Am I self-employed?

If you wish to be your own boss or have a hobby that provides you with an income, you might want to consider starting your own business. It can be difficult to know whether your activity’s considered business activity or not.

These four conditions must be met

There is no clear definition for when an activity counts as business activity, but there are four conditions that must be met. You must consider whether you fulfil all four conditions.

By profit we mean that your income is higher than your expenses. This is the most important condition for you to consider. The profit must be reasonable compared to your effort. It’s not a requirement that the activity must be profitable from the start, but it must have the potential to generate a profit over time. You should have some basis for believing that you’re likely to earn money from your activity, for example, market surveys, knowledge or other experience from the field. The fact that the activity generates an income is not enough if your expenses are higher than the income. A hobby or leisure activity that generates a small income for you but never produces a profit is not considered business activity. It does not entitle you to claim deductions for expenses/losses, either.

The requirement for a profit depends on the type of activity and, in most cases, must be considered over a number of years.

This means that you may have a deficit and still fulfil the condition for profit over time. This may be especially relevant during the start-up phase. There are some industries where you cannot see the result until a number of years has passed, for example, Christmas tree production.

Whether an activity is likely to generate a profit is normally considered with a 5 to 8 years’ perspective, or, in exceptional cases, 10 years.

You’ll find examples for cases where a hobby has developed into business activity further down the page.

There is no specific requirement for the duration of the activity. However, it’s logical to expect that you plan to be occupied with it for a considerable amount of time.

When you consider the duration, you must do so in connection with the other criteria. For example, it’s logical that your financial result will affect how long you’ll continue with the activity.

You must perform the activity on a regular basis. This means that small individual assignments and odd jobs are not considered business activity. However, if you get many or large assignments or have more than one client, this may indicate that you’re self-employed. For example, a single cleaning job is not considered business activity, but multiple cleaning jobs during the year could be. You do not have to be the active part yourself if you, for example, have employees doing the work.

Freelancer

If you only have individual assignments without being an employee, you should consider whether you’re a freelancer. If you’re a freelancer, you pay your taxes the same way as salary recipients and submit the tax return for employees and pensioners.

Read about the difference between being a freelancer and a self-employed person (altinn.no)

Passive capital investments

If the activity is so low that it must be considered a passive capital investment, it’s not business activity. Passive capital investments can, for example, be a share investment or renting one’s own residential property.

At your own expense means that you yourself cover the expenses in connection with the work, for example, expenses for materials, and expenses for the purchase and operation of equipment.

At your own risk means that you’re responsible for the execution of the assignment, for example, that the goods or services are delivered at the time and price agreed upon. You yourself are responsible for the business result.

If you do not provide your own equipment or tools for carrying out the work nor have overall responsibility for the work, you’re an employee instead of a self-employed person.

You must determine yourself whether you fulfil all four conditions

The Tax Administration does not assess whether you fulfil the conditions when you submit the tax return. It’s therefore important that you familiarise yourself with the individual conditions and make sure that you know your obligations as a self-employed person.

If your income is higher than your expenses and you plan to conduct your activity over time, this might indicate that you’re carrying out business activity. Regardless of this, you should keep all supporting documents for income and expenses from the time that you start your activity.

Many people think that there is a limit of NOK 50,000. However, this is the threshold amount for when you must register your business in the VAT Register and has nothing to do with whether you’re considered a self-employed person or not. Value added tax is calculated based on turnover, this means how much you have sold for, while tax applies to profits, this means the amount you have left after your expenses have been deducted.

If you do not consider yourself to fulfil all the conditions, but still have income from an activity, this may be taxable and must be reported in the tax return. If you’re not sure whether to report this income, you can contact us and explain the problem.

Get it right from the start as a self-employed person

If you’ve examined the conditions and find that you’re a self-employed person, there are several things that you must do.

How to get started properly as a self-employed person

Expenses in the start-up period

From the first year when you meet the conditions for business activity, all your income from the business will be taxable, and you can claim deductions for all expenses related to your business. You may have had expenses connected to the business in the years before you fulfilled the conditions. We call this a start-up period.

If you’re unsure

You can request a binding advance ruling (BFU) from the Tax Administration about your situation. A binding advance ruling is a clarification of the tax and duty related circumstances that apply in your case, and it functions as an addition to ordinary guidance. The ruling is binding for the Tax Administration.

The Tax Administration performs audits

The Tax Administration performs audits of tax returns where your case can be assessed. If the Tax Administration finds that the conditions for carrying out business activity are not fulfilled over time, we can demand a repayment of any deduction for losses that you submitted for previous years. In some cases we consider additional tax.