by Espen Nordbø

Business income is taxed at a flat rate of 28%. Recognition of taxable income will to a large extent be based on the leasing company's financial statements, with adjustments made for tax deprecation.

Generally, the person holding legal title to an asset used in income deriving activities will have the right to tax depreciation. However, the Directorate of Taxes has stated that when determining ownership for tax purposes, all rights, risks and obligations relating to the asset's residual value must be taken into account together with other contractual aspects. The Directorate has defined certain indicators for determining tax ownership which are similar to the indicators applied under Norwegian GAAP and IAS 17. However, the tax rules have a more generous threshold before the lessor loses the right to depreciation.

Business assets may be depreciated for tax purposes provided they suffer a reduction in value due to age or wear and tear, have an expected lifetime of three years or more and cost at least NOK 15,000.

The following business assets may be depreciated on a declining balance value:

a)

Office machinery/appliances

30%

b)

Purchased goodwill

20%

c)

Trucks, buses etc.

20%

d)

Cars, other machinery

15%

e)

Ships, rigs

14%

f)

Aircraft

12%

g)

Utilities for transmission and distribution of electrical energy, and electro technical equipment in power generation business

5%

h)

Factories, plants, hotels, restaurants, etc.

4%

i)

Commercial buildings, offices, etc.

2%

Assets belonging to groups a to d are pooled into a single pool for each class. Assets belonging to groups e to I are depreciated individually. The balance on each class or individual asset pool may be expensed when it falls below NOK 15,000.

Cross-border leasing is increasing; especially for high value moveable assets such as ships, rigs and aircraft. There is no withholding tax on lease rentals paid from Norway, and Norway has an extensive range of tax treaties that provide for zero rate withholding tax on lease payments, interest and dividends.

Cross-border leasing is increasing; especially for high value moveable assets such as ships, rigs and aircraft. There is no withholding tax on lease rentals paid from Norway, and Norway has an extensive range of tax treaties that provide for zero rate withholding tax on lease payments, interest and dividends.

Norway has not harmonized its VAT rules with the EU, and accordingly VAT issues must be explored on a case by case basis for cross-border transactions. Both finance and operating leasing are regarded as the provision of taxable services for VAT purposes. The Norwegian VAT rate is normally 24%, but lower rates may apply.

A special tax on investments applies for most VAT registered businesses. The tax is 7% of the purchase price. This tax will be abolished from 1 October 2002.

The content of this article is intended as a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.