Starting your new sole proprietorship

Running a sole proprietorship (ENK) can involve a great deal of freedom but also a great deal of risk since you have a personal responsibility for your finances. We’ve collected the most important things you need to know to get a good start in your business life.

Accounts and acquisitions

All sole proprietorships must keep accounts that comply with revlevant laws and regulations. You can do this yourself or hire an accountant to do it. You need to keep receipts, invoices, and other documents for five years. There are many benefits to using an accounting program.

Everyone who runs a sole proprietorship must keep accounts. You must keep your accounts according to the Bookkeeping Act and the Regulations relating to Bookkeeping. If you do not want to keep your own accounts, you can use an accountant.

Bookeeping means entering information about financial transactions into the accounts. For example, this could be purchases, sales and salary payments. There may also be other registrations, such as depreciations. (Read more about depreciation under «Purchasing and depreciating equipment» below.)

The accounts consist of all bookkeeping completed in a specific period, such as a financial quarter or a year. It could be a good idea to use an accounting system. This will give you a good overview of your income and expenses.

There are requirements for how to create an invoice and what information you need to include. An accounting system can often help you with creating and sending invoices.

Remember to keep receipts, invoices, and other documents for at least five years.

When you buy expensive equipment that you need to run your sole proprietorship, you can depreciate it. If something you buy costs more than NOK 30,000 and has a lifetime of more than three years, the cost must be distributed over several years. There are different rates for different types of equipment. Depreciating contributes to a lower profit and therefore a lower tax basis over a longer period.

When you run a sole proprietorship, you may buy equipment that you need to run your business. We call such equipment fixed assets. This can be tangible fixed assets such as a PCs, tools, or a vehicle, or it can be non-tangible fixed assets such as licenses, concessions, patents, etc. You can claim a deduction for some of the purchases in the accounts in the same year as you purchase them. On the other hand, if you make larger investments, the fixed asset may need to be depreciated over time.

Depreciation means that the cost of a fixed assets is spread over several years in the accounts. The value of the fixed asset is therefore lower year by year. The reason for depreciation is to take into account that the fixed asset loses value over time. You can claim deductions for and depreciate fixed assets only if they are necessary to run your business.

If the fixed asset you buy costs more than NOK 30,000 and can be used for more than 3 years, you must depreciate it. Then you distrubute the cost over time. You must record the deductions with the help of so-called balance depreciations.

You cannot claim a deduction for fixed assets that retain their value such as lots, roads, residential properties, and art.

The type of fixed asset and how much it cost when you bought it determines when and how you can claim a deduction. There is an amount limit for when you can claim a deduction for the entire purchase amount in the same year as the purchase, and when you must depreciate over several years. From and including the income year 2024, this limit is NOK 30,000. You can also claim a deduction for the entire amount in the same year if the expected lifetime of the fixed asset is less than three years.

Example of how to calculate a balance depreciation

  • You purchase a copy machine for NOK 50,000. You can use it more than threee years and you must therefore depreciate it.
  • You can find the different balance groups and information on how much you can depreciate each year in  . In this case, the copy machine belongs to balance group a and can be depreciated by up to 30 percent per year.
  • Depreciation the first year will then be NOK 15,000. You’ll receive a deduction for this in the accounts, and it will reduce your profit.

Your sole proprietorship can purchase fixed assets from you as a private individual. The price must be what you could have sold the asset for on the open market, not what you originally bought it for. You cannot sell the asset for an artificially low or high price.

You must be able to prove that you have checked the market value of a similar product.

Read more about depreciating

You may claim a deduction for expenses you’ve had for starting your sole proprietorship, for up to five years back in time. You must be able to provide supporting documents such as receipts or invoices. Amounts more than NOK 10,000 must be paid electronically.

As a new business, you can receive deductions for all the expenses you’ve had since you started your business activity. 

Regular start-up expenses may be related to the purchase of goods, tools, equipment, machines, and other things.

From the year you register your enterprise, you can have up to the previous five years approved as start-up years.

You must be able to provide supporting documents such as receipts or invoices for the expenses. A printout from the account is not a sufficient supporting document. Expenses of NOK 10,000 or more must be paid electronically to claim a deduction for them. You pay electronically if you use a bankcard, credit card, Vipps or online banking.

