What taxes do sole proprietorships pay in Norway?

Running a business in Norway is simpler than many people think. The most popular form chosen by people starting their own business is enkeltpersonforetak (ENK), meaning a sole proprietorship. This is the option chosen mainly by freelancers, tradespeople, IT specialists, drivers, people working in construction or services. According to Altinn and Skatteetaten, tens of thousands of new ENKs are set up in Norway every year - it is the most common start-up model because it does not require share capital.

The Norwegian tax system is based on the principle of personal tax responsibility - meaning that you are responsible for paying your taxes and contributions, and Skatteetaten relies on your declarations. In the case of an ENK, the business income is not a separate legal income, but is treated as the owner's personal income. This has major consequences: it means single taxation, but also the lack of certain allowances available to employees or AS company owners.

In this article we explain in simple terms what taxes people running an ENK in Norway pay in 2025. You will also see a comparison with employment income and an AS company - split into salary and dividends. We have also prepared numerical examples and an overview of legal optimisation methods, so that you can make an informed decision about which business form and tax approach will be most beneficial for you.

Taxes in a sole proprietorship (ENK) in Norway

In Norway, a sole proprietorship (ENK) is not a separate tax entity - its income is simply the owner's income. This means that the profit from the business is subject to the same tax categories as other income of a private individual.

The main tax burdens for an ENK are:

Income tax (inntektsskatt)

A rate of 22% on the company's net income, meaning profit after deducting costs. The amount of net income (and other taxable income) is reduced by the personal allowance (personfradrag) before this tax is calculated. This tax corresponds to taxation of the so-called alminnelig inntekt (general income) and is paid by both individuals and companies (for companies it is also 22%).

Social security contribution (trygdeavgift)

Paid as a percentage of personal income (personinntekt). For entrepreneurs running an ENK it is 10,9%, while for employees the rate is 7,7%. The higher contribution for self-employed people results from the lack of an employer paying part of the contributions - in practice, the ENK owner pays the full contribution themselves, which affects, among other things, entitlement to pension and sickness benefit.

Progressive tax on high incomes (trinnskatt)

This is a tax imposed on personal income after certain thresholds are exceeded. In 2025, the first threshold is approx. 217 400 NOK per year. As income rises, further rates apply: from 1,7% in the first band, 4,0% in the second, 13,7% in the third, 16,7% in the fourth, up to 17,7% on the amount above approx. 1,41 million NOK. Trinnskatt replaced the old "top tax" (toppskatt) and is imposed in addition to the 22% basic tax and trygdeavgift. For many smaller ENKs, personal income and the company's net income are similar amounts, so trinnskatt will only appear after the first income threshold is exceeded.

VAT (merverdiavgift, MVA)

Although this is not an income tax, it is worth remembering when running a business. The standard VAT rate in Norway is 25% (there are also reduced rates: 15% on food, 12% on transport and culture, sometimes 0% or full exemption). Businesses - including ENKs - must register in the VAT register (Merverdiavgiftsregisteret) once they exceed 50 000 NOK in sales of goods/services subject to VAT within the last 12 months. Until registration, VAT is not added to invoices. After registration, the entrepreneur must charge and remit VAT on sales, but can also deduct VAT on business purchases.

Wealth tax (formuesskatt)

Norway has a tax on the net wealth of private individuals. This also applies to the owner of an ENK if their wealth (assets minus liabilities) exceeds the tax-free allowance. In 2025, the threshold is 1,76 million NOK per person. The amount above this is taxed at 1% per year (combined municipal and state share), and for wealth exceeding 20,7 million NOK the rate rises slightly (to approx. 1,1%). When running an ENK, the value of business assets may affect wealth tax - fortunately, Norway applies valuation reliefs for business assets (for example, fixed assets are included in the tax base at 70% of their value). Wealth tax is paid separately from income taxes - usually as part of the annual tax return if the threshold is exceeded.

How much will you pay in total?

In practice, the total tax burden for a person running an ENK will depend on the level of income earned. The Norwegian tax office (Skatteetaten) takes into account the sum of all income of a given person (from the business and any other sources) when calculating tax.

