Running a business in Norway is easier than many people think. The most popular form chosen by people starting their own business is enkeltpersonforetak (ENK), or a sole proprietorship. This solution is primarily chosen by freelancers, craftsmen, IT specialists, drivers, and those working in construction and services. According to data from Altinn and Skatteetaten, tens of thousands of new sole proprietorships are established in Norway every year – this is the most frequently chosen startup model because it requires no initial capital.
The Norwegian tax system is based on the principle personal liability of the taxpayer – this means that you are responsible for paying taxes and contributions, and Skatteetaten relies on your declarations. In the case of ENK, company income is not a separate legal income, but is treated as owner's personal incomeThis has major consequences: it means single taxation, but also the lack of certain tax reliefs available to full-time employees or owners of AS companies.
In this article, we'll explain in simple terms what taxes ENK operators in Norway will pay in 2025. You'll also see a comparison of the taxation of full-time employees and AS companies, broken down by salary and dividend payments. We've also prepared numerical examples and a discussion of legal optimization methods, so you can make an informed decision about which form of business and taxation method will be most beneficial for you.
Taxes for sole proprietorships (ENK) in Norway
In Norway, a sole proprietorship (SMP) is not a separate tax entity – its income is simply the owner's income. This means that profits from the business are subject to the same tax treatment as other income earned by an individual.
The main tax burdens for ENK are:
Income tax (inntektsskatt)
22% rate from net income company, i.e., profit after deduction of costs. The amount of net income (and other taxable income) is reduced by the personal allowance (personfradrag) before calculating this tax. This tax corresponds to the 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 ENK it is 10,9%, while for full-time employees the rate is 7,7%. The higher contribution for self-employed individuals results from the lack of an employer paying part of the contributions – in practice, the ENK entrepreneur pays the full contribution themselves, which translates into, among other things, the right to a pension and sickness benefits.
Progressive tax on high incomes (trinnskatt)
This is a tax levied on personal income above certain thresholds. In 2025, the first threshold is approximately NOK 217,400 per year. As income increases, subsequent rates are imposed: from 1,7% in the first bracket, 4,0% in the second, 13,7% in the third, 16,7% in the fourth, up to 17,7% on the excess above approximately NOK 1,41 million. The tax replaced the former "top tax" (toppskatt) and is levied apart from 22% basic tax and trygdeavgift. For many smaller ENKs, personal income and company net income are similar, so trinnskatt only appears after the first income threshold is exceeded.
VAT (merverdiavgift, MVA)
Although it's not an income tax, it's worth remembering when running a business. The standard VAT rate in Norway is 25% (there are also reduced rates: 15% for food, 12% for transport and culture, sometimes 0% or full exemption). Companies – including ENK – are required to register with the VAT register (Merverdiavgiftsregisteret) after exceeding 50 000 NOK of sales of goods/services subject to VAT in the last 12 months. VAT is not added to invoices until registration. After registration, the entrepreneur must charge and remit VAT on sales, but may also deduct VAT on business purchases.
Wealth tax (formuesskatt)
Norway imposes a tax on the net worth of an individual's net worth. This also applies to the owner of an EIT if their net worth (assets minus liabilities) exceeds the tax-free allowance. In 2025, the threshold is NOK 1,76 million per person. Anything above this amount is taxed at 1% annually (municipal and state share combined), and for assets exceeding NOK 20,7 million, the rate increases slightly (to approximately 1,1%). When calculating EIT, the value of the company's assets may impact the wealth tax – fortunately, Norway offers tax relief on the valuation of company assets (e.g., fixed assets are included in the tax base at 70% of their value). EIT is paid independently of income taxes – usually as part of an annual tax return if the threshold is exceeded.
How much will you pay in total?
In practice, the total tax burden for an ENK individual will depend on the amount of income they earn. The Norwegian Tax Agency (Skatteetaten) considers the sum of all of a person's income (from business and possibly other sources) when calculating tax.
For most sole proprietorships the effective tax rate is in the range of approx. 33-50% income – the higher the profit, the higher the percentage you have to pay to the tax office. Therefore, Skatteetaten recommends setting aside approximately 40% of your income for future tax in the form of advance payments, which will help avoid underpayments.