If your sole proprietorship makes a loss, you can claim a deduction for this from other income you have received. Other income can be, for example, salary from another employer or pension income that you receive.

Remember that you can also claim a deduction for added value tax (VAT) that you have paid on purchases for your enterprise, if you are registered for VAT. You may also claim a deduction for VAT you have paid before you registered your enterprise, for up to three years before start-up.

 

 

Tax and duties

If your sole proprietorship makes a profit, you must pay tax. This is called advance tax. You must calculate how large your profit will be and register this in your tax deduction card. We can then calculate how much advance tax you must pay. Since you and your sole proprietorship are the same legal entity, you use the same tax deduction card. You must pay the advance tax yourself. You’ll receive an invoice from us four times a year. It’s smart to have a separate bank account where you set aside money for taxes.

Everyone who runs a sole proprietorship with a profit must pay tax. You have a profit when your income is higher than your expenses. The tax that a sole proprietorship pays throughout the year is called advance tax.

Advance tax is not automatically deducted from your income, so you’re responsible for paying this to us.

It can be difficult to know how big your profits are going to be for the entire year. We have a guide that can help you calculate your potential profits. You can find our guide in your personal tax deduction card under the topic “business.” Please note that you have just one tax deduction card that is for you both as a private individual and as the owner of a sole proprietorship.

When you’ve arrived at a profit that seems realistic, you must register this in your tax deduction card. Then we can calculate how much advance tax you must pay. If you see that your income changes over time, you can update the amounts in your tax deduction card as often as you want.

We send invoices for advance tax four times per year. You’ll receive the invoice in your online bank if you use eFaktura (eInvoice). If you do not use eFaktura, you’ll receive it in your Altinn inbox. If you’ve reserved yourself from online communication, we’ll send the invoice by post.

You’ll receive the invoice around three weeks before the payment deadline, which is either 15 March, 15 June, 15 September, or 15 December. We’ll take weekends and holidays into account.

We recommend that you create a separate account for taxes where you regularly set aside money from your income.  

It can be smart to set aside 40 percent of your expected profit for advance tax.

If we have not received the payment for a period by the deadline, we’ll send you a notice of enforced collection of the remaining advance tax for the entire year.

Everyone who runs a sole proprietorship must submit a tax return that contains business information. Since you and your sole proprietorship are the same legal entity, you submit just one tax return. You must submit the tax return even if you did not have income from your enterprise. It’s possible to apply for a one-month extended submission deadline. You can submit your tax return directly from an accounting system or via skatteetaten.no.

Everyone who runs a sole proprietorship must submit the tax return by 31 May each year. You’ll receive a notification from us when your tax return is ready for you to check and submit.

You must complete the business information, which you can find in your tax return. The business information provides an overview of all your income and expenses that your sole proprietorship has had throughout the year. This means that you must have closed out the accounts for the previous year before you can fill it out.

You can only submit one tax return. It is the same tax return for you as a private individual and as the owner of a sole proprietorship.

You can submit the tax return through your accounting system if you use a system that supports this. You can also submit it via My tax at skatteetaten.no.

Remember that you must submit your tax return even if you did not have any business income the previous year.

If you apply to defer submitting your tax return before 31 May, you can be granted up to a one-month extention. If you do this, your tax assessment may arrive a bit later.

If you do not submit by the tax return by the deadline, you may be issued an enforcement fine. If you do not submit it at all, we will discretionarily assess your income and wealth. You may also have to pay additional tax. The same applies if you submit an incorrect or incomplete tax return.

VAT stands for value added tax. This is a tax that is added to the sale of most goods and services. Whoever sells the goods must add VAT to the price, and then pay the VAT amount to the state afterwards.

VAT is not an extra expense for your enterprise if you’re registered in the VAT Register. It is a tax that you collect on behalf of the state.

You must register your sole proprietorship in the VAT Register when you have sold goods and services that are subject to VAT for more than NOK 50,000 over the course of a 12-month period. Not everyone needs to do this, so check if this applies to you.

If your sole proprietorship is registered for VAT, you must regularly submit VAT returns to us.

