Income deductions in connection with investments in start-up businesses - the tax incentive scheme
Personal taxpayers can claim a deduction from their general income of up to NOK 500,000 per year for share contributions to start-up companies.
Tiltakspakke - utvider fradragsordningen
- Beløpsgrensen heves til 1 mill. kroner per investor.
- Grensen for aksjeinnskudd i foretakene økes til 5 mill. kroner.
- Som et midlertidig tiltak for inntektsårene 2020 og 2021 utvides ordningen til å omfatte ansatte og deres nærstående
This deduction entitlement comes in addition to the normal right to include the share contribution in the input value of the shares being invested in. The share contribution must amount to at least NOK 30,000 in order to give entitlement to the deduction.
Annually, companies can receive a maximum of NOK 1.5 million in contributions that are entitled to the deduction. As an investor, you can claim a deduction (amounting to 23 percent of the investment for 2018 and 22 percent for 2019) from your general income of up to NOK 500,000 per year, leading to a possible reduction in the total tax burden by up to NOK 110,000 for the income year 2019.
What do I need to do?
You can invest in the start-up company either directly or through a limited company that you wholly or partly own when you participate in either the establishment or new share issue of the start-up company. In order to claim the income deduction, the company you're investing in (and any intermediate companies) must provide the tax authorities with information about the personal taxpayers who have made eligible share contributions. The start-up company (and any intermediate companies) must report this information in the Shareholder register statement (RF-1086). If they report this information correctly, the eligible contributions will be pre-filled in your tax return.
From the date of the investment, both you and the company will be subject to certain obligations for a period of three years:
- The company can't distribute dividends or make payments in connection with capital reductions during the three-year period.
- You and associates can't be, or previously have been, shareholders in the company/group in which the investment is made.
- You and associates also can't be, become or have been employees of the company/group during the three-year period.
- You must also retain possession of your shares for the year it was acquired and the three following years.
- Under the regulations, if you invest in year 1, you will not be able to sell the shares, receive dividends etc. until year 5; if you do, the deduction shall be reversed. If the rules are broken, the entire tax benefit will be reversed.
Here is an overview of the requirements which must be met in order to make use of the scheme:
Requirements on investors:
- Direct or indirect investment (if indirect investment from a private limited company, the owners will have a proportional allocation according to their stake in the company making the investment);
- Minimum amount of NOK 30,000 per company, maximum of NOK 500,000 per year;
- The investor or his or her associates must not be or have been shareholders in the company being invested in;
- Cannot be, have been or become employed by the company during the three-year period;
- Must own the shares for at least three calendar years after the end of the calendar year in which the contribution/investment was registered in the Register of Business Enterprises;
- During the three-year period, the investor cannot receive distributions in connection with capital reductions or dividends from the company.
Requirements on the company:
- Up to 6 years old;
- Fewer than 25 employees, calculated according to full-time equivalents - operating revenues not exceeding NOK 40 million;
- Balance sheet total maximum of NOK 40 million;
- Annual salary basis minimum of NOK 400,000;
- Must primarily carry on activity other than passive capital management;
- Can receive a maximum of NOK 1.5 million under the scheme annually;
- New share issues either through establishment or capital increase;
- Must be a Norwegian private limited company or equivalent foreign company domiciled within the EEA and liable to pay tax to Norway;
- Cannot be experiencing financial difficulties at the time of the capital increase;
- Must report amounts received and investors to the Norwegian Tax Administration (RF-1086).
For a more detailed description of the scheme, see the guide Skatte-ABC (in Norwegian only) under the topic "Shares – share contributions in start-up companies" and Section 6-53 of the Tax Act.