In Norway, the declining-balance method of depreciation is mandatory for most capitalised assets. The depreciation rates given below are the maximum rates.
There is a duty to capitalise an asset that has a value of NOK 15,000 or higher and an economic life of at least three years.
|Asset||Depreciation rate (%)|
|Office equipment machines, etc. (asset group a)||30|
|Acquired goodwill/business value (asset group b)||20|
|Trucks, lorries, buses, taxis, vehicles for persons with disabilities (asset group c)||24/30 (1)|
|Machinery, cars, tractors, instruments, fixtures and furniture, etc. (asset group d)||20|
|Ships, vessels, offshore rigs, etc. (asset group e)||14|
|Aircraft, helicopters (asset group f)||12|
|Plant for transmission and distribution of electric power and electronic equipment in a power company (asset group g)||5|
|Buildings and construction, hotels, hostels, inns, etc. (asset group h)||4/6/10/20 (2)|
|Office buildings (asset group i)||2|
|Fixed technical installations in buildings (e.g. heating, cooling and freezing installations, electrical installation, sanitary installations, elevators). (aset group j)||10|
- An increased depreciation rate of 30% applies to certain electric delivery trucks.
- Livestock housing construction in agriculture can be depreciated at a rate of 6%. The applicable rate is 10% if, from the date of its erection, the structure has an economic life of 20 years or less. Costs for the establishment of fruit and berry fields can be depreciated as facilities at 20% and 10%, respectively, annually.
Norwegian tax regulations allow for accelerated depreciation of wind power plants. According to the rules, the main assets in wind power plants acquired between 19 June 2015 and 31 December 2021 can be depreciated on a linear basis over five years, provided that the project did not commence prior to 19 June 2015.
Special depreciation rules apply to assets moved in and out of Norwegian jurisdiction to and from companies resident outside the EEA.
Acquired goodwill may be amortised according to the declining-balance method at up to 20% per annum. Tax authorities have, however, in some cases questioned an allocation to goodwill and claimed that a part of the purchase price should be allocated to intellectual property (IP), concessions, etc. Intangibles other than goodwill are amortisable only if they are subject to an evident loss in value (impairment test) or if they are time-limited.
In general, start-up expenses are deductible, provided that the costs are borne by the company. Start-up costs could include costs related to registration in the Register of Business Enterprises, lawyers and accountant fees, drafting articles of association and shareholders agreement, etc.
In general, interest expenses are deductible. Norway does not have a rule distinguishing between different income categories (as in the United Kingdom). If income is exempt from taxation in Norway pursuant to a tax treaty, corresponding costs or losses are not tax deductible.
For corporations, special interest deduction limitation rules apply. Please see the detailed description under Thin capitalisation in the Group taxation section for further information.
In general, receivables are tax deductible if the debt is clearly irrecoverable or realised (e.g. if the receivable is sold to a third party, converted to share capital, or waived) and is sufficiently connected to the company’s business (the business requirement). For accounts receivables, a calculated rate multiplied by the total account receivables at year-end may be deducted. The rate is calculated based on the two preceding years losses on such receivables multiplied by a fixed rate set by the Ministry of Finance.
Losses on receivables between group companies (with more than 90% direct or indirect mutual ownership of shares) and partnerships are, as a main rule, not tax deductible. However, trade receivables and losses on receivables created in connection with mergers or demergers are deductible for tax purposes.
Donations to certain charitable institutions are tax deductible. The upper limit for the tax deduction per year is NOK 50,000 (NOK 25,000 from 1 January 2022). The donation must at least correspond to an amount of NOK 500 per charity. The same limit applies to individuals and companies. The receiving entity must be pre-approved by the Norwegian tax authorities.
Fines and penalties
Fines and penalties are normally not tax deductible. This also applies to some administrative charges that are penal in nature. Charges that have no statutory basis in Norwegian law may be tax deductible, provided that the general conditions are fulfilled.
Real estate tax, as well as foreign income and capital taxes paid by the taxpayer, are deductible when determining corporate income. Foreign taxes derived from income that is taxable in Norway are deductible only if they have not been credited against Norwegian tax payable.
Net operating losses
Losses may be carried forward indefinitely. Losses incurred in the year of ceasing business may be carried back for a period of two years.
Payments to foreign affiliates
Royalties and service fees paid to related foreign companies are fully deductible, provided they meet the arm’s-length principle. As regards loans, the tax authorities require that the entity in question is able to service its debts. In addition, any loan terms should be comparable to those that would have been agreed upon by unrelated parties. Interest on financing, to the extent that these rules are not satisfied, may be regarded as dividends and are thus non-deductible and, in certain cases, subject to Norwegian WHT. In addition, limitations on interest deductions apply to corporations. Please see the detailed description under Thin capitalisation in the Group taxation section for further information.