You must register your sole proprietorship in the VAT Register when you have sold goods and services that are subject to VAT for more than NOK 50,000 over the course of a 12-month period. The limit of NOK 50,000 applies to turnover, which is the amount of sales you make, not your profit.

Check if you need to be registered

If you’re registered for VAT, you can claim a deduction for VAT that you’ve paid on purchases for your enterprise. This means that it is an advantage for you to be registered for VAT. You may also claim a deduction for VAT you’ve paid before you registered your enterprise, for up to three years before start-up.

Some industries are exempt from calculating VAT on the sale of goods and services. In some cases, you can run an enterprise subject to VAT but some of your goods or services are VAT exempt (zero-rated VAT).

Read more about the difference between exemptions and exceptions from VAT.

If you meet the criteria for registering in VAT Register, you must apply to register.

How to register the enterprise in the Value Added Tax Register 

You can register for VAT before you reach the limit of NOK 50,000, but then there are a few requirements you must meet.

Check if you meet the requirements for pre-registration under point 3 («Find the correct registration»):

Register, change or delete in the Value Added Tax Register (VAT Register)

After your sole proprietorship is registered in the VAT Register, you must add VAT to the invoice that resulted in your turnover exceeding NOK 50,000.

If you’ve issued invoices before you’ve been registered for VAT, you must issue a new invoice after you’re registered. In this case, you issue a credit invoice without value added tax and issue a new invoice with value added tax.

Enterprises that are registered for VAT must generally submit VAT returns six times per year. This return must summarise all output and input VAT you have in the period. The invoice date determines which VAT return you must submit the VAT in. The VAT return shows whether you must pay or receive a refund for VAT.

You submit the VAT return via the Tax Administration’s website or through an accounting system that supports this.

Even if you do not have VATable purchases or sales in the period, you must remember to submit the VAT return.

Sole proprietorships with a low turnover can apply to submit the VAT return just once a year. In this case, certain requirements must be met, in addition to the fact that your sole proprietorship must have been registered for one year.

There are different rates for VAT that apply to different types of goods and services.

Read about the rates for value added tax

If you’re registered for VAT and do not submit the VAT return by the deadline, you may be issued an enforcement fine. If you do not pay the VAT by the deadline, you must pay interest on the overdue payment in addition. If illness or something similar means that you cannot submit the VAT return, you cannot defer the submission. You can appeal any issued enforcement fines retrospectively.

You must pay excise duties on certain goods and services. The most common are beverages, sugar, tobacco, and electricity. You must check whether your sole proprietorship operates with goods or services that are subject to excise duties. If you’ve registered as liable to pay excise duties, you must submit excise tax returns to us regularly.

Excise duties are a tax you must pay if you buy, produce, or sell certain types of goods. This could, for example, be beverages, tobacco, sugar, and electricity.

Check our overview of goods and services that are subject to excise duties.

As a main rule, you must register your enterprise to report and pay excise duties.

Find out if you need to register or not 

This page will also tell you how to register, and what information or supporting documents you need to provide.

If you’re registered for excise duties, you must report information about the goods subject to excise duties and pay excise duties, usually once a month. You do this in the excise tax return.

If you import goods subject to excise duties without being registered, you must report the excise duties to Norwegian Customs.

Find out more about taxes and duties on purchases from abroad here.

If you do not submit the excise tax return by the deadline, or submit an incorrect return, you may have to pay an enforcement fine.

As the owner of a sole proprietorship, you are not considered an employee. Money that you take out of your sole proprietorship for yourself or your spouse is not considered salary. However, if you pay salary or remuneration to others, we consider you to be the employer. This triggers a number of obligations. For example, you must submit an a-melding once a month. You may also have to set aside pension contributions for your employees.

If you pay salary or remuneration to others, we consider you to be the employer.

Examples of remuneration can be the free use of a car, paid telephone/internet, paying for travel, board and lodging or other things. Remuneration also means to refund others for expenses they’ve had while working for you.

If you take money from your sole proprietorship for yourself or your spouse, it’s not considered salary. You and your spouse are also not considered employees in the enterprise.

