Tax for general partnerships
In a general partnership (ANS or DA), the partners (owners) are personally liable for the company’s obligations. This also applies to tax. The company is therefore not a separate tax entity. You and the other partners in the partnership must pay tax on any profit.
Remuneration and distributions
When you work for the partnership, you do not receive salary for your work, but work remuneration may be paid. This is considered to constitute business income and will not be subject to employer's National Insurance contributions. Remuneration paid to the partners is deducted as an expense against the company's revenue.
It is also possible to distribute funds from the partnership to the owners. Distribution is defined as 'any transfer of assets from the partnership to partners that is free of charge.' Distribution is not considered to be an expense for the partnership and will therefore not reduce the calculated profit.
For partners in a general partnership, tax must be calculated on:
- work remuneration
- the partnership's profits
- distributions from the partnership
How much tax must be paid?
In most cases, the tax rate on the partners´ work remuneration is between 33.1 and 50.6 percent. There is also 22 percent tax on the partnership profits and 22 percent tax on distributions.
You and another person own a partnership which has been established for one year. You want to take out NOK 50,000 in work remuneration. The partnership's profit before the payment of work remuneration is NOK 90,000. You want to take out NOK 30,000 in distribution. You share the tax on the profit equally between you. The other partner does not take out remuneration or distribution. No contributions have been paid to the partnership either at the time of establishment or during the income year.
|Profit before work remuneration||NOK 90,000|
|- work remuneration||NOK 50,000||Personal income tax (tax 33.1 - 50.6%)|
|= Taxable profit||NOK 40,000||Ordinary income tax (tax 22%)|
|- your share of the tax on the profit||NOK 4,400||(NOK 40,000 which is shared between two people gives NOK 20,000*22/100)|
|- deduction for risk-free return||NOK 0||see below|
|= Basis for calculation of extra tax||NOK 25,600||The calculation basis for extra taxation is multiplied by the factor|
|x Factor||1,72||(Factor for 2022: 1,60)|
|Tax basis for distribution||NOK 44,032||Ordinary income tax (tax 22%)|
Specific information concerning the calculation basis for distributions
Deduction for risk-free return = risk-free interest rate x basis for the deductible risk-free return.
The risk-free interest rate is determined annually by the Ministry of Finance. The basis for the deductible risk-free return is either your contribution to the partnership as of the year-end or the acquisition cost for the share at the time you entered into the partnership. There are specific rules for shares purchased before 1 January 2006.
Repayments of paid-up capital will not constitute taxable income for you, but any repayments will reduce the basis for your deductible risk-free return and the input value in the event of the share being sold.
When calculating the basis for extra taxation on the distribution, consideration must be given to tax which you pay on your share of the profit. This provision was introduced to enable partners to receive distributions from the partnership in order to cover ongoing taxes on the profit, without being taxed for this.
After subtracting any deduction for risk-free return and the tax on your share of the profit, the calculation basis should be multiplied by a factor of 1.72 before the tax is calculated.
You will not be sent a tax invoice automatically. You must therefore alter your tax deduction card yourself and state how much you expect to take out in work remuneration, distributions and what your share of the profit will be. The Norwegian Tax Administration will calculate the amount of tax that you will have to pay based on the information given in your tax deduction card. For partnerships which are already operational, the calculation of tax on the profit will be based on the previous year's profit.
If you do not intend to take out work remuneration and the partnership expects to generate a loss, you should not alter your tax deduction card. The loss should be reported in your tax return instead.
How to pay the tax
After you have made the necessary changes in your tax deduction card, the Norwegian Tax Administration will send you a payment slip for the appropriate period.
Tax payments for work remuneration and distributions are split between four periods during the year:
- 15 March,
- 15 June,
- 15 September and
- 15 December.
This must be paid by the relevant deadline in order to avoid interest surcharge in the event of late payment.
You can pay extra tax if you suspect that the tax amount that was previously calculated may be too low because of an increase in turnover, for example: Additional advance tax. You then need to generate a KID number (on the Norwegian Tax Administration's website). You will also find the account number for paying the tax.
Reporting to the Norwegian Tax Administration
Profit/loss, work remuneration and distributions must be reported annually via your ordinary tax return for income and wealth tax. Depending on your turnover and business, you may need to complete a number of forms and attach them to the tax return when you submit it. For example, partnerships are generally required to submit 'RF-1215 Selskapsmelding for selskap med deltakerfastsetting' (Company tax return, etc. for business assessed as a partnership - in Norwegian only) and 'RF-1233 Selskapets melding over deltakerens formue og inntekt i selskap med deltakerfastsetting' (The business's statement of partner income and assets in a business assessed as a partnership - in Norwegian only).
Partners must submit the partner statement 'RF-1221 Deltakernes melding over egen formue og inntekt i selskap med deltakerfastsetting' (Partner statement of income and assets in business assessed as a partnership - in Norwegian only).
For the income year 2021, the company must submit the tax return with attachments directly via skatteetaten.no and Altinn, or via an accounting system or annual settlement program.
As of the income year 2023, companies assessed as a partnership (SDF) must submit the information via an accounting system or annual settlement program.
The deadline for submitting the tax return is 31 May and submission must take place electronically via Altinn.
Expenses attributable to the running of the partnership are generally deductible for the company. All expenses and acquisitions must be documented through original vouchers and recognised in the enterprise's accounts. Deductions for the use of cars, expenses for telephone and internet use (ECOM services) and deductions for home office expenses are subject to specific rules.
You can normally make deductions for expenses in connection with courses required to keep you up-to-date in your profession. Education and further education are not deductible expenses.