Tax can be daunting, and is among the most common reasons people give for not selling their handmade items. But with a little information you can easily get started without the risk of any major repercussions.
When do we have to pay it? How do you work out how much it will be? And what about mva?
I’ve put together the basics, the things you really do need to know. And it’s really not that scary after all.
- You pay 28% tax on any profit you make from the first day you begin selling, even if it’s just a hobby. Income accrued from a hobby should be declared on your tax return (selvangivelse) as an extra income.
- When you have a regular income from it then it is no longer a hobby. Notice I say regular, not high. Because it’s not about how much you earn but how often.
- You will need to register a business when you have reached that point. The scale of your project will determine whether you should set up and ENK (Enkeltpersonforetak) or an AS (Aksjeselskap). Most transitioning from hobby to business will choose to set up an ENK. It is a pretty painless task to switch to an AS later on if things really take off.
- As an ENK you are personally liable for any loses. Which means that if your business owes money but doesn’t have it in the bank, then it has to come out of your pocket.
- As an AS your business is liable for any loses up to the amount equalling your total start up capital. This is set to a minimum of 30,000kr. Which is the minimum sum you must put in to the business to start an AS. If your company owes anything on close of business then it will be difficult for creditors to get their money back once the bank account is empty. They cannot come to you personally for the money.
- You will need to be listed on the mva register when you reach 50,000kr worth of sales. This is not based on profit, but total sales before tax. So if you have sold for a total of 49,500kr and then need to send an invoice for 501kr you will need to charge mva on that invoice as it will take you over the 50,000kr threshold.
- In addition to the 28% tax on your profit you will also need to deduct either 11% trydeavift (social security payments) on any money you take out of the ENK or 14% arbeidsgiveravgift (employer tax) from your salary if your business is an AS.
Well, that’s the basics covered. Yes it does get more complicated later on as your business grows. But you learn as you go along.
Feel free to ask questions or add extra information in the comments box below.
Keep creating and don’t fret about tax. If in doubt ask Skattetaten.
I plan on selling crafts in Norway, however do not expect to make money from it for a long time. Do I not need to register myself a sole propietorship? How do I sell my products/have customers pay without a business number?
Hi Isabelle, I suggest you come and join us in our Facebook group (Called Handmade in Norway group). It’s a great way to get in contact with other makers, and I answer these kind of questions directly in the group too. I also run courses on exactly how to start selling your handmade products, we go through every step, from telling your story, using social media, when, where and how to register a business, and branding. The course is called The Handmade in Norway Scholarship as it’s a very comprehensive course that will tell you everything you need to know. I hope to see you in our Facebook group soon!