Using your own home for business purposes
If you use parts of your own home for business purposes, you can claim a deduction for this in the business income.
Does this apply to me?
This applies to you if you use a part of your own home for business purposes, such as a home office, head office for the business, sales outlet, workshop, or warehouse.
When can I claim deductions?
To claim a deduction, the room in your home must be used only for business purposes. If the room is also used for private purposes, you cannot claim a deduction.
An example of a room that gives the right to a deduction is a designated home office that is not used privately.
When you own a sole proprietorship, you may only claim deductions for those expenses that are linked to the business activity. You cannot claim a deduction for calculated rent.
If you have expenses that also apply to private use, you must divide them between private use and business use.
If you conduct your business via a private limited company, the company’s expenses for renting an area in your private residential property will be considered an ordinary operating expense.
For the company to claim a deduction, a real rental agreement must exist between the owner and the company. The rental expense must correspond to the market rent, in other words, what others would have paid to rent your premises. If the rent you calculate is too high, the excess amount will be considered private withdrawal of dividend or salary from the private limited company.
The following questions are among those you must consider:
- Is there a written agreement between you as the lessor and the private limited company as the lessee?
- Does the private limited company have the sole use of the rented area?
- Does the area have a separate entrance so that the lessee can access it without having to go through the private living area?
- Are the rooms equipped for business purposes in such a way that they cannot easily be converted to another purpose?
- Does the private limited company own the equipment in the rooms, or do they rent it?
- Is the rental expense proportionate to the scope of the business?
- Are the premises used by other employees in the private limited company?
- Are the premises used to receive customers?
- Do the premises have direct access to their own toilet?
- Are the premises’ location made known, for example, by a sign outside the building and information on a webpage?
- Are the premises used during normal working hours?
- Are the premises the only office that the private limited company has
The above list is not exhaustive and none of the factors are decisive on their own but must be seen in connection with the other factors.
Examples of rental agreements that are not real:
- the company rents your private garage for a car that’s used privately by you
- the company covers the rental expenses for your private garage
Unless a real rental agreement exists, payment for the use of your private home, garage and similar, will be considered salary or dividend from the private limited company.
Home office
When you conduct your business together with others in a business assessed as a partnership, deductions for a home office are calculated and assessed by the individual partner.
Other use
Businesses assessed as partnerships can claim deductions for the partners’ rental expenses in the same way as a private limited company.
Unless a real rental agreement exists, payment for the use of your private home, garage and similar, will be considered distributions or remunerations for work.
Deductions according to standard rates or actual expenses
Standard rates
When you use at least 50 percent of the residential property as your own home (calculated according to the rental value), you can choose whether to use a standard rate or to claim deductions for the actual expenses for the part of the building that you use for business purposes. This also applies if you rent out a larger part of your home, as long as the total rental income during the year does not exceed NOK 20,000.
Actual expenses
These are expenses for electricity, maintenance, and the share of the fixed expenses for the entire building, such as insurance, municipal taxes, and external maintenance. When determining the deductions, you must show and prove the expenses related to the part of the building that’s exclusively used for business purposes.
When you rent your home, you must divide the expenses between the residential part and the part used for business purposes. You only get deductions in the business income for the part that’s related to the business activity.
The private limited company is entitled to deductions for the amount that the company pays to you personally for the actual rent of your private premises. If the private limited company pays you an expense allowance according to standard rates, the company can deduct this as a salary expense.
As a salary recipient in the private limited company, expenses that are not covered by the company will be included in the basic allowance.
Example:
If the private limited company pays NOK 25,000 per month for premises with a market value of NOK 20,000 kroner, NOK 5,000 is considered dividend or salary. The company can only deduct NOK 20,000 as rental expenses.
Home office
Home office – rates for tax-free expense allowance not subject to withholding tax
Selling a residential property that has been used for business purposes
If you sell your residential property that has also been used for business purposes, you must pay tax on the share of the profit that is related to the business use. This applies even if the residential property otherwise can be sold tax free.
However, if you’re a salary recipient in your own private limited company, you’re considered to have lived also in that part of the building that has been used professionally but not been rented out to the company. The profit from the sale of the entire building is then tax free if the requirements are otherwise met.