A cohabiting partner is not the same as a spouse. If your cohabiting partner performs work for your business, and you pay salary or remuneration for this, you become an employer.

Businesses that have employees, pay salaries, pensions, or other remuneration, must submit the a-melding once a month.

You must provide information in the a-melding about employment relationships, salary, advance tax deductions, employer's national insurance contributions and attachment of earnings for tax. There are many public and private agencies and enterprises that use the information provided in the a-melding. The employment relationship that you report for your employees will be sent to NAV’s State Register of Employers and Employees (the so-called Aa Register).

If the payments to an employee are less than NOK 2,000 for one year, you do not need to report this in the a-melding.

You must consider whether you meet the requirements that make you liable to create a pension scheme for your employees, a so-called mandatory occupational pension scheme (OTP). In that case, you must pay an amount equivalent to at least two percent of the employees’ salary to pension savings.

Read more about the OTP - mandatory occupational pension scheme

If you do not submit the a-melding by the deadline, or submit an incorrect a-melding, you may have to pay an enforcement fine.

View your deadlines and tasks

Log in to My page for your enterprise to find an overview of your deadlines, tasks, and claims.

Log in to My page

Special circumstances

If you’re resident abroad and run a sole proprietorship here in Norway, you have the same obligations as those who live in Norway. In addition, you must remember to report the following:

  • If you have employees who work on an assignment with a reporting obligation, the employees must be reported in the Assignment and employee register.
  • If your client is a private individual, you must report your employees in NAV’s State Register of Employers and Employees (the Aa Register). You do this in the a-melding in Altinn.

If you’ve given an assignment to a foreign enterprise, you must report the assignment in the Assignment and employee register if the assignment is carried out in Norway or on the Norwegian continental shelf.

Foreign sole proprietors can apply for an exemption from submitting a tax return. An exemption may be granted if your business activity in Norway in the income year has been excepted from taxation in Norway according to a tax treaty.

Read more about submitting the tax return

If you’re no longer going to run the business in Norway, you must close your sole proprietorship or deregister the NUF

There are several things you should know concerning your rights as a sole proprietor.

If you do not have employees, there is no requirement to set aside holiday pay from what you earn in your enterprise. As a sole proprietor, you decide when and how long your holiday should be.

As the owner of a sole proprietorship, you earn a pension from your business income. Most individuals experience a significant reduction in income when they retire. Saving for retirement will therefore be important. You can also enter private pension schemes. Your bank can often advise you about what is best for you.

If you have a sole proprietorship, you will not be paid sickness benefits for the first 16 days you’re sick. From the 17th sick day, you’ll receive 80 percent of your profits covered by NAV. Your profits are what you’re left with after expenses are deducted from your income. To prove that you’re sick, you must have a sick note from your general practitioner.

NAV offers an insurance that ensures better financial coverage if you become sick as a sole proprietor. You can choose between three different alternatives:

  • 80 percent coverage from the 1st to the 16th day of sickness
  • 100 percent coverage from the 17th day of sickness
  • 100 percent coverage from the 1st day of sickness

Read more about insurance for sole proprietors at NAV

Income from your sole proprietorship does not give you the right to unemployment benefits or to be laid off.

To have the right to parental benefits, you must have had income in six of the previous ten months. Your income the previous year forms the basis for how much you can receive in parental benefits. This applies regardless of whether the income is salary from an employer or money you’ve earned through a sole proprietorship.

Read more about parental benefits at NAV

If you want to close your sole proprietorship, you need to submit a Coordinated register notification in Altinn. Tick the box to report deletion. The deletion is free.

Take the time to carry out an orderly closure. It’s a big advantage for yourself and your finances. You may have obligations and returns to submit even after you’ve closed your business.

You can still receive a tax return for self-employed persons for two years after you closed your sole proprietorship. You must then submit the tax return for self-employed persons with business information without completing the business information.

You may also be assessed advance tax after your sole proprietorship is closed. You must then change your tax deduction card.

Read more about how to close your sole proprietorship

Join our free courses

The Tax Administration arranges in-person courses and webinars that are specifically created for persons like you who have just started a business. These courses are held nationwide and are free.

In addition to our courses, we have compiled short films with many useful tips for you.