It is worth emphasizing that in the case of income from ENK, taxes are slightly higher than on equivalent income from employment – precisely because of the higher trygdeavgift contribution for the self-employed.
Example
Let's assume that a sole proprietorship earned the following net income during the year (after deducting expenses):
- 100 000 NOK
The 22% income tax is calculated on income less the personal allowance (approximately NOK 88,000 in 2024), so the tax base is minimal. As a result, the 22% tax will only amount to approximately NOK 2,600. The 10,9% tax on the full amount is NOK 10,900. There will be no tax deduction (income below the threshold of NOK 217,400). Total taxes approx. NOK 13,500, which is only approx. 13,5% of income – very low effective tax thanks to relief.
- 600 000 NOK
At this level of income, a significant portion will already be covered by taxes. You'll pay 22% tax on the amount after deducting the personal allowance (approximately NOK 512,000), which is approximately NOK 112,000. Plus a 10,9% tax on the amount exceeding NOK 65,400. There will also be a tax on the amount exceeding NOK 217,400 (up to NOK 306,050) and 4% on the amount exceeding NOK 306,050 – a total of approximately NOK 13,300. In total, taxes will amount to approximately NOK 191,000, which is approximately 31,8% of income.
- NOK 1
A high income will result in entering the upper thresholds of the tax allowance. Tax of 22% on approx. 1,112 million (after personal allowance) is approx. NOK 244,600. Trygdeavgift 10,9% = NOK 130,800. Tax allowance: 1,7% on 217k-306k, 4% from 306k-697,1k, 13,7% from 697,1k-942,4k, 16,7% from 942,4k-1,4107k, 17,7% on the surplus over 1,4107 million – in this case, most of the income will fall into the third and fourth tier. The total tax will be approximately NOK 125,000. The total tax is approximately NOK 500,000, or approximately 41,7% of income.
The above calculations are approximate, but they clearly demonstrate that the effective tax rate increases with income. At lower income levels, we use the tax-free allowance and lower thresholds, ensuring a small percentage paid to the tax office. With high earnings, especially above NOK 1 million per year, the total tax burden for an ENK entrepreneur can exceed 40%, and with the addition of wealth tax, it can even approach 50%.
The owner of an ENK must take care of settling and paying these taxes themselves. Since, unlike with a full-time job, no advance payments are made from the "salary," the entrepreneur pays forskuddsskatt – tax paid in advance during the tax year. Skatteetaten typically sets quarterly payments (with due dates of March 15, June 15, September 15, and December 15) based on projected income. If you are a new entrepreneur, you must submit your income forecast to the tax system (e.g., by submitting/updating your skattekort) – the tax office will calculate the advance payments based on this. It is important to save funds for these payments (hence the advice to set aside approximately 40% of your income for tax), as failure to pay the advance payment will result in a demand for payment and late payment interest. Alternatively, you can pay the tax only after filing your annual tax return as a so-called residual tax (surcharge), but then interest is charged - however, it is more advantageous to pay during the year.
Comparison: sole proprietorship and full-time employment
Many people wonder how the taxation of their own business (NCB) compares to that of working for an employer. The key difference lies in the method of calculation: a full-time employee receives their salary after deduction of tax (the employer pays tax and contributions for the employee), while an entrepreneur receives the entire income and contributes a portion of their own taxes. However, if we look at the total amount of tax burden, it turns out that:
- Full-time employee – pays income tax and contributions on their salary, but benefits from certain reliefs not available to ENK. First and foremost, every employee is entitled to standard employee relief (minstefradrag) – this is a flat-rate deduction for income-earning costs. In 2025, this deduction amounts to 46% of income from work, with a maximum of NOK 92,000 per year. This means that the real tax base for an employee is smaller than their gross income. The employee also receives personfradrag (personal allowance, NOK 108,550 in 2025). Overall, for incomes in the low and middle ranges, the effective tax rate for an employee may be slightly lower than for comparable ENK income.
