Prinsipputtalelse

Dispensation from certain provisions in the Bookkeeping Act and Bookkeeping Regulation

  • Published:

The Bookkeeping Act, section 13, last subsection

Regulated exceptions from the requirement for storage location:

Section 7-4 of the Bookkeeping Regulation sets out certain exceptions from the requirement that accounting records must be stored in Norway. If the entity with a bookkeeping obligation meets the conditions for these exemptions, there is no need to inform or apply to the Directorate of Taxes.

On 21 May 2010, the Ministry of Finance adopted a new section 7-5 in the Bookkeeping Regulation. The provision took effect on the same day and allows storage of electronic accounting records in other EEA states on specified conditions, including the condition that the Directorate of Taxes is notified in writing (notification) about such storage, see below. More information about the regulatory change.

Section 7-5 of the Bookkeeping Regulation provides a legal basis for the Directorate of Taxes to issue regulations regarding which EEA countries that at all times meet the conditions in the regulation. On 3 June 2010, the Directorate of Taxes issued a regulation regarding storage of electronic accounting records in other EEA countries. The regulation provides entities with a bookkeeping obligation the opportunity to store electronic accounting records in Denmark, Finland, Iceland and Sweden without having to apply. You can read our article regarding the regulatory change here. The article states that a notification to the Directorate of Taxes must contain the following information:

  • Which parts of the electronic accounting records are stored abroad, specifications, type of documentation, etc.
  • The company name and address where the accounting records will be stored abroad, i.e. where the server is located. Any changes in storage location must likewise be notified to the Directorate of Taxes.
  • How the control authorities can get access to the accounting records. This could be information about the relevant registered business address in Norway where the terminal and required passwords are kept.

Exemptions from the requirement for storage location upon application

If the entity with a bookkeeping obligation cannot use the exceptions to sections 7-4 or 7-5 of the Bookkeeping Regulation, yet wants to store accounting records abroad, it must apply to the Directorate of Taxes for dispensation pursuant to section 13, last subsection, of the Bookkeeping Act. As of 1 July 2010, the Directorate of Taxes has considered 777 applications regarding permanent storage of accounting records abroad. A considerable number of these are applications for storage in the Nordic Region, and they are cases that would meet the conditions for exemptions in the new section 7-5 of the Bookkeeping Regulation today. The Bookkeeping Act presupposes that accounting records are stored in Norway. To be granted dispensation from the Directorate of Taxes, it must be a problem for the enterprise with a bookkeeping obligation to meet the legal requirement to store said records in Norway. In this case, the Directorate of Taxes does not consider cost savings gained by foreign storage to constitute an independent basis for dispensation. Where dispensation has been granted so far, the deciding factor is whether storage abroad is part of a common accounting solution within a group company or similar amalgamated entities, and that the storage is taking place in a group company or similar abroad or under the control of such a company. They have also placed emphasis on whether the data is stored in a country with which Norway has entered into a tax treaty. Furthermore, there is a condition that accounting records stored abroad must be available in readable form in Norway, and that they can be printed during the entire storage period from a terminal or similar in Norway. Similarly, there is a condition that control authorities cannot be denied access to the accounting records. Note that specifications of mandatory accounting reports, see section 5 of the Bookkeeping Act, and documentation of the accounting system must be in Norwegian, Swedish, Danish or English even upon accounting and storage abroad, see section 12 of the Bookkeeping Act.

An application for dispensation for foreign storage of accounting records will not be granted unless said accounting records can be printed from a terminal in Norway. This means that accounting materials that only exist on paper normally must be stored in Norway.

Applications for dispensation must contain the following information:

  • The name and organisation number for the entity with a bookkeeping obligation.
  • The grounds for the application.
  • A short description of the relevant accounting records. 
  • Information about any group company affiliation or similar to the companies involved in storing the accounting records abroad. 
  • The company name and address to where the accounting records will be stored abroad (location of server). 
  • A confirmation that all material stored abroad can be read and printed from a terminal in Norway, as well as the name and address of such a location. 
  • Information about which languages are used in specifications of mandatory accounting reports and in documentation of the accounting system.

Regarding applications for dispensation from taxable entities with bookkeeping obligations without a place of business or domicile in the VAT area nor a VAT representative, we refer to a separate article.

Reduced storage period:

As of 1 July 2010, the Directorate of Taxes has considered 43 applications regarding reduced storage period. A fair share of these applications originate from enterprises that have ceased trading. The Directorate of Taxes notes that ceased trading does not constitute an independent basis for dispensation. The requirement to store accounting records for a specific period is one of the prerequisites for running an enterprise with a bookkeeping obligation, and one that is taken into account in other legislation. One example is how company law requires a dissolution board to ensure there are sufficient funds for a satisfactory period of storage. (Section 122 b of the Bankruptcy Act sets out separate rules for the estate administrator’s access to destroy accounting records for legal entities that cease to exist after bankruptcy.)

