How to deduct VAT in Norway?

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. 

Is your business entitled to deduct VAT in Norway?

Enterprises doing business in Norway are not entitled to deduct input VAT for their acquisitions until they are formally registered for VAT. Ordinary registration can, as a main rule, only take place after a Norwegian turnover is documented. In the stage of starting the Norwegian division, this delay can be impractical and offer a significant liquidity disadvantage. The solution is to pre-register for VAT.

Pre-register for VAT to deduct VAT

The VAT Act allows businesses to register in the VAT Register before the ordinary registration limit 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 related to the registered business. Once registered, the import of goods should also be significantly easier.

Also read: How do you get a VAT refund in Norway?

How to pre-register your business for VAT

The VAT Act sets out two possible grounds for a business to pre-register in the VAT register. 

Pre-register VAT - option 1

Significant investments

The first option is aimed at businesses that 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

Three conditions must be met to pre-register in the VAT Register under option 1:

• The enterprise must document 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 it is likely that the business will be characterized as a business activity. Start-ups in high-risk industries should be qualified if the initiative appears 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 their turnover exceeds NOK 50,000.

Also read: VAT on e-commerce (VOEC) in Norway

Pre-register VAT - 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 already exceed the registration threshold on the first invoice, so it is very practical to be pre-registered.

Requirements to apply for option 2

For practical reasons, the condition for pre-registration is that the VAT-liable turnover from the business will most likely 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 do you apply for VAT registration?

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 VAT registered and has all the rights and obligations that this entails.