds:
- that the foreign business is not obliged to register in Norway
- that the purchase is for use in the business that the person carries on abroad
- that the business would have been obliged to register for VAT if it had been carried on in Norway and
- that the VAT would, in that case, have been deductible.
VAT on goods that are imported for delivery to purchasers in Norway and VAT on goods that are imported/purchased for supply in Norway is not refundable.
More detailed information and an application form is available on this website.
7.7 Foreign tourists
A seller can be credited with the VAT calculated on sales of goods to persons resident abroad if the goods are taken out as luggage.
If the purchaser is resident in Denmark, Finland or Sweden, the seller’s accounts must document the fact that the buyer imported the goods into his or her home country in immediate connection with the sale, and that payment of VAT or a corresponding general purchase tax was demanded upon the importation of the goods. The seller can then reimburse the VAT amount to the buyer.
If goods are sold to persons resident in countries other than Denmark, Finland or Sweden, the seller can be credited with the VAT if his accounts document the fact that the goods were taken out of the country by the buyer within a month of delivery. The same applies to sales of goods to persons resident on Svalbard or Jan Mayen.
The selling price of each item sold to a person resident in Denmark, Finland or Sweden must be at least NOK 1,000 excluding VAT. The same applies to sales to persons resident on Svalbard (Spitsbergen) or Jan Mayen. A group of goods normally constituting a single item of goods is also regarded as one item.
For sales to persons resident in other countries, it is sufficient for the individual invoice amount to be at least NOK 250 excluding VAT.
In addition, Tax Free Shopping will refund VAT to foreign tourists resident outside of Scandinavia and Finland upon their departure from Norway. To be eligible for this refund, the goods must have been purchased in shops that are linked to the Tax Free Shopping scheme.