- Owner of ENK – is not entitled to tax relief, and instead deducts actual operating costs from income. Tax-wise, the cost of earning income in the ENK is simply all company expenses (materials, fuel, equipment, etc.) that reduce taxable income. Effective taxation of ENK profits can be slightly higher than gross salary, primarily due to higher social security contributions. On the other hand, an entrepreneur can structure costs to reduce the tax base – which is difficult for a full-time employee (while a full-time employee does have certain tax reliefs, they cannot, for example, "expense" a computer or car, as a company can).
Comparative example
Let's assume that in both cases, we have NOK 600,000 at our disposal, which "costs" the company (for simplicity, we ignore VAT here). If an employer wants to pay an employee a salary that absorbs NOK 600,000 from the payroll fund, they must take into account that the gross amount will be subject to approximately 14,1% employer contributions (arbeidsgiveravgift). This means that the employee could receive a gross salary of approximately NOK 525,000, and the company would pay NOK 74,000 in contributions. From NOK 525,000 gross, the employee will pay income tax according to the scale - after deducting minstefradrag (46%, but limited to NOK 92,000) and personfradrag, the employee will pay 22% tax on approximately NOK 345,000 (approx. NOK 76,000), plus trygdeavgift 7,7% (approx. NOK 40,000) and trinnskatt approx. NOK 10,300. The employee will be left with approximately NOK 398,000 net. The total burden is approximately NOK 202,000, which is 33,7% of the original cost to the company.
For comparison, a sole proprietorship with an income of NOK 600,000 (with the same assumptions regarding start-up costs): the entrepreneur pays 22% of the base of approximately NOK 512,000, i.e. NOK 112,000, trygdeavgift approximately NOK 65,400 and trinnskatt approximately NOK 13,300, totaling approximately NOK 190,700. This leaves him with approximately NOK 409,000 net. The effective tax wedge is 31,8%. In this approach, ENK seems to be more advantageous 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 the salary is usually negotiated gross. What matters to the employee is that they received approximately NOK 398,000 net from NOK 525,000 gross (meaning they paid approximately 24% of their gross income in taxes), while the entrepreneur had to pay approximately NOK 190,000 from NOK 600,000 income (meaning they paid approximately 31,8% of their "gross").
summarizingIncome taxes for self-employed individuals and those employed as full-time employees are comparable, but not identical. Self-employed individuals pay slightly higher social security contributions, but can actually reduce their income through business expenses. Employees receive a standard tax deduction upfront and don't have to worry about filing their own taxes (their employer does it for them). For average incomes, the differences are small—on the order of a few percentage points of effective taxation. Higher earnings (over NOK 1 million), however, are subject to a highly progressive tax (trinnskatt), regardless of whether they receive a salary or business income.
It's also worth mentioning non-tax differences: a full-time employee is entitled to a range of benefits (fully paid sick leave from the employer for the first 16 days, and from the NAV from the 17th day – 100% of salary, maternity/paternity leave, employer-paid accident insurance, etc.). A self-employed employee in ENK typically receives sick pay only from the 17th day of illness, at 80% (unless they voluntarily purchase higher insurance from NAV) – which is a hidden cost/risk of running their own business. However, these differences can be minimized by purchasing additional insurance (contributions to voluntary sickness and accident insurance are, in fact, deductible costs under ENK).
Comparison: ENK and AS company – remuneration vs. dividend
An alternative form of running a business in Norway is to establish a capital company AS (corporationThe 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, while the owner (shareholder) pays tax on income derived from the company (e.g., salary or dividends). How does this work in practice from a tax perspective?
Corporate profit tax (selskapsskatt)
The company pays a 22% tax on earned profits (similar to the income tax in the European Central Bank). This tax is only charged the following year (as the company's tax liability), after the company files its tax return. Important: this tax applies to profits left in the company. If the company pays salaries, purchases services, etc., this naturally reduces the profit and therefore the tax.
