This blog post describes how Ukrainians with temporary residence permit should report taxable income to the Norwegian Tax Authorities from private consultancy work. Ukrainian refugees coming to Norway have been given a temporary collective protection, meaning that they can stay and work in Norway without individual applications. The collective protection is valid for one year from the 11th of March 2022.
Many Ukrainians are doing different kinds of consultancy work remotely from Norway to clients abroad and locally, but there seems to be an information gap on how to report and pay taxes from this income.
If you have income from private consultancy or other sources where you are not considered a regular employee, you should follow the following steps after you have received temporary residence permit:
1. Apply for a tax card.
A tax card is mandatory in order to report salary to Norway, and as a foreigner you have the option to choose between a PAYE tax card with 25% fixed tax percentage, and a regular income based tax card.
Foreigners by default normally receives the 25% tax card, but you should consider this option carefully. A regular tax card actually gives a lower tax rate for annual salary up to NOK 510 000. On the other hand, if your annual salary is above NOK 644 700 you can not use a PAYE tax card.
Here is an in dept explanation about the 25% PAYE tax card: https://www.skatteetaten.no/en/person/foreign/are-you-intending-to-work-in-norway/tax-deduction-cards/paye/
2. Get access to Altinn – the online electronic portal.
A crucial element in order to operate a business or report taxes in Norway is to have access to Altinn.no. To get access, you must first order access codes by following the steps here: https://www.altinn.no/ui/Authentication.
3. Consider which business to register in Norway
If you are delivering consultancy work to a client, you should send invoices in order to receive funds. Before you can send an invoice, you will need a business entity with an organisation number to attach the income to. There are several options, and below are the ones we find most relevant.
a. Register a sole proprietorship (enkeltpersonforetak)
The easiest company structure is a private limited company called “Enkeltpersonforetak” or “Sole proprietorship”, which is an entity attached to you as a private person. After you have received login codes to Altinn.no, you can easily register such an entity here: https://www.altinn.no/en/forms-overview/bronnoysund-register-centre/coordinated-register-notification–registering-a-new-entity-or-changing-information-regarding-an-existing-entity-/
If you have registered a sole proprietorship and are ready to make some money, you should take a step back and consider how much you believe you will earn the current year. For revenue below NOK 50 000 you do not need to file a complete tax return for business owners, but a simplified version. Please note that when you have business income in a sole proprietorship, your personal income taxes are not based on the tax card you have applied for, but rather the total profit in your business.
b. Register an LLC
An LLC (limited liability company) or “AS” as we call it in Norway is the most preferred business model, but it comes with a cost. The advantage is that you can employ yourself in such an entity, and the authorities will consider you as a regular employee. You are not personally liable for the company, except from the minimum share capital of NOK 30 000. The costs involved are higher than in a sole proprietorship, as you may need an accountant to assist with annual tax reports and VAT registrations. After a revenue threshold there is also mandatory with an auditor approving your annual accounts. With an LLC you can report your own salary through the online portal Altinn.no, and here is an explanation of how to do this: https://www.altinn.no/en/start-and-run-business/working-conditions/pay/a-melding/.
c. Use a third party vendor to send invoices and employ you
If your income from the consultancy business is ad-hoc and not very consistent, it may be an idea to consider using a third-party vendor to issue invoices from. You will then not need to register a business, but will be considered an employee of this vendor for the time you spend on business activities. We would recommend have a closer look at Frilansfinans (https://www.frilansfinans.no/en/) or Cool Company (https://coolcompany.com/no/). For longer and more consistent contract, you may also look at the “Employer of Record” option through GTS Nordic Norway AS (https://gtsnordic.com/norway/).
With option a) and b) you will need an invoicing software to issue invoices with, as it is not legal to raise invoices manually from Excel or Word. We recommend have a closer look at https://fiken.no/, https://www.poweroffice.no/, https://24sevenoffice.com/no/ or https://www.sendregning.no/. The latter one is only for invoice issuing, while the other ones are larger systems with accounting, payroll etc included.
In this blog post we have used some expressions that might need to be explained:
Salary – a salary is the personal income you receive as a private person.
Business income – the invoice amount that you invoice clients. Must not be mixed up with a salary income.
Profit – business income (sales) minus business costs. Please note that in sole proprietorships an ownership “salary” is not considered a business cost.
Feel free to contact ECOVIS Norway if you need assistance with registering an entity, tax advice, work permits or accounting.