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Deduction for expenses relating to research and development (R&D)

Subject to certain conditions, taxpayers who run a business may be entitled to direct deductions from tax and national insurance contributions for a percentage share of their expenses attributable to research and development projects. The set of rules regulating this is often referred to as the Skattefunn tax deduction scheme.

To be covered by the scheme, the Research Council of Norway must approve research and development projects. On the Research Council of Norway's website, you will find information on the scheme, conditions, an application form and details of the application procedure, etc. The applicant is entitled to have his application subject to substantive consideration during the year of application if the Research Council of Norway receives it before 1 September. Applications received after this date may also be subject to substantive consideration during the year of application, but the applicant will not be entitled to demand such consideration. In the event of reorganisation where the business is continued in an enterprise with a new organisation number, the new enterprise must re-apply for approval. The Research Council of Norway also approves research institutions. You will find a list of approved R&D institutions at

The deduction from tax, etc. is in addition to the income deduction for R&D expenses. If the deduction exceeds the assessed tax, the surplus amount will be paid via the tax assessment. In reality, the tax deduction is a subsidy scheme administered via the tax system, and supersedes the previous FUNN scheme, which was entirely administered by the Research Council of Norway.

The size of the deduction

The tax deduction can generally be granted for 18 percent of expenses for approved research and development projects. Businesses that satisfy the conditions for small or medium-sized businesses as set out in section 16-40-5 of the Ministry of Finance's Regulations pursuant to the Taxation Act (FSFIN) are entitled to the deduction at the rate of 20 percent. All the following conditions must be met:

  • the taxpayer's collective enterprise has fewer than 250 employees (i.e. less than 250 full-time equivalents), and
  • the taxpayer’s collective enterprise has annual sales revenues not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million.

The decision as to whether or not the requirement concerning sales revenues or balance sheet total is met will be based on the business's most recently approved annual accounts. In the case of newly established businesses without any previously approved annual accounts, a reliable estimate determined during the year will be used as a basis. The decision as to whether or not the requirement concerning the number of employees is met will be based on the average number of full-time equivalents during the most recently closed financial year.

An independent business is a business that is not a “partner business” or “associated business”. A partner business owns 25 percent or more of the capital or voting rights in another business, either alone or jointly with one or more associated businesses. However, the business may still be deemed independent when the threshold of 25 percent is reached or exceeded, if the threshold is exceeded by a particular category of other investors. To find out which categories of investors this concerns, see the Tax ABC and section 16-40-5 (2) (b) of the Ministry of Finance's Regulations pursuant to the Taxation Act (FSFIN). This assumes that the investors are not associated with the underlying business.

Associated businesses are all businesses that have one of the following connections to each other:

  • Holds the majority of the voting rights in another business
  • Has the right to appoint or remove a majority of the members of an administration, management or control body in another business
  • Has the right to have a dominant influence over another business
  • Is a shareholder or partner in another business and alone controls a majority of the voting rights of the shareholders or partners in this business.

Businesses that maintain a connection as referred to above through one or more businesses or with an investor as referred to in section 16-40-5 (2) (b) or a partner business, will also be considered to be associated. Businesses that maintain such connections through a natural person or group of natural persons will also be considered associated businesses if they carry on all or part of their activity in the same or adjacent markets.

Where a business is not an associated business, it will not be deemed a small or medium-sized business if 25 percent or more of the capital or voting rights are either directly or indirectly controlled by one or more public sector bodies.

Calculating the costs

Costs that are included in the basis for the deduction must be directly linked to the approved project, and the nature of the costs must be such that they are deductible under Chapter 6 of the Taxation Act. In addition, the costs must be covered by Article 25 (3) or Article 33 (3) (a) of Regulation (EU) No 800/2008 (the General Block Exemption Regulation).

The costs are calculated and allocated according to the following criteria (taxes that will be refunded or offset are not included in the project costs):

  • staff costs and indirect costs. For the business’s own employees, the number of hours per employee will be limited to a maximum of 1,850 hours per year and the hourly rate will be limited to 0.12 percent of the agreed and actual annual salary, subject to a maximum of NOK 600 per hour
  • procurement of R&D services,
  • procurement of instruments and scientific equipment,
  • procurement of contract-based research, technical knowledge and patents
  • other operating expenses

Costs incurred by a business for auditing, etc. in connection with applications for project funding and auditor confirmation of attachments to the tax return will not be included in the basis for the deduction.

Maximum basis for calculating the tax deduction

Costs for in-house R&D projects are limited to NOK 25 million per income year. Costs for R&D projects carried out by approved research institutions are limited to NOK 50 million per income year. If a taxpayer incurs costs relating to both in-house R&D and outsourced R&D, the costs will be limited separately. In addition, the total deduction basis must not exceed NOK 50 million per income year. It is not permitted to transfer costs that exceed the deduction limit in one year to another year.

Other state aid

If a taxpayer receives other state aid in addition to the tax deduction, the sum of the state aid granted for the project must not exceed the highest total permissible aid intensity in accordance with ESA’s guidelines for state aid. The decision as to whether the project exceeds the highest total permissible aid intensity is based on the total project period as a whole. For more information on the state aid rules, see and The tax deduction will be reduced if the total state aid exceeds the specified limits. The state aid percentage must be checked for each individual project. ‘State aid’ includes financial assistance for the project from public instruments (Innovation Norway, Research Council of Norway, municipal/county industrial development funds, etc.), aid for the project from the European Union (incl. the EU’s framework programs) and differentiated employer's national insurance contributions.

RF-1053 and project accounts

Any entity that claims a deduction from tax for R&D costs must submit form RF-1053 Fradrag i skatt for forskning og utvikling (Deduction from tax for research and development - in Norwegian only) together with their tax return. The taxpayer must provide an auditor’s attestation concerning the costs, along with confirmation of the information concerning state aid (regardless of whether or not the taxpayer is subject to an audit obligation).

Separate accounts must be prepared for the project, specifying the time spent for R&D staff broken down per person and other project-related costs. The time records must state the date, name of R&D person, number of hours per day and the sub-objectives concerned. The project accounts must be presented to the tax authorities upon request. The Research Council of Norway and the Directorate of Taxes have prepared a template for the preparation of project accounts that you can use as an aid. This template is available at


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