The National Budget 2021 – what it means for you running an SP or a small LLC

Illustrasjon til statsbudsjettet 2021

Sist oppdatert 31.12.2022

The proposition for the National Budget 2021 was introduced today, 7th of October 2020. Last year, when we had a majority government, it was a cakewalk. Now the government is in the minority at the Storting.

Therefore, the final budget is a bit less clear until it will finally be decided in December. We need to account for several rounds back and forth in the budget negotiations.

Especially between the government and former government partner The Progress Party (Fremskrittspartiet).

The government parties agreed with The Progress Party at the beginning of December, and after going through it I can see that the points below are not subject to change as a result of the agreement.

I have, as usual, seen parts of the proposition that have extra significance for you if you are running a small limited company or a sole proprietorship, whether it involves changes or continuing in the same track.

The blog article will be updated after the budget has finally been decided.

1) Tax on ordinary income

This is kept on the same level as before, both for persons and limited companies, meaning at 22%.

If this stays like this, this rate will have been unchanged in the last few years, after being gradually reduced to harmonize better with the rates in surrounding countries.

2) The bracket taxes in the National Budget 2021

The bracket tax kicks in at a bit higher amounts than in 2020, as well as the two lowest brackets being reduced by 0,2 per cent units (to 1,7 and 4 per cent).

Maximum effective marginal tax rates in the National Budget

No changes are suggested, meaning continued marginal tax on 53% (wage income including employer’s tax) and 49,6% (business income).

The minimum standard deduction in wage income

The rate is suggested to be increased from 45 to 46% of the wage income, and the upper limit to be increased from 104.450 NOK to 106.750 NOK. An increase of the per cent rate means to many people that running an LLC (and being employed) will be preferred over running an SP.

The maximum value of tax-free presents received in working relations

This point only applies to employees, including if you’re employed in your own limited company.

This applies to presents that consists of anything but money, for instance, Christmas presents, summer presents, gift cards that can’t be redeemed for cash and so on. It is suggested to increase the tax-free amount per year per employee from 2000 to 5000 NOK.

Depreciation of machines, inventory etc.

As a measure to heal the financial situation tied to the coronavirus, a start depreciation of 10% for newly purchased fixed assets that belong to balance group d (passenger cars, machines, inventory etc.) has been introduced. The start depreciation comes in addition to ordinary depreciation of 20%. The suggestion applies to purchases and costs from 20th of June 2020 (the time of approval of the measure from EFTA’s supervising organ (ESA)) to 31st of December 2020.

NB! Note that this applies to 2020, even though it is put in as part of the suggestion for the National Budget 2021.

VAT in the National Budget 2021

There are no suggestions for changes to the rates.

However: The government is suggesting to repeal the exception for VAT for alternative treatment, cosmetic surgery and cosmetic treatment.

Traffic insurance fee in next year’s budget

This is suggested to be applied to electric cars, with 2135 NOK in 2021.

The government is, at the same time, suggesting an increase of between 3,4 and 3,8 percent for other types of vehicles.

Flu vaccine

It is suggested to introduce tax deduction for flu vaccines funded by an employer. This seems to be a suggestion directed at LLCs, but it would be strange if SPs were not to also get this opportunity.

Extended deadline for advance tax for self-employed

Are you running an SP? If the Government gets their will, the deadline to pay advance tax for the second and fourth term will be extended by one month.

You can find more information about the National Budget 2021 on the Government’s website.

Is there something I have forgotten? Please send me an e-mail with your input.

Feel free to share this article if you think others could have use of it.

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