VAT for housing companies – when does it become relevant?

Ordinary residential operation does not normally trigger VAT, and the housing company gets no deduction on its bills either. The picture changes with commercial premises, parking let to outsiders, EV charging sold on and larger construction projects. Where input VAT on a construction measure is at least NOK 100,000, the adjustment rules track the use for ten years – and a sale mid-period can trigger the whole remaining adjustment.

Shared costs do not normally trigger VAT

When a housing co-operative or jointly owned property collects shared costs to cover insurance, municipal charges, cleaning, electricity for shared areas and maintenance, 25% VAT is not normally added to the residents' payments. What decides it is whether there is actually a supply of goods or services, or cost sharing within the community. That the property pays a supplier and allocates the cost does not necessarily mean it has «sold» the service on. But the reverse also holds: regularly supplying its own goods or services for payment can be a supply even where the housing company adds no mark-up. Cost price is not a VAT argument.

Does the housing company get a deduction on its bills?

For the ordinary residential part the answer is normally no. VAT on invoices from tradespeople, the accountant, the caretaker and other suppliers therefore becomes part of the cost the housing company has to cover – a real cost, not a pass-through item. A right to deduct only arises where the purchase has a sufficient connection to activity giving that right. That becomes relevant particularly where the same building contains both homes and VAT-liable commercial activity – see VAT deductions

When can a housing company become VAT-liable?

The ordinary registration threshold is NOK 50,000 of taxable turnover in any twelve-month period – not per calendar year. Passing NOK 50,000 is not enough on its own; the activity also has to meet the other conditions for registration. Typical areas to consider: parking let to outsiders, selling services to other properties, letting or operating commercial space, EV charging and other separately charged services – see VAT registration

Parking and EV charging

Letting parking spaces as a parking business is covered by the VAT rules. But that does not mean all letting of parking spaces is VAT-liable: where a residential property allocates spaces to its own owners as a natural part of living there, that can happen without VAT. Where spaces are also let to outsiders, the activity has to be assessed. The letting has to have a certain scale and duration before it can normally be characterised as a parking business. EV charging is an area to be careful about rules of thumb. Where the housing company merely allocates its actual electricity cost between residents as part of a shared cost arrangement, the position differs from regularly selling electricity or charging services. That the residents only pay «cost price» does not alone rule out VAT – a supply can exist without a profit margin. Where the housing company establishes a larger charging arrangement with individual invoicing, the VAT treatment should be assessed first.

Commercial premises and voluntary registration

Letting real property is as a general rule outside the scope of VAT. But there is an important arrangement for voluntary registration for letting commercial premises. A housing company letting a ground-floor shop to a VAT-registered business can on certain conditions register the letting voluntarily. The rent is then invoiced with VAT for the part of the area covered, and the landlord can deduct input VAT on costs for the registered letting activity. It is not enough that the tenant is registered in the VAT Register – the premises actually have to be used in qualifying activity. Where the tenant uses part of the premises in activity without a right to deduct, the landlord's VAT treatment may have to be limited correspondingly. The whole arrangement is in Voluntary VAT registration for letting property

What if the commercial space stands empty?

Where a VAT-liable tenant moves out, the vacancy itself does not necessarily mean previously deducted VAT has to be adjusted immediately. But while the premises stand empty and future use is unsettled, the landlord normally has no continuing right to deduct on new costs for that area. When a new qualifying lease is signed, it can in some cases be possible to correct earlier costs.

Combined residential and commercial needs apportionment

Picture a building where the ground floor is voluntarily registered commercial space and the rest is housing. All the VAT on the building's costs cannot then be deducted. Costs relating only to the residential part normally give no deduction. Costs relating only to the registered commercial part can give a deduction within the scope of the registration. Costs relating to both have to be apportioned. For building costs, area can be a suitable apportionment key where the costs are spread roughly evenly per square metre. What matters is that the method reasonably expresses how much of the purchase is actually used in the registered activity. The 5% rule works both ways: where the out-of-scope turnover does not normally exceed five per cent of total turnover, there can be a full deduction on a shared purchase – and conversely there is normally no deduction where the registered turnover does not exceed five per cent. The rule applies to shared purchases and must not be used on costs that can be attributed directly.

Large construction projects follow you for ten years

On larger new builds, extensions and conversions the adjustment rules come in. For real property the measure counts as a capital item where the input VAT on the new build, extension or conversion is at least NOK 100,000. The adjustment period is ten years, and the year of completion counts as year 1. Example: a property carries out a construction project where the input VAT is NOK 5 million. On completion, 60% of the relevant area is used in activity giving a right to deduct, and the property deducts NOK 3 million. Where part of the commercial area is later converted to housing, the property has to reduce the deduction through an annual adjustment for the rest of the period – normally one tenth of the input VAT per year. No adjustment is made where the deduction percentage changes by less than 10 percentage points compared with the starting point. But the rule has to be applied correctly: where the change concerns a particular space that previously gave a 100% deduction and now moves to use without one, the change may have to be assessed in isolation for that space.

A sale can trigger the whole remaining adjustment

Where the property or a relevant construction measure is transferred before the adjustment period ends, the general rule can be that the remaining adjustment has to be made in full. That can in some cases be avoided where the buyer lawfully takes over the obligation – but the agreement has a deadline, and it is short. On buying or selling property with large historical VAT deductions, the adjustment history should therefore be examined before the transaction completes – see The VAT adjustment rules for real property

VAT should be assessed before the project starts

VAT is often only considered once the invoices have arrived. For housing companies with both residential and commercial space that can become expensive. Before larger refurbishments, conversions, new lettings or changes in the use of commercial space, the board should settle which part of the property is covered by the VAT registration, what right to deduct the housing company has, how shared costs are to be allocated, and whether the project is covered by the adjustment rules. See also Accounting for property letting Greenleaf helps housing co-operatives and jointly owned properties with the accounts, VAT assessments, reporting and financial monitoring.

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.

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