National budget 2025: VAT, excise taxes and customs duties

On October 7, 2024, the Støre government presented its proposal for the 2025 national budget. No significant changes have been announced for most businesses. However, the budget contains a proposal that could have considerable consequences for municipalities and water and wastewater sector actors.

Reduced VAT on water and wastewater

The government's most notable VAT proposal is to reduce the VAT rate for water and wastewater (VA) from 25% to 15%. The government has justified this proposal as an attempt to lower living costs for households that have experienced significant price increases and rising interest rates over the past year.

If the proposal is adopted, VAT-registered businesses can apply the reduced rate when selling and withdrawing water from waterworks and for wastewater services. With approximately 85% of the Norwegian population connected to the municipal VA network, this measure will be particularly relevant for the municipal water and wastewater sector.

The proposal also includes cases that fall outside the provisions for water and wastewater fees. As the proposal currently stands, private companies' charges to their subscribers, as well as municipalities' charges for the sale of water or wastewater services to other cities, will also be included in the proposed reduced VAT rate.

The department will send a proposal for changes to the VAT regulations for consultation in the fall of 2024. Further information about the details of the proposal will be provided then.

Increase in insignificant value for VAT

Additionally, the government proposes raising the threshold for insignificant value from NOK 100 to NOK 200. This means that goods and services below this threshold will be exempt from VAT. This measure is relevant for exchanging gifts, promotional items, and sales from charitable organizations and is justified by the general price increase since 2010.

Adjustment of excise taxes

The government has also proposed a price adjustment of excise taxes for 2025, increasing tax rates for various products, including alcohol, tobacco, greenhouse gas emissions, lubricating oil, and sugar.

Customs duties and trade agreements

Regarding customs duties, the government is further developing multilateral trade agreements through the WTO, aiming to create stable conditions for economic growth. Norway and EFTA member states have signed 32 free trade agreements with 43 countries and customs areas.

What does this mean for you as a business owner?

The proposed changes to VAT, excise duties, and tariffs may bring advantages and disadvantages. Reducing the VAT rate on water and sewage services may affect how you, as a water and sewage industry business operator, must now invoice costs to your customers. This is especially relevant if your goods and services have different VAT rates. Raising the threshold for trivial value may simplify reporting small transactions, depending on your sector. You should also be prepared for increased excise duties that could impact pricing on certain goods. As a business owner, you must assess how these changes affect your cost structure and the potential to benefit from the proposed measures.

Uncertain about how this affects you?

Our lawyers have experience handling and reporting VAT and taxes, and we are happy to assist you. Contact us for a no-obligation consultation and review.

Questions about VAT, excise tax or custom duties?

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