For most sole proprietorships, the effective tax rate is in the range of approx. 33-50% of income - the higher the profit, the higher the percentage you have to hand over to the tax authorities. Skatteetaten therefore recommends setting aside around 40% of earned income for future tax in the form of advance payments, which helps avoid underpayment.

It is worth emphasising that for income from an ENK, taxes are slightly higher than for equivalent employment income - precisely because of the higher trygdeavgift for self-employed people.

Example

Let us assume that a sole proprietorship has achieved the following net income during the year (after deducting costs):

• 100 000 NOK

Income tax of 22% is calculated on income reduced by the personal allowance (approx. 88 000 NOK in 2024), so the tax base is minimal. As a result, the 22% tax will be only approx. 2 600 NOK. Trygdeavgift of 10,9% on the full amount is 10 900 NOK. Trinnskatt does not apply (income below the 217 400 NOK threshold). Total taxes are approx. 13 500 NOK, which is only about 13,5% of income - a very low effective tax rate thanks to the allowance.

• 600 000 NOK

At this income level, a significant part will already be covered by taxes. The 22% tax is paid on the amount after deducting the personal allowance (that is, on approx. 512 000 NOK), which gives approx. 112 000 NOK. In addition, trygdeavgift of 10,9% = 65 400 NOK. Trinnskatt will also apply: 1,7% on the amount above 217 400 (up to 306 050) and 4% on the amount above 306 050 NOK - in total approx. 13 300 NOK. In total, taxes will amount to approx. 191 000 NOK, which is about 31,8% of income.

• 1 200 000 NOK

A high income will push you into the upper trinnskatt bands. The 22% tax on approx. 1,112 million (after the personal allowance) is approx. 244 600 NOK. Trygdeavgift 10,9% = 130 800 NOK. Trinnskatt: 1,7% on 217k-306k, 4% on 306k-697,1k, 13,7% on 697,1k-942,4k, 16,7% on 942,4k-1,4107k, 17,7% on the amount above 1,4107 million - in this case most of the income falls into the third and fourth bands. In total, trinnskatt will be approx. 125 000 NOK. The total tax is approx. 500 000 NOK, or about 41,7% of income.

The above calculations are approximate, but they clearly show that the effective tax rate rises with income. At lower income levels, we benefit from the tax-free allowance and lower thresholds, so the percentage handed over to the tax authorities is small. At high earnings, especially above above 1 million NOK per year, the total tax burden for an ENK owner may exceed 40%, and if we add wealth tax - it may even approach 50%.

The ENK owner must take care of the tax return and payment of these taxes themselves. Because, unlike employment, nobody deducts advance tax from the "salary", the entrepreneur pays forskuddsskatt - tax paid in advance during the tax year. Skatteetaten usually sets quarterly payments (with deadlines of 15 March, 15 June, 15 September, 15 December) based on the expected income. If you are a new entrepreneur, you must report your income forecast yourself in the tax system (for example by submitting/updating skattekort) - on this basis the office will calculate the advance payments. It is important to save funds for these payments (hence the advice to set aside approx. 40% of income for tax), because missing an advance payment results in a payment demand and late-payment interest. Alternatively, you can pay the tax only after the annual return as so-called restskatt (balancing payment), but then interest is charged - it is more beneficial to pay during the year.

Comparison: sole proprietorship versus employment

Many people wonder how taxation of their own business (ENK) compares with employment under an employer. The basic difference lies in the way it is settled: an employee receives pay after tax has been withheld (the employer pays tax and contributions for the employee), while an entrepreneur receives the full income and sets aside part of it for taxes themselves. However, if we look at the total amount of charges, it turns out that:

