Value added tax (VAT)

Value added tax, or VAT (mva in Norwegian), is the tax most founders understand the least and fear the most. It is actually quite logical once you see the mechanism: you are a collector on behalf of the state, not the one who ultimately bears the tax.

What VAT is, and how it flows

VAT is a tax on consumption. When you sell a VAT-liable good or service, you add VAT to the price and collect it from the customer — this is output VAT (utgående mva). When you yourself buy goods and services for the business, you pay VAT on them — input VAT (inngående mva). What you send to the state is the difference between output and input VAT.

The point is that the tax is ultimately borne by the end consumer, not by the businesses in the chain. The business is merely an intermediary that collects and passes it on. That is why VAT is not a cost for you once you are registered — but it is money you manage on behalf of the state, and that you must have ready for settlement.

The registration threshold as a mechanism

You do not become VAT-liable from the first krone. The obligation to register in the VAT Register (Merverdiavgiftsregisteret) arises when your VAT-liable turnover passes a certain threshold within a period of twelve months. The threshold itself is adjusted, and for some types of business special thresholds apply — you will find the current amount at the Tax Administration.

Not all turnover is VAT-liable. Some services are exempt from VAT (for example health, education and a number of financial services), and some are zero-rated (VAT-liable, but at a zero rate). There are also different rates for different goods and services. Because rates and exemptions change, you should check what applies to your particular business before you price and invoice.

The VAT return and terms

If you are registered, you report through the VAT return (mva-melding), usually every other month — six terms a year. Small businesses can apply to file annually. In the return you enter output and input VAT, and pay the difference (or get money back if input VAT is larger). The return is submitted digitally via Altinn or straight from the accounting system, and both the reporting and payment deadlines apply for each term.

Voluntary and advance registration

Sometimes it pays to enter the VAT system before you are obliged to. If you have large start-up investments with a lot of input VAT — equipment, inventory, development — you may miss out on deductions if you wait. The rules allow for advance registration and certain forms of voluntary registration in specific situations, so that you can deduct input VAT earlier. This is not relevant for everyone, and the conditions are specific, so check with the Tax Administration or your accountant whether it suits you.

If you trade with other countries, separate rules apply: on imports, VAT is calculated, and when buying certain services from abroad you may have to calculate the tax yourself. You do not need to memorise the details now, but be aware that cross-border trade has its own VAT rules.

Deductions and common mistakes

The main rule is that you can deduct input VAT on purchases used in the VAT-liable business. But there are important exceptions: VAT on entertainment (representation) and certain passenger vehicles is usually not deductible. Two mistakes recur — deducting VAT on private purchases or on costs without a right of deduction, and lacking the voucher that documents the deduction. A good accounting system and tidy vouchers solve most of it, but if you are in doubt about a specific item, ask your accountant before you record it.

Do this now

Work out whether what you sell is VAT-liable, exempt or zero-rated. Set up a simple way to track your turnover, so that you notice when you are approaching the registration threshold — and do not discover it too late. If you are already over it, register in the VAT Register and put the VAT terms into your calendar.