Fixed assets in the enterprise
When you buy fixed assets for your business, you may be entitled to a deduction. If you sell fixed assets at a profit, this is taxable income for the business. If you sell at a loss, you may be entitled to a deduction.
Does this apply to me?
This applies to you if you're self-employed and have fixed assets in the company.
By fixed assets, we mean assets that the enterprise owns and uses in its business activity. These can be physical assets, such as cars, copy machines, or buildings. Fixed assets can also be licences, patents or the like.
The difference between assets and fixed assets
You may be entitled to a deduction when you buy fixed assets that have primarily been purchased for use in the business.
If the fixed asset is partly used in the enterprise, and partly for other purposes, such as privately, it should generally not be divided between use inside and outside the company. Either it is a fixed asset in the enterprise or it is not.
Assets purchased for sale are called current assets (goods) and are not fixed assets.
Assets that primarily cover the owner's private needs are not considered the enterprise's fixed assets.
Exceptions for separate residential parts of buildings that are depreciated
If the owner uses a part of a building that is not sectioned as his or her own home, the residential part must not be included in the basis for depreciation. This also applies if the building is owned by a jointly owned property.
An asset is considered a company's fixed asset, even if it is mainly used by shareholders, partners, or employees. This also applies if the assets are used by shareholders or partners in related companies.
The assets are considered to be the company's fixed assets even when the shareholders, partners or employees pay to use them and the use is taxable. In this case, the company must pay tax on the withdrawal or the benefit of the use.
Withdrawal of assets or services
In companies assessed as partnerships, private use or withdrawals are treated as distributions or remuneration for work.
Deductions and depreciation on purchases
The business may be entitled to a deduction for fixed assets that lose value as they are used or age. The costs of purchasing fixed assets can be spread over several years (depreciated).
Income and deduction on sales
If you sell fixed assets at a profit, this is taxable income for the business. If you lose money on the sale, you may be entitled to a deduction.
Deductions for use and upgrades
The business can claim a deduction for the expenses it has incurred in renting an asset.
The business cannot depreciate a leased asset.
If a business has income from renting out tangible fixed assets, it's taxable income for the business. Examples are renting out vehicles, containers, computer equipment, or real property that is a fixed asset in the business activity.
If you, as the owner of the business, use parts of your own property for your business, you cannot charge rent from yourself as a private individual. The business does not receive a deduction for rent costs that are paid to you as the owner.
The business cannot rent from a spouse.
This also applies to other assets you own privately.
When a shareholder or the shareholder's related parties use the company's assets privately, they must generally pay a market price for the use. Market price is the amount the company can expect to get on the open market. The company must enter the rental amount as income in the accounts.
When a shareholder pays less than the market price, the company must enter the difference between the market price and the actual payment as a taxable withdrawal. The company must enter the withdrawal as an income in the accounts.
If the company has purchased an asset that is primarily to be made available for the shareholder's private use and the cost is higher than the market price, the company must enter the total cost as a withdrawal in the accounts.
When the company calculates the benefit of the withdrawal, all the annual costs relating to the asset must be included. Examples of costs:
- interest on debt relating to the asset
- calculated interest benefit on used equity
- various operating expenses, such as insurance, electricity, and maintenance
- actual depreciation due to wear and age Here the depreciation in the accounts can be used as a starting point.
When a shareholder pays a lower price than the annual costs, the company must enter the difference between the annual costs and the price paid by the shareholder as a taxable withdrawal. The company must enter the withdrawal as income in its accounts.
For a shareholder who works in the company, the company must consider whether the benefit should be considered salary or dividend.
Assets owned by the business
When the company has upgraded previously capitalised fixed assets, it can claim a deduction for the costs. The business must enter the cost in the accounts (capitalising for depreciation), even if the upgrade is below the threshold amount or has a duration of less than three years. This also applies if the fixed asset is completely written down or has a negative balance.
If you entered the entire deduction for the fixed asset in the same year that the company bought it, you must only capitalise the upgrade if the fixed asset is long-term and the upgrade is above the amount limit. The amount is depreciated in the same way as when you bought the fixed asset.
Adapting a fixed asset to a shareholder
If the company has upgraded an asset to adapt it to a shareholder, without it having value for the company, the value of the adaptation must be entered as a withdrawal in the year of the upgrade.
Assets rented by the business
If the business has upgraded the asset it is renting, the business must enter the cost in the accounts over the rental period. In exceptional cases, you can activate and depreciate the upgrade in the balance group to which the asset belongs. If, for example, you pay for an office building, you must depreciate according to the rules that apply to the building.
Specific information regarding
When a company owns or leases a car, the car is always considered a commercial car for the company. The employees' driving in the profession is considered as use for business.
When a business assessed as a partnership owns or leases a car and a partner uses the car, it is business travel for the company. This applies whether the participant uses the car in the business or privately. When the participant uses the car privately, the participant must pay tax on the use.
Sole proprietorships
If a caravan is used as a dining barracks or overnight barracks for employees or other workers, the owner can claim a deduction for the costs.
If the caravan is mainly used in the enterprise and costs more than the amount limit, you can capitalise and depreciate it. If the caravan is also used privately, you need to consider how much of the use this constitutes to calculate the benefit of private use.
