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When does something become a business activity?

Mann i blå kjeledress som bærer en verktøykasseSome activities are more like hobbies/leisure activities than business activities. The difference is decisive as regards tax liability. Income from a hobby is not taxable, whereas business income is taxable. If the extent of your activity is limited, this may suggest that it is a hobby. 

For the activity to be regarded as a taxable business activity it must be of a commercial nature, i.e. the content of the activity must be suited to generate a profit over a period of time. An activity that is potentially profitable might be considered to be  business activity even if it runs at a loss for the first few years.   
   
The activity must also be of a certain scope and be intended to continue for a certain length of time. Individual and more random assignments would normally not make you a self-employed person.   
   
If you are in doubt about how to classify an activity, you should contact the tax office and present complete information about the activity. If you are starting a business in a somewhat special and uncommon area, and the initial scope of the activity is limited, the tax authorities may consider this to be a hobby. This means that you will not be able to deduct expenses during the start-up phase, while you will be liable to pay tax as a self-employed person when you start to earn money. 

All income from the business activity is liable to taxation, and all business related expenses are deductible. The first income year in which your activity is considered to be a business you may get up to the previous five years approved as start-up years for the business, provided that you can show expenses and revenue connected to the business. You can show expenses incurred in previous years by submitting the form "Oppstart av virksomhet" for the relevant years along with the first income statement.

You are required to register for VAT if the activity reach a turnover of NOK 50 000 during a twelve month period (not necessarily a calendar year) and is classified as a business activity rather than a hobby. Once registered in the VAT register you are required to add VAT to the whole amount of the invoice that took your turnover past NOK 50 000. 

Siste endring på denne siden: 02.05.2016

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