• Employee - pays income tax and contributions from their salary, but benefits from certain allowances not available to ENKs. Above all, every employee is entitled to the standard employee allowance (minstefradrag) - this is a flat-rate deduction for earning income. In 2025, this allowance is 46% of employment income, up to a maximum of 92 000 NOK per year. Thanks to this, the real tax base for an employee is smaller than their gross income. The employee also receives personfradrag (personal allowance, 108 550 NOK in 2025). In total, at low and medium income levels, the effective tax rate for an employee may be slightly lower than for a comparable ENK income.
• ENK owner - is not entitled to allowances such as minstefradrag, instead deducts actual business costs from income. From a tax perspective, the cost of earning income in an ENK is simply all business expenses (materials, fuel, equipment, etc.) that reduce taxable income. The effective taxation of profits in an ENK is sometimes a little higher than salary gross pay, mainly because of the higher social security contribution. On the other hand, the entrepreneur can shape costs to reduce the tax base - which is difficult for an employee (an employee does have some tax allowances, but cannot, for example, "put a computer or car through the business" in the same way a company can).

Comparative example

Let us assume that in both cases we have 600 000 NOK available, which "costs" the business (for simplicity we ignore VAT here). If an employer wants to pay an employee a salary that uses up 600 000 NOK from the payroll budget, they must take into account that employer contributions of approx. 14,1% must be paid on the gross amount. This means the employee may receive a gross salary of approx. 525 000 NOK, and the company will pay 74 000 NOK in contributions. From 525 000 NOK gross, the employee will pay income tax according to the scale - after deducting minstefradrag (46%, but capped at 92 000 NOK) and personfradrag, they will pay 22% tax on approx. 345 000 NOK (approx. 76 000 NOK), plus trygdeavgift of 7,7% (approx. 40 000 NOK) and trinnskatt of approx. 10 300 NOK. The employee will be left with approx. 398 000 NOK net. The total burden is approx. 202 000 NOK, which is 33,7% of the original cost to the business.

For comparison, a sole proprietorship with income of 600 000 NOK (with the same assumptions regarding initial costs): the entrepreneur pays 22% on a base of approx. 512 000 NOK, i.e. 112 000 NOK, trygdeavgift of approx. 65 400 NOK and trinnskatt of approx. 13 300 NOK, in total approx. 190 700 NOK. They are left with approx. 409 000 NOK "in hand". The effective tax wedge is 31,8%. In this view, the ENK appears more favourable by a few percentage points. However, it should be remembered that the employee does not feel the burden of employer contributions - the company pays them, and salary is usually negotiated gross. For the employee, what matters is that from 525 000 NOK gross they received about 398 000 NOK net (which means they paid about 24% of their gross in taxes), whereas the entrepreneur had to pay about 190 000 NOK from 600 000 NOK income themselves (that is, they paid about 31,8% of their own "gross").

In summary, income taxes in an ENK and in employment are comparable, but not identical. A self-employed person pays a slightly higher social security contribution, but can in return genuinely reduce income through business costs. An employee has the standard allowance deducted automatically and does not have to worry about setting money aside for taxes themselves (their employer does that for them). At average incomes, the differences are small - on the order of a few percentage points of effective taxation. High earnings (over 1 million NOK) are, however, subject to strongly progressive taxation (trinnskatt), regardless of whether it is salary or business income.

It is also worth mentioning non-tax differences: an employee has the right to a range of benefits (full sick pay from the employer for the first 16 days, and from NAV from day 17 - 100% of salary, maternity/paternity leave, accident insurance paid by the employer, etc.). A self-employed person in an ENK normally receives sickness benefit only from day 17 of illness and at 80% (unless they voluntarily buy higher insurance in NAV) - which is a certain hidden cost/risk of running your own business. However, these differences can be minimised by taking out additional insurance (premiums for voluntary sickness or accident insurance are, in fact, a cost that you can deduct in an ENK).

Comparison: ENK versus AS company - salary versus dividends

An alternative form of running a business in Norway is to set up a limited company AS (aksjeselskap). The difference between an ENK and an AS is fundamental - the company is a separate legal and tax entity. An AS pays income tax on its profits, and the owner (shareholder) pays tax on income received from the company (for example salary or dividends). How does this work in practice from a tax perspective?

