How much tax must I pay?
Property tax is a municipal tax that each municipality can levy pursuant to the Property Tax Act.
Each municipal council decides whether property tax should be levied in the municipality and to which properties it should apply. The municipal council also determines the tax rate that should apply.
However, the Property Tax Act imposes certain limits on municipalities. For example, the act sets limits on which properties are subject to property tax and the tax rate that can be applied.
The basis for calculating property tax
Property tax is calculated based on an estimated market value of the property. Two methods are used to determine this value:
- The municipality estimates the market value: The municipality estimates the market value using either a valuer who inspects the property from the outside or by using standard values, typically based on area. There is a long-term practice whereby the municipalities reduce the rate (local reduction factor) to a percentage of the estimated market value. The reduction amount varies from municipality to municipality. In this way, the municipality allows for some leeway that prevents some properties from being assigned an unrealistically high value. Some municipalities use cost price as a basis.
- The municipality can use the Norwegian Tax Administration's estimated market value for residential properties: The estimated market value is based either on statistics from SSB or the actual market value as documented by the property owner (when the owner has appealed to reduce the statistically estimated market value). The estimated market value is reduced by an obligatory reduction factor in order to prevent some properties ending up with an excessively high property tax basis. This reduction means that the basis for property tax cannot exceed 70 percent of the estimated market value in any particular year.
Regardless of which method is used for residential properties (and holiday homes that can be considered independent housing units), municipalities can also opt to reduce the basis for property tax further by using an annual basic deduction.
Calculating property tax and the tax rate
The Property Tax Act states that the tax rate must be between 0.2 and 0.7 percent of the property tax basis. For properties and holiday homes, the rate cannot exceed 0.5 percent of the property tax basis.
During the first year in which the municipality introduces property tax, the rate cannot exceed 0.1 percent. The increase in subsequent years cannot exceed 0.1 percent per year, until the maximum tax rate is reached. Nevertheless, the increase can be 0.2 percent if a basic deduction is introduced in the same year. The tax rate cannot be increased in a year in which a basic deduction is abolished.
Note that the tax rate may vary depending on the type of property concerned. For example, the rates can be different for residential properties and plots within the same municipality.