The shielding deduction – what is it, and why should you use it?
The shielding deduction lets you receive a calculated normal return on invested capital without shareholder tax. It is calculated per share you own on 31 December, as the shielding basis times the shielding rate, and unused shielding carries forward and increases next year's basis. It can be used against dividends and against a gain on a sale – but it can never create a loss.
The calculation
The main formula is simple: shielding basis × shielding rate = this year's shielding deduction The shielding basis is as a general rule the share's tax base + unused shielding from earlier years. The tax base is normally what you actually paid for the share, including costs directly connected to the purchase.
Unused shielding earns a return
Where this year's shielding is larger than the dividend, the unused part carries forward. It can be used against later dividends from the same share, used against a gain on a later sale, and included in next year's shielding basis. So in practice new shielding is calculated on earlier unused shielding too. Unused shielding does not sit still – it grows.
Who gets this year's shielding?
This year's shielding goes to whoever owns the share on 31 December. If you sell the share in August, you do not get this year's new shielding on it. You can still use previously accrued, unused shielding against the gain on the sale. The buyer who owns the share at year end gets their own shielding calculated from their own tax base.
Shielding cannot create a loss
Assume a tax base of NOK 100,000, a sale price of NOK 105,000 and unused shielding of NOK 10,000. The gain before shielding is NOK 5,000. Shielding can reduce the gain to nil, but it cannot create a deductible loss of NOK 5,000. Remaining shielding lapses when the share is realised. On an ordinary sale at a loss, the loss is calculated without shielding increasing the relief. So when the shielding is used matters: accumulated shielding that never meets a dividend or a gain is lost.
The tax base is not the same as paid-in capital
This is an important difference, and it is often confused. The tax base is normally what the current owner paid for the share. Tax-paid-in capital is capital historically paid in on the share, such as share capital and share premium. They can be very different. If you buy a share for NOK 1 million where the historical paid-in capital is only NOK 30,000, your tax base can be NOK 1 million – even though only NOK 30,000 can be taken out as a tax-free repayment of paid-in capital. See Dividends from your own AS
Inheritance and gifts
On inheritance and gifts, tax continuity normally applies. The recipient takes over the tax base, the shielding basis and unused shielding. The latent tax position therefore follows the share, and that is one reason the positions have to be documented in a family succession
Splits, reverse splits and bonus issues
In a share split or reverse split, the total tax base and total unused shielding do not change. The amounts are spread over the new number of shares. In a bonus issue no new capital is contributed. Existing tax bases and shielding positions therefore have to be reallocated. In a cash issue the new shares get their own tax base based on what was paid for them – see Share issues in a limited company
Shielding in a share savings account
In an ASK, shielding is not calculated for each individual share. The shielding basis is set at account level, based on the lowest deposit balance during the year plus unused shielding from earlier years. That makes an ASK administratively simpler than holding many shares directly. See A share savings account or a holding company
An illustrative example
Assume you buy shares for NOK 100,000, and that we use hypothetical shielding rates of 2, 3 and 4% for the first three years. Year 1, no dividend: shielding NOK 2,000, unused shielding carried to year 2 NOK 2,000. Year 2: shielding basis NOK 102,000, this year's shielding NOK 3,060, total available shielding NOK 5,060. Receive NOK 1,500 in dividends and it is covered by the shielding, leaving NOK 3,560 unused to carry forward. Year 3: the shielding basis is therefore NOK 103,560 before this year's rate is applied. The example shows why unused shielding does not just sit still – it also increases the future shielding basis.
The shielding rate for 2026 is not known yet
The shielding rate is set from the average rate on three-month Treasury bills, with the adjustments in the regulations. The Directorate of Taxes publishes the final rate in January of the year after the income year. The rate for 2026 will therefore only be known in January 2027. That is why no 2026 rate appears in this article. A source giving a final 2026 rate now is giving either last year's figure or an estimate. Note that this is a different rate from the shielding rate for extra tax on loans from a personal taxpayer to a company, which is set every two months – see Loans from your own company
Watch the share statement
For Norwegian shares, the shareholder register is used to calculate the tax base and the shielding. Incorrect historical information can therefore give the wrong shielding deduction year after year – and the error is often only discovered when the shares are sold, many years later. Check in particular the tax base, the number of shares, the purchase date, share issues, splits and reverse splits, inheritance and gifts, and unused shielding. Greenleaf can check the share history, tax bases and shielding positions and make sure the shareholder reporting gives the right basis for later dividend and gain taxation. Cryptocurrency, by contrast, is not covered by shielding – see Accounting and tax on cryptocurrency
Read more
This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.
More on owner pay, dividends and benefits
- Salary or dividend from your own company – which pays better?
- Dividends from your own AS – which rules and deadlines apply?
- A loan from your own AS – why is a «loan» taxed as a dividend?
- Company car or private car – which pays better?
- A home office – what can you actually deduct?
- Pension for the self-employed – what are your options?
- Mandatory occupational pension – when does a business have to have one?
- Benefits in kind – what is taxable?
- Directors' fees – can they be invoiced from your own company?
- A share savings account or a holding company – which suits you?
Is it urgent?
We can work out what actually has to be done, what documentation exists and how quickly it can be sorted. You can also reach us in the evenings and at weekends.
GET IN TOUCH