In Odelsting Proposition No. 46 (2003-2004) regarding the Act on bookkeeping, point 12.3.3, large amounts of paper vouchers are mentioned as a possible reason to grant dispensation. The Directorate of Taxes assumes that the amount of paper vouchers must be seen in context with what is considered normal in the relevant sector and with regards to the size of the enterprise. The full storage period must also be considered to be difficult for the applicant to comply with. In their practise of granting dispensation, the Directorate of Taxes assumes there must be factors that make it especially difficult to meet the storage requirement, and that there in all likelihood are no unclarified aspects of the accounts. For this reason, it is very rare that a reduced storage period of less than 3.5 years is granted. One example of a case wherein dispensation was granted is when the person with a bookkeeping obligation is deceased, and where the heirs have substantiated that it is problematic to continue storing the accounting records.

There are also a few applications regarding reduced storage period because the accounting records are damaged in a way that leads to decreased readability, and where costly repairs are required. In some of these cases, dispensation is granted where the age of the records and the need for control is weighed against the cost of the restoration.

Applications for a reduced storage period must at least contain the following:

  • The name and organisation number for the entity with a bookkeeping obligation.
  • A short description of the relevant accounting records (type and year).
  • An account of why the storage is considered to be difficult.
  • Any relevant information about controls carried out by public authorities.

The Bookkeeping Regulation, section 5-2-9, subsection 1

At the time when the Bookkeeping Regulation took effect, there were several schemes wherein the buyer could prepare a sales document on behalf of the seller (self-billing). As the Bookkeeping Regulation took effect, this was no longer allowed, with exception of some cases as set out in section 5-2-1, subsection 2, letters a to d.

As of 1 July 2010, the Directorate of Taxes has considered 270 applications for dispensation from the requirement in section 5-2-1, subsection 1, of the Bookkeeping Regulation, stating that sales documents must be issued by the seller. Almost all of these applications were received before the Bookkeeping Regulation was changed on 20 December 2006, where a new exception was added to the requirement that sales documents are issued by the seller, see section 5-2-1, subsection 3, letter e of the regulation. The change relates to buyers who in entirety or in part calculates the scope, weight, quality or similar as the basis for paying commissions or other considerations to the seller. Simultaneously, another subsection was added to section 5-1-3 of the regulation. This change means that buyers with a bookkeeping obligation who, pursuant to section 5-2-1, subsection 3, may issue a sales document on behalf of the seller, may state how much has been paid to the seller in question so far in the accounting year, instead of consecutively numbering each separate seller’s sales document. The new provisions regulated the practice of dispensation the Directorate of Taxes had established.

The Directorate of Taxes notes that for the buyer to create their own sales document pursuant to section 5-2-1, subsection 3, letter a, of the Bookkeeping Regulation, it is a condition that the seller does not know the basis for the invoice. This means that if both buyer and seller know the entire basis for the invoice, the seller must still issue the sales documents pursuant to the main rule of the regulation as set out in 5-2-1, subsection 1. However, if the seller must obtain the entire or parts of the invoice basis from the buyer, the provision on exceptions set out in section 5-2-1, subsection 2, letter e, can be used. The Directorate of Taxes did not receive enough applications to be able to describe a dispensation practice after the new exception in the regulation’s section 5-2-1, subsection 3, letter e, took effect.

An application for dispensation must, at minimum, contain the following information:

  • The name and organisation number for the entity with a bookkeeping obligation. 
  • Similar information for the other party/parties to the transactions 
  • The grounds for the application.
  • Information on turnover, scope of transactions, value-added tax liability, etc.
  • A description of the relevant routines and documentation from the buyer that will contribute to reduce the increased existential risk that will arise when the buyer prepares the sales document (their own expenditure voucher).
  • State whether there is any need for exceptions from the requirement of consecutively numbered vouchers from the seller, see section 5-1-3 of Bookkeeping Regulation. In this connection, please note that the enterprise may include other information in the sales document that make it possible to control the condition for completeness on the seller's part. This could be accumulated revenue between the parties so far in the accounting year.
  • If the application concerns an existing scheme, an example of the sales document (settlement) must be attached, as well as any additional documentation on the buyer’s part.

The Bookkeeping Regulation, section 5-2-9, subsection 2

As of 1 July 2010, the Directorate of Taxes has considered 14 applications regarding permission to prepare sales documents, including VAT, before the tax liable goods or services are delivered (advance invoicing). Such permits can be issued under special circumstances. One example is permission to several funeral homes. Headstones cannot be erected before the ground has settled, which may take months after the funeral. Among other things, it could be of particular importance when settling an estate to have all expenses determined and documented in immediate connection with the funeral.

