Half tax for Christmas - how true is it?

Anyone who has worked in Norway has certainly heard about the "half tax before Christmas". It is said to be a gift from the king, that we get more money. That is not entirely true, but as with any myth, there is a bit of truth in it too. But what exactly is it about?

Advance tax and tax

Looking at a calculator. First of all, it is worth noting the difference between advance tax and tax itself. This is why this allowance is often repeated incorrectly. So:

Advance tax is what we pay every month. It is deducted by the employer from our salary, taking our tax card into account. Advance payments are used to pay tax during the year, so that at the end of the year we do not have to pay a large amount in one go.
Tax, on the other hand, is calculated based on our annual earnings only in the following year. Without taking deductions into account, it is the same for everyone who earns the same amount (unless one of them is on kildeskatt 25%). The tax card does not matter here. It is subtracted from the advance tax paid, and if the amount comes out negative, that is how much we have to pay; if it comes out positive, that is how much we will get back. If the amount is less than 100, we neither receive nor pay anything.

So what about the "half tax"?

Now that we know what advance tax and tax are, we can move on. Before Christmas, we do not pay half the tax, but half of the ADVANCE tax. If we are paid every two weeks, we do not pay anything with one of the pay packets. Because of this, before Christmas we receive more money in hand than during the rest of the year.

NOTE: This does not apply to kildeskatt 25% (PAYE).

Why does it not apply to kildeskatt?

Under kildeskatt, we pay fixed advance tax of 25% every month, and the final tax will also be 25% of our earnings. In other words, you could say that together with the advance tax we are paying off the tax, and its amount will not change (provided the employer deducts the advance tax correctly). No deductions apply here, and we cannot file a tax return for it either.

Can this be avoided? Yes - if you earn less than 40.000 kr per month, it is worth giving up kildeskatt and switching to the standard tax return. You may be entitled to a refund of up to 20.000 kr! All you need to do is order the service here and we will check how much you are entitled to, and help you make the change.

When does the employer deduct half the advance tax?

According to the law, it works as follows:

if you are paid monthly, the employer should deduct half the advance tax in November or December.
if you are paid every two weeks, the employer should not deduct the advance tax from the last pay packet in November or the first in December.

However, it is the employer who decides exactly when this is done. If you want the full advance tax to be deducted during this period, you can ask them to do so.

What about benefit payments? Is it the same there too?

Yes, with benefits and allowances from NAV, half of the advance tax will also be deducted, or it will not be deducted at all. Half of the advance tax is deducted if:

we receive sykepenger, foreldrepenger, svangerskapspenger, overgangsstonad, pleiepenger, omsorgspenger, uføretrygd.

However, no advance tax will be deducted at all if:

we receive dagpenger or arbeidsavklaringspenger - in both cases, no advance tax will be deducted only for the last meldekort period in November or the first period in December.
we receive alderspensjon, avtalefestet pensjon (AFP).

Half tax for Christmas - how true is it?