Payment of remuneration from your own company
The owner of an AS company can work there and collect a salary. Tax-wise, this works the same way as a full-time job: the company, as the employer, must withhold income tax on the salary paid according to the owner's tax rate and pay employer contributions (arbeidsgiveravgift). For the owner, the salary is considered employment income, taxed at the standard rate (22% + 7,7% tax-free gift). For the company, the salary is an expense, reducing its profits and tax. Consequently, by paying themselves a salary, the owner can extract funds from the company, effectively paying a similar tax rate to a typical employee.
WARNING: Working full-time in your own company also gives you the same social rights – e.g. full sick leave, pension contributions from your salary, etc. A small disadvantage is the need to complete all the employer's formalities (sending a-melding every month, making advance payments, paying contributions).
Dividend payment (utbytte)
A company's after-tax profit (i.e., after paying 22%) can be paid to its owners as a dividend. Shareholder dividends are subject to separate taxation—in accordance with the so-called aksjonærmodellen is treated as income from capital, but with a certain modification. First, the dividend is reduced by the tax-free amount (skjermingsfradrag, depending on the invested capital and the rate announced annually – it protects the portion of the profit corresponding to the "normal" return on investment). Then, the remaining portion of the dividend is multiplied by the so-called increasing factor (1,72 in 2025), and a 22% tax is charged on this increased amount. As a result, the actual effective tax rate on the dividend is approximately 37,84% (in 2025). To put it simply: after the 22% taxation of the company's profit, the shareholder pays an additional 37,84% on the net dividend amount. The total taxation of profits earned and paid out as dividends therefore reaches approximately 51-52%.
The above indicates that taxation of income from a business in a partnership can be higher than in an ENK form if we want to pay out all the profits immediately. For example, of NOK 100,000 earned by a company, NOK 78,000 remains with the owner, and after taxing the dividend, the owner is left with approximately NOK 48,500 of net profit – a total tax rate of approximately 51,5%. However, NOK 100,000 of income in ENK will leave us (at such amounts) most of it in our pocket, because we will effectively pay a fraction of the tax (as shown earlier, approximately 13,5% for 100,000, approximately 32% for 600,000, etc.). In a partnership, double taxation (standard 22% + dividend tax) becomes unfavorable, especially for small and medium-sized profits.
Legal tax optimization at ENK
When running a sole proprietorship in Norway, you have some freedom in shaping your taxable income. Of course, we're talking about legal optimization – using available reliefs and deductions, and not avoiding taxation.
Here are some ways to ensure you only pay the tax you really need to:
Use all your income-earning costs
In ENK you can subtract any income from your income. reasonable costs of doing businessMake sure you account for everything related to your business: materials, equipment, fuel, business travel, phone and internet, office rent, professional training, accounting, etc. Every złoty (krona) deducted reduces your taxable profit, and therefore your tax. For example, if you're in the 34% tax bracket, every 1000 NOK in expenses will reduce your tax by approximately 340 NOK. For most ENKs, the tax savings from expenses is approximately 33-50% of the value of the expense (because that's the typical tax rate). Remember, however, that the expense must be truly business-related and properly documented (receipts, invoices). Don't try to artificially "inflate" expenses just to reduce your tax – firstly, it's illegal, and secondly, it reduces your income, which is the basis for calculating benefits (e.g., lower income = lower pension base).
Home office, car and other lump sum reliefs
Many sole proprietorships operate from home – Norwegian regulations allow for the deduction of the so-called fradrag for hjemmekontor (a flat-rate home office allowance) if you use part of your apartment exclusively for work. There are also favorable rules for calculating the use of a private car for business purposes (kilometergodtgjørelse – a mileage allowance that can be deducted as an expense up to a certain mileage limit per year). From 2024, the mileage allowance is NOK 3,50/km (up to 6,000 km per year). Furthermore, you can deduct part of your telephone and internet bills – normally, an amount exceeding NOK 4392 per year is considered business expenses and can be deducted as an expense. Check out the full list of available deductions for the self-employed – small things that add up to significant deductions are often overlooked (e.g., purchases of professional literature, software subscriptions, meals during business trips, minor equipment repairs, etc.).