The Directorate of Taxes also considered several applications to be able to issue sales documents in advance for services as set out in section 5-2-7, but for a period that is over one year. Therefore, the Directorate of Taxes has considered whether the legal basis set out in section 5-2-9, subsection 2, only allows for advance invoicing for a period up until a year in cases that are not regulated in section 5-2-7, or if it is also possible to allow advance invoicing of services as set out in section 5-2-7 for periods over one year. The Directorate of Taxes presupposes that the regulation must be interpreted in such a way that it does not prohibit an extended period of advance invoicing where special circumstances dictate that such invoicing should be allowed. In one case, they gave permission for advance invoicing of magazine subscribers for a period of two years. The deciding factor was that the customers were mainly private individuals that are not eligible to deduct VAT. Another important factor was that the scheme had existed for a long time. Some applications were denied, such as one application from a property company, who for practical reasons wanted to invoice the rent for the entire rental period (20 years) in advance, instead of dividing the amount in 20 invoices. The Directorate of Taxes concluded that such practical matters could not be considered special circumstances that gave grounds for dispensation.

  • An application for dispensation must, at minimum, contain the following information:
  • The name and organisation number for the entity with a bookkeeping obligation.
  • The grounds for the application. The reason why the rules of the regulation cannot be followed.
  • Information on turnover, scope of transactions, etc.
  • A description of what category of buyers (entities with a bookkeeping obligation or private consumers) will be invoiced in advance, and if the buyers will be entitled to deduct VAT.
  • An example of the sales document that is used.

The Bookkeeping Regulation, section 5-4, subsection 4

As of 1 July 2010, the Directorate of Taxes has considered 167 applications for dispensation from the requirement for a cash register, terminal or some other equivalent system as set out in section 5-3-2, subsection 1, of the Bookkeeping Regulation.

The legal basis for granting dispensation from the requirement for a cash register applies to “special circumstances”. Therefore, the Directorate of Taxes has only granted dispensations in special cases where it has been considered very impractical to use a cash register, terminal or some other equivalent system, or where other special reasons give grounds for dispensation. In addition, there are some time-limited exceptions, where for instance complicated electronic solutions must be individually adapted, or where the entity with a bookkeeping liability will cease trading within a reasonably short amount of time.

The Directorate of Taxes' starting point for considering the applications has been to consider whether it is possible to use a cash register, terminal or some other equivalent system as set out in the regulation. Whether other forms of documentation will be as secure as a cash register, terminal or some other equivalent system, as is claimed in some applications, is not a factor in and of itself, as the regulation primarily sets out the requirement that cash sales must be documented by using a cash register. If the Directorate of Taxes finds there are grounds for dispensation, as described in the preceding paragraph, it is on the premise that there are suitable alternative methods of documentation in place.

Many enquiries and applications come from entities with a bookkeeping obligation who make occasional sales and from enterprises that do not have a high cash sale measured in NOK. Section 5-4, subsection 1, of the Bookkeeping Regulation contains an exception for occasional or itinerant cash sales not exceeding three times the National Insurance basic amount (3 G) during a financial year (as of June 2009 this is NOK 218,643 excl. VAT). See the rulings regarding the exceptions from the requirements for a cash register and for itinerant businesses, joint cash register to learn more about the terms “occasional or itinerant cash sales”.

As mentioned in the ruling regarding the exceptions from the requirements for a cash register, there are two conditions that must be met. The cash sale must either be occasional or itinerant, and it must not exceed 3 G. If an enterprise has cash sales that do not exceed 3 G, this is not a reason in and of itself to be included in the exception. For instance would a pedicurist who takes on clients once a week, and who on a regular basis receives cash payments, not be said to have an occasional cash sale, even if the cash sale do not exceed 3 G. If the cash transactions are very few compared to the number of sales transactions, the cash sale would be considered occasional. The same applies if the number of cash sales transactions are so few that it is natural to describe the sales as occasional. One example could be a specialist within the field of psychology, who in average had four cash transactions per month, and where the cash sale was a small portion of the total sale.

When it comes to applications from entities with a bookkeeping obligation that have occasional cash sales, many substantiate their application by describing how difficult it is to provide electricity for or use cash register that run on electricity because of climate related reason. In such cases, the Directorate of Taxes has not granted dispensation. Note that this issue has been discussed and answered in the Storting, see Krav til kassaapparat (requirement for cash register - in Norwegian only).

Every entity with a bookkeeping obligation must consider whether their activity fall under any of the exceptions in the Bookkeeping Regulation. If the entity with a bookkeeping obligation think that their activity does not fall under the exceptions in the regulation, and that it is difficult to meet requirement for a cash register, terminal or similar equivalent system, they must apply for a dispensation.

Applications for dispensation must contain the following information:

  • The name and organisation number for the entity with a bookkeeping obligation.
  • The grounds for the application, including information on why the requirements in the Bookkeeping Regulation cannot be met.
  • A description of the goods for sale or the service. The scope of the cash sales, number of transactions, etc.
  • A description of routines, including other methods of documenting cash sales. Please attach an example of the documentation to the application.

Send the application to:

The Norwegian Tax Administration
P.O. Box 9200 - Grønland
0134 OSLO
Norway