Tax on company profit (selskapsskatt)

An aksjeselskap pays 22% tax on the profit it generates (similarly to income tax in an ENK). This tax is calculated only in the following year (as the company's forskuddsskatt), after the company has submitted its tax return. Important: this tax applies to profit left in the company. If the company pays salaries, purchases services, etc., this of course reduces the profit and therefore the tax.

Paying yourself a salary from your own company

The owner of an AS can employ themselves and draw a salary. From a tax point of view, this works in the same way as employment: from the salary paid, the company as employer must deduct income tax advances according to the owner's skattekort and pay employer contributions (arbeidsgiveravgift). For the owner, salary is employment income, taxed according to the scale (22% + trygdeavgift 7,7% + trinnskatt). For the company, salary is a cost, so it reduces its profit and tax. As a result, by paying themselves a salary, the owner can take money out of the company while effectively paying a similar tax to a regular employee.
NOTE: Employment in your own company also gives the same social rights - for example full sick pay, pension contributions deducted from salary, etc. A small downside is the need to complete all employer formalities (sending a-melding every month, remitting advance tax, paying contributions).

Dividend payment (utbytte)

Profit after tax in the company (that is, after paying 22%) can be paid to the owners as dividends. Dividend for a shareholder is subject to separate taxation - under the so-called aksjonaermodellen it is treated as capital income, but with a certain modification. First, the dividend is reduced by a tax shield allowance (skjermingsfradrag, dependent on invested capital and the rate announced each year - this protects the part of the profit corresponding to a "normal" return on investment). Then the remaining part of the dividend is multiplied by the so-called uplift factor (1,72 in 2025), and 22% tax is charged on that increased amount. As a result, the real effective tax rate on dividends is around 37,84% (in 2025). In simple terms: after the company's profit has already been taxed at 22%, the shareholder pays a further 37,84% on the dividend amount received net. The total taxation of profit generated and paid out as dividends therefore reaches approx. 51-52%.

From the above it follows that taxation of business income in the form of a company may be higher than in the form of an ENK if we want to withdraw all profit immediately. For example, from 100 000 NOK earned by the company, 78 000 NOK remains after tax, and after dividend taxation the owner is left with about 48 500 NOK of pure profit - in total the tax authorities take about 51,5%. By contrast, 100 000 NOK of income in an ENK will leave us (at these amounts) with most of it in our pocket, because effectively we pay only a fraction of the tax (as shown earlier, about 13,5% at 100k, about 32% at 600k, etc.). In a company, double taxation (standard 22% + dividend tax) becomes unfavourable especially at small and medium profits.

Legal tax optimisation in an ENK

Running a sole proprietorship in Norway gives you some freedom in shaping your taxable income. Of course, we are talking here about legal optimisation - using the available allowances and deductions, not avoiding tax.

Here are a few ways to pay only as much tax as you really have to:

Use all allowable business expenses

In an ENK you can deduct all reasonable business costs from income. Make sure you account for everything related to the business: materials, equipment, fuel, business travel, phone and internet, office rent, industry training, accounting, etc. Every such deducted krone reduces your taxable profit and therefore your tax. For example, if you are in a tax band of around 34%, every 1000 NOK of costs will reduce your tax by about 340 NOK. For most ENKs, the tax saving from costs is around 33-50% of the value of a given expense (because that is the typical tax rate). Remember, however, that the cost must genuinely be related to the business and properly documented (receipts, invoices). Do not try to artificially "inflate" costs just to reduce tax - first, that is not compliant with the rules, and second, you reduce your income on which benefits are calculated (for example, lower income = lower pension basis).

Home office, car and other flat-rate allowances

Many sole proprietorships operate from home - Norwegian rules allow you to deduct the so-called fradrag for hjemmekontor (home office allowance) if you use part of your home exclusively for work. There are also favourable rules for accounting for the use of a private car in the business (kilometergodtgjørelse - mileage allowance, which you can include as a cost up to a certain annual kilometre limit). From 2024, the mileage rate is 3,50 NOK/km (up to 6 000 km per year). In addition, you can deduct part of your phone and internet bills - normally the amount above 4392 NOK per year is treated as business-related and can be included as a cost. Familiarise yourself with the full list of allowances available to the self-employed - often overlooked are small items that together give significant deductions (for example, specialist literature, software subscriptions, meals during business travel, minor equipment repairs, etc.).