A caravan is often bought for private use. If the caravan is not primarily used in your business, you can claim a deduction for the extra loss of value due to the use in the business. You must use discretion in assessing how large the loss of value is.
The annual deduction is limited to 10 percent of the caravan's price as new.
If the enterprise rents a caravan, it can claim a deduction for the rental costs that relate to the use in the enterprise. If the caravan is used both in the enterprise and privately, the enterprise may claim a deduction for the part of the rent that relates to the use in the enterprise.
Companies
A caravan is considered a company's fixed asset, even if it is mainly used by shareholders, partners, or employees. This also applies if the caravan is used by shareholders or partners in related companies.
The caravan is considered to be the company's fixed asset even when the shareholders, partners, or employees pay to use it and the use is taxable. In this case, the company must pay tax on the withdrawal or the benefit of the use.
In companies assessed as partnerships, private use or withdrawals are treated as distributions or remuneration for work.
If you rent out a home or holiday home with furniture and home contents, you can deduct the entire cost of the home contents in the year of purchase if:
- they’re mainly purchased for use in the rental property
and - their value is reduced as a result of wear and tear and/or ageing
and - they have a cost price that is below the threshold amount or a useful life of less than three years
- up to and including the income year 2023: NOK 15,000
- from and including the income year 2024: NOK 30,000
Example:
If you buy a bed for NOK 13,000, you may claim a deduction for the entire amount in the year you purchased the bed. The same applies if you buy a snow shovel that costs NOK 700.
If the cost price for furniture and fixtures is above the amount limit, you can depreciate the balance (balance group d, depreciation rate 20 percent). In practice, it will never go to zero, but when the amount is less than the amount limit before this year's depreciation, the entire residual value (balance) is deductible.
Depreciation example:
If you buy a couch that costs NOK 50,000 in year 1, you can claim a deduction for depreciations amounting to (NOK 50,000 x 20 percent) NOK 10,000 in the first year. In year 2, the residual value is (NOK 50,000 – NOK 10,000) NOK 40,000, and your deduction for depreciations amounts to (NOK 40,000 x 20 percent) NOK 8,000 for the second year.
If the rental period is less than three years, and you use the furniture yourself before and after the rental period, you can claim a deduction for 15 percent of the gross rental income instead of using declining-balance depreciation.
Example when renting out furnished housing:
You’ll be renting out your furnished residential property for two years. The agreed annual rent is NOK 200,000. Instead of declining-balance depreciations, you can then claim a deduction of (NOK 200,000 x 15 percent) NOK 30,000 in both year 1 and year 2, (in total, NOK 60,000).
For newly purchased home contents, you must calculate the deduction based on the price you paid for the home contents. For home contents used by the owner, you must set the opening value to the presumed sales value at the time the rental period starts.
If you rent out a fully furnished home for a shorter period, and you use the home contents privately both before and after the rental, you can claim a discretionary deduction for the home contents that is set to 15 percent of the gross rental income. If you have income from short-term rentals of your own home, you must exclude it. This rule must not be applied when the rental period is more than three years.
Each piece of furniture is considered a separate fixed asset, but the purchase of several pieces of furniture below the threshold amount may in some cases be considered as a single unit, so that the total purchase price must be capitalised and depreciated. The furniture can be considered as a unit if it's of the same nature and has the same function. This may be the case, for example, when purchasing a sofa section with an accompanying table and chair.
How much tax you must pay when you sell a property depends, among other things, on what you sell, what the property is used for and who you sell to.
If the business loses or must expropriate larger assets in balance groups e to h and receives a gain when the asset is replaced, it may be entitled to tax exemption under certain conditions. This occurs in the event of involuntary realisation and applies when the asset:
- has been completely lost in an accident, for example, natural damage, fire, shipwreck, vandalism, flood or theft
or - has been expropriated
Conditions
For the business to be exempt from recognising the gain from the involuntary realisation as income, it must:
- use the compensation (consideration) to buy a new asset of the same type
and - the new asset must have been purchased, or a binding purchase agreement must have been entered into, by the end of the third year after the involuntary realisation
If the business has not purchased a new asset by the deadline, 80 percent of the gain must be placed in the profit and loss account in the year in which the deadline expires. The last 20 percent of the gain must be recognised as income in the year in which the deadline expires.
Example:
The compensation (consideration) the company has received for a fixed asset is NOK 1,000,000. The gain on the fixed asset is NOK 400,000.
The business uses the entire compensation of NOK 1,000,000 to purchase a new asset. The condition is then met for the entire gain of NOK 400,000.
If the business uses NOK 800,000, that is, 8/10 of the compensation to pirchase a new asset, then we calculate that 8/10 of the gain of NOK 400,000 (NOK 320,000) has been used (reinvested). In this case, NOK 80,000 must be entered as income.
Specific information on involuntary realisation of fixed assets in balance group j
The rules also apply to fixed assets that are depreciated on a separate collective balance for each building.
If the business has a negative balance when it writes down with the compensation on the collective balance for fixed technical installation in the building in question, it can be granted tax exemption for this amount.
The business must not calculate a gain for fixed assets in balance group j.
Supporting documents
You must retain your vouchers along with other supporting documents, but you do not have to include any attachments in the tax return. If the Tax Administration needs more information, we’ll contact you.