What are the tax rules when you buy and sell property in Norway?
Between the viewings and bidding rounds, buying property in Norway can be a stressful process. Once everything is agreed upon, will you need to worry about any taxes?
Buying a home is typically one of the most significant outlays anyone will ever make, with a decades-long commitment to pay off your mortgage.
So before putting ink to paper (although if you've already put a bid in, it's legally binding) on a purchase, you'd like to be aware of any taxes you'll be liable to pay for completing the transaction.
Additionally, if you've sold your home for a tidy profit and are planning for the future, you'd appreciate knowing whether the tax agency is due a percentage.
For the most part, whether you will need to pay tax on a property sale or purchase in Norway will be dependent on a few factors.
Typically, the tax that most home buyers will need to be aware of is dokumentavgift or stamp duty. When buying a freehold property in Norway, you must pay 2.5 percent of the purchase to the state in stamp duty. Unfortunately, banks in Norway don't offer financing for stamp duty, so it's worth remembering that you will need to pay this cost.
One of the main benefits of buying into a housing association over a freehold is that you are not liable to pay any stamp duty.
Stamp duty also applies when the deed of the house changes hands or is transferred as an advance on inheritance.
Generally, any gains and losses on the property are taxable or tax deductible. However, you can be exempt if two conditions are met.
Firstly, any profits or losses made on the sale of a home are tax-free if the sale occurs more than one year after you acquired the property. This applies when you buy a house and inherit or are gifted a home.
The second criteria applies to a period of occupancy in the home. Essentially, the owner will need to have lived in the dwelling for 12 months or one full year of the previous 24 months when the sale takes place.
If you have any gains or losses that need reporting to the Norwegian Tax Administration, you will need to report them for the tax return for the year in which the property is sold. For example, if you sell a home in 2023, you will report it in the 2023 return which arrives in 2024.
If you are exempt, then any losses on a home can't be made tax deductible.
Other tax considerations
When purchasing a property, other taxes may not be related to the transaction but will be relevant for you as a homeowner.
For example, homeowners in Norway are required to pay property tax. Property tax is a municipal tax that local authorities charge each year. Municipalities decide how much tax they want to charge. They can charge between 0.1 and 0.7 percent of an estimated market value for a property.
Additionally, real estate counts as a person's wealth. You will be charged wealth tax if your property and assets amount to a high enough total value. Residents of Norway are taxed on their wealth above 1.7 million kroner at a rate of one percent (or higher for those with a higher net wealth).
However, the tax takes into account net wealth. Therefore, if you have a mortgage on the property, you won't be charged wealth tax on the full value of your home, as what you owe the bank will be deducted from the market value. Additionally, one's primary residence is only valued at 25 percent of the market value for tax purposes. This means many don't owe a lot (if anything) in wealth tax through home ownership alone.
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Buying a home is typically one of the most significant outlays anyone will ever make, with a decades-long commitment to pay off your mortgage.
So before putting ink to paper (although if you've already put a bid in, it's legally binding) on a purchase, you'd like to be aware of any taxes you'll be liable to pay for completing the transaction.
Additionally, if you've sold your home for a tidy profit and are planning for the future, you'd appreciate knowing whether the tax agency is due a percentage.
For the most part, whether you will need to pay tax on a property sale or purchase in Norway will be dependent on a few factors.
Typically, the tax that most home buyers will need to be aware of is dokumentavgift or stamp duty. When buying a freehold property in Norway, you must pay 2.5 percent of the purchase to the state in stamp duty. Unfortunately, banks in Norway don't offer financing for stamp duty, so it's worth remembering that you will need to pay this cost.
One of the main benefits of buying into a housing association over a freehold is that you are not liable to pay any stamp duty.
Stamp duty also applies when the deed of the house changes hands or is transferred as an advance on inheritance.
Generally, any gains and losses on the property are taxable or tax deductible. However, you can be exempt if two conditions are met.
Firstly, any profits or losses made on the sale of a home are tax-free if the sale occurs more than one year after you acquired the property. This applies when you buy a house and inherit or are gifted a home.
The second criteria applies to a period of occupancy in the home. Essentially, the owner will need to have lived in the dwelling for 12 months or one full year of the previous 24 months when the sale takes place.
If you have any gains or losses that need reporting to the Norwegian Tax Administration, you will need to report them for the tax return for the year in which the property is sold. For example, if you sell a home in 2023, you will report it in the 2023 return which arrives in 2024.
If you are exempt, then any losses on a home can't be made tax deductible.
Other tax considerations
When purchasing a property, other taxes may not be related to the transaction but will be relevant for you as a homeowner.
For example, homeowners in Norway are required to pay property tax. Property tax is a municipal tax that local authorities charge each year. Municipalities decide how much tax they want to charge. They can charge between 0.1 and 0.7 percent of an estimated market value for a property.
Additionally, real estate counts as a person's wealth. You will be charged wealth tax if your property and assets amount to a high enough total value. Residents of Norway are taxed on their wealth above 1.7 million kroner at a rate of one percent (or higher for those with a higher net wealth).
However, the tax takes into account net wealth. Therefore, if you have a mortgage on the property, you won't be charged wealth tax on the full value of your home, as what you owe the bank will be deducted from the market value. Additionally, one's primary residence is only valued at 25 percent of the market value for tax purposes. This means many don't owe a lot (if anything) in wealth tax through home ownership alone.
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