Voluntary social insurance as a cost

If you want better social protection, you can voluntarily increase the scope of your sickness insurance (NAV offers the self-employed the option to buy 100% sickness benefit from day 17 or shorten the waiting period for benefit to 3 days - of course for an additional premium). Similarly, you can insure yourself against workplace accidents. The good news: such additional insurance premiums can be deducted from income - they are treated as a business cost. So you improve your social protection while also reducing your tax base.

Splitting income between spouses

If your spouse helps run the business, it is worth considering formally splitting the income with them. Norwegian rules allow spouses running an ENK together to divide the profit proportionally to the work each of them has contributed. This is not treated as salary (the spouse in an ENK is not an "employee", so employer contributions are not paid on their share), but in the annual return part of the income can be allocated to the spouse. The effect? Instead of all the income being under one name - and taxed progressively - we have two smaller amounts for each spouse. This allows better use of allowances (each person has their own personfradrag) and lower tax thresholds. Note: the split must be justified by the spouse's real involvement in the business. If, however, you both genuinely work for the common household, why not take advantage of the possibility of reducing the joint tax burden? (Example: instead of 800 000 NOK income for the husband and 0 for the wife - it can be split, for example, into 500k + 300k, which will reduce trinnskatt and allow the wife to use her personal allowance, lowering the family's total tax). It is worth adding that this will not work for cohabiting partners - a partner who is not a husband or wife must be formally employed in order to transfer income to them, which involves normal contributions.

Changing the legal form as the business grows

Optimisation is not only about day-to-day tricks, but also strategic decisions. If your business is growing and you are consistently earning high income, consider whether ENK is still the best form. At a certain scale of profit, an AS may offer advantages - for example deferring part of the tax (retaining profit after 22%) or the possibility of combining salary/dividend to avoid the highest bands. Converting a business into an AS is quite common in Norway when a company moves from the small-business stage to a larger enterprise. Of course, such a change brings additional costs (for example minimum share capital of 30k NOK, reporting obligations), but it may bring tax relief in the long term. Remember - optimisation means making legal use of available options, not bending the law. A consultation with a tax adviser or accountant can help you decide when the right time is for the next step.

Summary

Running a sole proprietorship in Norway is a simple way to start a business, but it requires a good understanding of the tax rules. An ENK owner pays 22% income tax, 10,9% trygdeavgift and progressive trinnskatt at higher incomes. The total tax burden in practice usually ranges from about one third to half of the profit earned. In addition, there is an obligation to register for VAT once turnover exceeds 50 000 NOK.

Compared with employment, an ENK entrepreneur pays slightly higher contributions (in practice only a little higher, almost identical), but has the ability to account for real business costs, which can significantly reduce tax. In comparison with an AS company, a sole proprietorship avoids the double taxation that occurs when dividends are paid out. However, an AS gives greater opportunities to reinvest profits and optimise salary/dividend at very high incomes. The choice of form therefore depends on your situation and business development plans.

It is recommended that ENK owners regularly set aside around 40% of their income to cover future taxes. This is a practical rule that helps avoid problems with quarterly advance payments (forskuddsskatt) or balancing payments at the annual return. It is also worth keeping clear accounts from the start - even if this is not required up to 50 000 kr turnover, a simple record of income and costs makes life easier and allows you to make full use of all possible allowances. And once turnover exceeds 50 000 NOK, it becomes an obligation anyway.

Finally, remember that taxes in Norway - although high - are transparent, and the system offers many allowances and opportunities for optimisation. Use them wisely: account for costs, invest in your future pension, consider splitting income with your spouse or choosing an AS when your business grows. In this way you will not only pay less tax, but also build a solid foundation for the further development of your business.

Do you have questions about taxes in Norway?

Or do you need help running a business?
Contact us: +47 21 38 38 21. We are available Monday to Friday from 9:00 - 21:00 and will be happy to help!

Author of the article: Marcin - marcin@efirma.no