In this context, ‘related party’ means spouses or individuals to whom the shareholder is related by blood or marriage in an ascending or descending line, or in a lateral branch up to and including uncles and aunts. This is described in the provision on dividends in the Taxation Act (in Norwegian only).

Rent or use of company assets

• If the company acquires an asset as a business investment, you as a shareholder/related party should generally pay market price when renting this asset.
• If the main purpose of the acquisition is private use and this use results in an income reduction or loss for the company due to the commonality of interest, the shareholder/related party must cover all loan expenses, operating expenses and yield on invested capital exceeding paid market price. This is on the presumption that the company’s costs for the private use is higher than the market price.

  Examples of when market price does not cover the company’s costs

  When the market price does not cover the company’s costs for the private use

  The examples show what you as a shareholder/related party must pay in rent when the purchase and use of an asset is mainly for your or a related party’s private use. 

  If you have not paid rent, a corresponding amount must be reported as a taxable dividend.

  If you have paid rent that does not cover the company’s costs, the difference must be reported as a taxable dividend.

  The company must recognize the missing rental income as a taxable withdrawal.

  Example 1 - Property

  The purchase price including improvements is NOK 6,000,000

  Relevant costs including value added tax related to the company’s property	NOK
  Fixtures and fittings	50,000
  Maintenance and repairs	55,000
  Miscellaneous other expenses, insurance, electricity, etc.	25,000
  Interest expenses	0
  Yield on invested capital*	84,000
  Calculated rent	214,000
  Paid rent or reported dividend	100,000
  Underpaid rent or dividend	114,000

   

  *In the example, we’ve assumed that the company has used its unrestricted equity to make the acquisition, and an interest rate of 1.4 percent has been used on the acquisition cost.

  The rent a shareholder/related party should pay is NOK 214,000. The taxable dividend is the difference between paid rent (NOK 100,000) and the calculated rent (NOK 214,000), that is NOK 114,000.

  Even if the price on the open market indicates a rent of NOK 100,000, the shareholder/related party must pay or report a taxable dividend of another NOK 114,000 when the main purpose of the acquisition is the private interest of the shareholder/related party.

  Example 2 - Boat

  The acquisition costs is NOK 5,000,000 including value added tax.

  Relevant costs including value added tax related to the company’s boat	NOK
  Fuel	80,000
  Insurance	50,000
  Rent of mooring space	60,000
  Maintenance and repairs	40,000
  Miscellaneous other expenses	75,000
  Interest expenses*	75,000
  Depreciation**	150,000
  Yield on invested capital***	35,000
  Calculated rent	565,000

   

  *Loan for the purchase of the boat, NOK 2,500,000 – 3 percent interest.

  **Example depreciation – real loss in value or best estimate – for example, 3–5 percent.

  ***Equity funding of NOK 2,500,000 – 1.4 percent interest.

  In the example, it is assumed that you as a shareholder/related party do not pay rent for the use of the boat and that the calculated rent that you must pay or report as a taxable dividend, is a minimum of NOK 565,000

A commonality of interest generally exists when a shareholder owns more than 50 percent of the shares. However, the real influence on the company will be decisive.

Loss of yield on invested capital

Even if the loan and operating expenses are paid with your private funds, the company may still suffer a loss if the acquisition is equity funded.

• As a shareholder/related party, you must pay rent to the company or report the calculated rent as taxable dividend corresponding to the lost yield of the company’s invested capital.
• The company must add the lost yield as a taxable withdrawal.

Incorrect rent price the tax return

If it turns out that you have entered an incorrect rent price, the Tax Administration may change your tax assessment on a discretionary basis, impose additional tax, and:

• for you as a shareholder/related party, add the amount as a taxable dividend 
• for the company, add the amount as a taxable withdrawal (reversal of private operating expenses and loan costs and yield on invested capital) 

Value added tax

If the company has acquired and deducted input value added tax on expenses related to the private use, the tax is added as a dividend to you as a shareholder/related party.

All deducted input value added tax, both on the acquisition and operating expenses, will be returned to the company in keeping with the amounts on the VAT returns.