Voluntary social insurance as a cost
If you're looking for better social security, you can voluntarily increase your sickness insurance coverage (NAV offers self-employed workers the option to purchase 100% of their sickness benefit from the 17th day or shorten the waiting period to 3 days – for an additional premium, of course). Similarly, you can insure yourself against accidents at work. The good news is that these additional insurance premiums can be deducted from your income – they're treated as a business expense. This means you're improving your social security while simultaneously reducing your tax base.
Division of income between spouses
If your spouse helps run the business, it's worth considering formally splitting the income with them. Norwegian regulations allow spouses running an ENK jointly to split the profit proportionally to each other's work. This isn't considered remuneration (the spouse in an ENK is not an "employee," so employer contributions are not paid on their share of the salary), but you can allocate a portion of the income to your spouse in your annual tax return. The result? Instead of all the income going to one name—taxed progressively—you have two smaller amounts for each spouse. This allows for better utilization of tax breaks (each has their own personfradrag) and lower tax brackets. Note: the split must be justified by the spouse's actual involvement in the business. However, if you both actually work on a joint account, why not take advantage of the opportunity to reduce your joint tax? (Example: instead of NOK 800,000 in income for the husband and NOK 0 for the wife – you can split it into, for example, NOK 500k + NOK 300k, which will lower the trinnskatt and allow the wife to use her personal allowance, reducing the total family tax.) It is worth adding that in the case of cohabitants, this solution will not work – the partner who is not the husband/wife must be formally employed in order to transfer the income to them, which is associated with normal contributions.
Changing the legal form when developing a company
Optimization isn't just about day-to-day tricks, but also about strategic decisions. If your business is growing and you're generating consistently high income, consider whether an independent company (ENK) is still the best option. With a certain level of profit, an independent company (AS) can offer benefits, such as deferring part of the tax (retaining profits at 22%) or the possibility of a salary/dividend combination to avoid the highest tax thresholds. Transferring operations to an independent company (AS) is quite common in Norway when a company transitions from a small business to a larger enterprise. Of course, such a change carries additional costs (e.g., share capital of at least NOK 30, reporting obligations), but it can provide tax relief in the long run. Remember – optimization is about legally utilizing available options, not bending the law. Consulting with a tax advisor or accountant can help you decide when the right time is for your next NOK.
Summary
Running a sole proprietorship in Norway is a simple way to get started, but it requires a thorough understanding of tax rules. The sole proprietor pays 22% income tax, 10,9% tax relief, and a progressive tax on higher incomes. The total tax burden in practice typically ranges from about one-third to one-half of the profit. VAT registration is also required once revenue exceeds NOK 50,000.
Compared to a full-time job, an entrepreneur in an ENK pays slightly higher contributions (in practice, they're almost identical), but has the option of deducting actual business expenses, which can significantly reduce tax. Compared to a sole proprietorship (AS), a sole proprietorship avoids double taxation, which occurs with dividend payments. However, an AS offers greater opportunities for reinvesting profits and optimizing salary/dividends even with very high income. Therefore, the choice of form depends on your situation and business development plans.
It is recommended that ENK owners regularly set aside approximately 40% of your income to cover future taxes. This is a practical rule that helps avoid problems with quarterly advance payments (forskuddsskatt) or additional payments when filing an annual return. It's also worth keeping transparent accounting from the beginning – even if it's not required for 50 000 NOK income, a simple record of income and expenses, makes life easier and allows you to maximize all possible tax reliefs. And after exceeding 50 000 NOK revenue becomes an obligation for us anyway.
Finally, remember that taxes in Norway, although high, are transparent, and the system offers numerous reliefs and optimization opportunities. Use them wisely: settle costs, invest in your future retirement, consider splitting income with your spouse, or choosing an AS company when your company grows. This will not only reduce your tax bill but also build a solid foundation for further business development.
Do you have questions about taxes in Norway?
Or maybe you need help running your business?
Contact us: +47 21 38 38 21. We are available Monday to Friday from 9:00 a.m. to 21:00 p.m. and we will be happy to help!
Author of the article: Marcin – marcin@efirma.no
