Navigating the complexities of business registration in Norway’s VAT system can be daunting, especially when faced with the delay in accessing crucial tax benefits. However, proactive measures can be taken to alleviate these challenges. This article explores the avenues available for businesses to register in the VAT system before reaching the ordinary registration threshold.
Enterprises doing business in Norway are not entitled to deduct input VAT for their acquisitions until the enterprise is formally registered for VAT. An ordinary registration can, as a main rule, only take place after a Norwegian turnover is documented. In the stage of starting up the Norwegian division, this delay can be both unpractical and offer a significant liquidity disadvantage.
Pre-register for VAT
Enterprises should be aware that there are solutions to this problem. The VAT Act provides opportunities for businesses to register in the VAT Register, before the ordinary registration limit for the VAT-register has been reached. The ordinary registration limit is currently NOK 50 000 in taxable turnover during a 12-month period.
The pre-registration options have one obvious advantage: Once a business is registered for VAT, the enterprise can deduct input VAT for costs relating to the registered business. The import of goods should also be significantly easier once registered.
The VAT Act sets out two possible grounds for a business to pre-register in the VAT register.
How to pre-register for VAT
Pre-registration option 1
Significant investments
The first option is aimed at businesses who make significant investments in the start-up phase. Without the possibility for early registration in the VAT Register, enterprises will not be able to continuously deduct VAT on these early investments, which may cause liquidity disadvantages.
Requirements to apply under option 1
There are three conditions that must be met, in order to pre-register in the VAT Register under option 1:
- The enterprise must document that there have been so-called “significant investments”. The threshold for significant investments is currently NOK 250 000 including VAT. Only investments that are subject to VAT can be considered.
- Once up and running, the enterprise should expect an annual turnover significantly above the registration limit (NOK 50000), and that it is likely that the business will be characterized as business activity. Start-ups in high-risk industries should be qualified as long as the initiative appears to be serious. The tax office would, among other things, emphasize whether the owner or other third-party lenders have invested considerable amounts in the business, or if the public sector has provided grants or granted a license for the business.
- The enterprise should not reach the registration limit during the first four months after the application for pre-registration is submitted. Such businesses must wait and apply for ordinary registration once turnover exceeds NOK 50 000.
Also read: VAT on e-commerce (VOEC) in Norway
Pre-registration option 2
Practical reasons
The second option is aimed at enterprises that will reach the registration threshold immediately or shortly after starting their business activities in Norway.
It is prohibited to issue invoices with VAT before registration. The registration process may take time, and could be as long as 3 weeks. Many enterprises will exceed the registration threshold already on the first invoice, and for these, it is very practical to be pre-registered.
Requirements to apply for option 2
The condition for pre-registration for practical reasons is that the VAT liable turnover from the business most likely will exceed the amount limit (NOK 50.000 in taxable turnover) no later than three weeks from the time the turnover is initiated. This can be documented and / or substantiated with contracts, information from public tender documents etc.
Also read: 6 tips for businesses: How to get a VAT refund in Norway
Where to apply for VAT and what happens next?
Applications for pre-registration are processed by the tax authorities. Applications must be sent online through the tax authorities registration portal. A Norwegian business registration number must be submitted before VAT registration is possible.
In the event of refusal of pre-registration, it is important to be aware of the right to a recurring tax settlement. This can be done in connection with an ordinary VAT registration. The right to deduct extends up to three years back in time.
If the application for pre-registration is approved, the business is VATregistered and has all the rights and obligations that this entails.
More on our website: VAT in Norway