Hobby or commercial activity?
In order for an activity to be accepted as commercial, it must be carried out on your own account and at your own risk and have a certain scope and duration. In addition, over time it must be suitable to generate a profit.
Why separate hobby and commercial activity?
Some activities can be characterised more as a hobby than as a commercial activity. The boundary between the two is not defined in the legislation, but hobbies are tax-free, while commercial activity is taxable. In other words, the difference will determine how you should be taxed and whether you are entitled to deductions for your expenses. It is the Norwegian Tax Administration which decides whether an activity is a hobby or a business, but you should first assess whether you should declare your activity as a taxable activity.
When is the activity a hobby?
If the scope of your activity is limited and your expenses are about the same as your income, it may count in favour of you pursuing a hobby. Profits from hobbies are not taxable income.
An activity which has the characteristics of a hobby or which is simply a one-off event will not be considered to be a commercial activity and cannot be registered as a sole proprietorship with the Brønnøysund Register Centre.
The Brønnøysund Register Centre – Am I running a business?
Your hobby has become a business
Over time, a hobby can develop into commercial activity. Once your activity meets the requirements to be considered as a business, all your income attributable to the enterprise will be taxable and all your expenses will be deductible. As a business, you are obligated to keep accounts and you must submit the tax return for businesses. If you receive a tax return for wage earners, you must add the business information to the tax return (you can search for this in the search field of the tax return).
The Norwegian Tax Administration's guide - get help to find out whether you are self-employed
Startup period
From the first year in which you are considered to be self-employed, you can have up to the previous five years approved as start-up years for the enterprise. This only applies to those who start a sole proprietorship. To claim deductions for startup costs from previous years, you must submit a new tax return with business information for each of the last three years. If there's a need to amend years four and five retrospectively, you can request this by submitting an appeal.
If your tax settlements are changed for the startup period, you will receive deductions for actual expenses incurred. It is therefore important to retain all your income and expense vouchers linked to your activity from the first day.
The Norwegian Tax Administration - about the start-up period
Once you have been approved as a sole proprietor, you will be subject to the bookkeeping obligation and you must submit the tax return for self-employed persons.
The Norwegian Tax Administration – Tax return for businesses
If you consider your activity to be a hobby but still generate income from it, this income may be taxable and must be reported in your tax return. If you are unsure whether to declare this income, contact the Norwegian Tax Administration for guidance.
