Understanding local company car taxation is essential for foreign companies operating in Norway with employees who use company cars. Norwegian tax authorities have specific rules on private vehicle use, and non-compliance can lead to unexpected tax liabilities. In this blog, we will examine the rules and the employer’s obligations, the lines between when taxation applies and when it does not, and the documentation requirements.
Company car taxation in Norway is an important topic for foreign companies, with employees who are taxable in Norway and use company cars in their work. Norwegian tax regulations impose strict requirements on how private use of company cars should be treated, and employers operating in Norway must be familiar with the rules. Correct reporting and accurate calculation of company car taxation help avoid unexpected tax claims and ensure that the company meets its obligations.
Private use of a company car is considered a form of taxable income in Norway. This means that employees who use the company car for private driving, such as commuting between home and work, must pay tax on the benefit. This tax obligation applies to any employee with a company car at their disposal, including owners of companies employed in their own company.
Also read: A brief guide to your Norwegian tax return.
If the company car is only used occasionally for private driving—defined as a maximum of 10 days and 1,000 kilometers per year—this use is considered tax-free. To ensure that the use falls within the limits for occasional use, it is recommended that employees maintain a mileage log. A mileage log is a simple way to document the number of kilometers driven for work purposes and private use. This can help avoid doubts during later audits and makes it easier for the employer to assess whether the use triggers tax liability.
The taxable benefit calculation for the company car's private use is based on the car's list price when new, including any optional extras. The list price is the price the manufacturer or dealer sets before any discounts, promotions, or negotiations.
The list price forms the basis for the calculation and applies regardless of whether the car is purchased new or used. However, for company cars older than three years or used extensively for business purposes, the employer may use a lower calculation basis, which can reduce the tax burden for the employee. The employer needs to consider this when reporting to Norwegian tax authorities.
Specifically for certain types of vans and smaller trucks, the employer can choose between two methods for calculating taxable income—the standard rule or a kilometer rate. The standard rule involves calculating the taxable benefit based on the car's list price when new. Still, for this type of vehicle, the employer can instead choose to use a kilometer rate, which provides an alternative basis for calculation. This choice applies for the entire year and must be made before the year begins.
If the employer covers certain private costs associated with using the company car, such as tolls, parking fees, and ferry tickets, these benefits are taxable and must be reported separately. This is because they constitute an additional benefit for the employee.
To manage the requirements for correct reporting and ensure that all documentation is in order, foreign companies operating in Norway should familiarize themselves with Norwegian regulations or seek assistance from an expert. Norwegian company car taxation is complex, and it can be challenging for foreign companies to navigate this landscape. The tax rules require an accurate assessment of the car's value and usage pattern, which can involve significant administrative requirements.
First, the employee must maintain a mileage log. Foreign employers with taxable employees in Norway should, therefore, inform their employees about the Norwegian regulations regarding company car taxation and require the maintenance of a mileage log.
Furthermore, the employer must include the taxable benefit in the monthly payroll reporting, known as the A-melding. The taxable benefit for private use of the vehicle must be reported in the A-melding for each month the car has been available. This gives the tax authorities the necessary information to calculate the employee's taxable income. Correct and timely reporting of the benefits associated with company car use is necessary to avoid penalties for the employer and any additional tax for the employee.
Also read: 9 things to know for foreign companies hiring in Norway.
Company car taxation in Norway for foreign companies is complex and requires a good understanding of the rules. Private use of company cars is considered taxable income, and tax is often calculated based on the car's list price when new. Occasional use, up to 10 days and 1,000 kilometers per year may be exempt from taxation. Correct reporting via the A-melding is essential to avoid sanctions, and maintaining a mileage log is recommended for documentation. Foreign employers should guide employees on the requirements and ensure correct documentation to fulfill Norwegian obligations. It is also advisable for employers to seek assistance from an expert to navigate the complexities of Norwegian company car taxation effectively.