Buying and selling fishing quotas
If you've bought or sold fishing quotas, you have to make sure it's reported correctly.
You can only depreciate structural quotas. All other types of quota, including participation access rights, cannot be depreciated for tax-purposes. You depreciate structural quotas on page 2 of the form for depreciation (RF-1084 - in Norwegian only). The cost price for the structural quota will be deducted over several years. The depreciation in the year of sale/purchase will be based on the use of the quota, as agreed between the parties.
How to separate the quotas in your accounts
An easy way to separate the different quotas and cost price, is to use the quota's ID-number. The ID-number is a unique identification the Norwegian Directorate of Fisheries allocate all licenses. The ID-number can be found in the allotment letter from the Norwegian Directorate of Fisheries. You'll then know the cost price, if you later decide to sell quotas.
Keep this in mind:
1. You must send an invoice
You have to send an invoice to the buyer where you split the total sales price on boat, gear and quota. This way, you make sure that the buyer can enter the purchase correctly in his accounts. The invoice must be numbered and it must contain information whether it is invoiced with or without VAT. You may use the sales contract as a sub-voucher to the outgoing invoice in your accounts.
2. You must assess whether VAT should be calculated
Income from selling fishing boats, gear and quotas are usually VAT liable. The rate is 25 percent. You pay the VAT as usual, by submitting the tax return for VAT.
There are some exemptions from VAT liability:
- Fishing boats of at least 6 metres can be sold without VAT if the buyer is a business. If the fishing boat is between 6 and 15 metres, you have to document the exemption with a confirmation from the tax office that the buyer is registered in the VAT-register. In addition, you have to get a statement from the buyer that the vessel will be used exclusively for professional fishing purposes.
- If you sell your business to a new owner, you should not pay VAT. The main terms are that all or part of the business is sold and that it mainly continues under the new owner. In order to receive VAT exemption, the seller must submit an application to the Tax Administration (in Norwegian only).
3. You have to calculate profit or loss
If the sales price is higher than the tax value, there will be a profit. Similarly, there will be a loss if the sales price is lower than the tax value. You can find the tax value on the depreciation form (RF-1084 - in Norwegian only). For non-depreciable assets, such as participation access rights, profits or losses will be the difference between sales price and cost price.
Remember to include the current market value when you sign the contract
It's the market value of the different assets that determine how the cost price is to be distributed. If you have used a broker, he or she will be able to help you with this. This is important when you sign the contract. It will make it easier to submit a correct income statement and tax return.
This is how to distribute the cost price
Boats are depreciated for tax-purposes by 14 percent (balance group e), and gear by 20 percent (balance group d). In terms of quotas, only structural quotas can be depreciated for tax-purposes, and the depreciation is linear (equal) over a period of 20 or 25 years (see the section below). Participation access rights cannot be depreciated for tax purposes.
This is how to depreciate structural quotas
Structural quotas are subject to linear depreciation over a period of 20 years. Structural quotas purchased before 1 January 2007 are subject to linear depreciation over a period of 25 years. Note that the depreciation period is 20 or 25 years combined - for all owners of the structural quota. The depreciation form RF-1084 has its own field for linear depreciation.
The easiest way to calculate the depreciation is that each owner uses twelfths, see the example below
Owner A is allocated a structural quota 1 July in year 1. The cost price for the quota is NOK 240,000.
The quota is sold to Owner B 1 September in year 5 for NOK 950,000.
Structural quotas are depreciated over a period of 20 years = 240 months from the first month it has been acquired.
Owner A has the quota for 50 months: 6 + 36 + 8 (year 1 + years 2, 3 and 4 + year 5). Depreciation per month is 240,000/240 = NOK 1,000.
Owner B has the quota for 190 months: 240 – 50 (total depreciation period minus owner A's period). Depreciation per month is 950,000/190 = NOK 5,000.
Graphical representation of the example (PDF). (In Norwegian only)
Graphical representation of the example (Word). (In Norwegian only)
When buying and selling fixed assets in the fisheries industry, it’s important to include statutory information in the invoice.
The invoice must contain information about whether the amount includes value added tax. The sales amount must be divided between the boat, equipment and quota, and it must be in accordance with the sales value.
Differing between quotas
In the invoice, you must differ between the quotas by structural quotas, unit quotas, licences and accesses by using the quota ID number. You’ll find the ID number in the Directory of Fisheries’ allocation letter.
Documentation of the sale
Sales must be documented through invoices. An agreement is not sufficient documentation of a sale. However, an invoice may reference the agreement, if the agreement includes all the information that is required in a sales document.
Make sure you send the correct invoice when selling a fishing boat, fishing permits and equipment, etc. If you sell the assets combined, make sure to divide the sales amount into the actual sales value of each asset.
The invoice must include the following information:
- Date of sale
- The seller's name and organisation number
- If you are registered in the Value Added Tax Register, you must add the letters “MVA” after your organisation number
- The buyer's name and address or organisation number
- A clear description of the goods or services
- The price including VAT in Norwegian kroner
- The total amount
For limited liability companies (AS) and Norwegian-registered foreign companies (NUF), the word “Foretaksregisteret” (Register of Business Enterprises) must be included in the invoice. Example: The Company AS, org. no. 123 456 789 MVA Foretaksregisteret.
If you include sales that are vatable and non-vatable in the same invoice, you must specify this on separate lines. If the VAT rates differ, this must also be specified on separate lines in the invoice.
A credit note may be used to correct any mistakes in previous invoices. The documentation requirements that apply to an invoice will also apply to a credit note.