Tax for general partnerships

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

Tax Act on which companies must undergo tax assessment (in Norwegian only)

How much tax must be paid?

In most cases, the tax rate on the partners´ work remuneration is between 33 and 50.6 percent. There is also 22 percent tax on the partnership profits and 22 percent tax on distributions.

Example

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.

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.

The shareholder model

Risk-free interest rate for shares

Advance tax

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.

Amend tax deduction card/advance tax

Loss

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.

Generate KID numbers for tax for businesses

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. Partnerships are generally required to submit "Tax return with business specifications"

The tax return should contain information about:

• The partners' shares in the company
• Distribution of income and wealth among the partners
• Distributions to the partners
• Transfer of shares
• Business specifications

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 partners´ tax return should contain, among other things, the following information:

• The partners´ share of company assets/wealth
• Share of the company's profit or loss
• Compensation for work (personal income)
• Distributions
• Profit/loss on sale of share

The deadline for submitting the tax return is 31 May and submission must take place electronically via Altinn.

Deductions

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.