Investing in Norway: personally or through a Holding AS?
Investment Strategies in Norway 2024: ASK Versus AS
Since the introduction of the Aksjesparekonto or Share savings account (ASK) in 2017, the landscape of investing in Norway has evolved significantly, especially in 2024. This change has bridged the gap between personal and corporate investments, offering diverse options for both individual investors and corporate entities like Aksjeselskap (AS).
Aksjesparekonto (ASK)
The ASK simplifies long-term personal investments, allowing individuals to buy and sell securities without immediate tax liabilities. This setup enhances the potential for greater investment returns. Most investors find that an ASK or investment account offers similar tax advantages as an AS but without the additional costs and administrative workload associated with corporate structures. Such an account is usually free of charge. You will pay transaction and maintenance fees on some of the investment products. Most larger banks like DNB and Sparebank offer share saving accounts. Note that not all of them offer all mutual funds and stocks but may have a more limited selection. Arguably the service with the most extensive selection of funds (ETF, index funds, mutual funds), stock and more advanced products is Nordnet.
Aksjeselskap (AS): Ideal for Significant and more complex Investments
For those looking to invest significantly in unlisted stocks or derivatives, setting up an AS is advantageous. These investments are covered by the ‘exemption method,’ which allows tax-free realization of gains from stock and mutual fund investments. However, the exemption method applies specifically to unlisted stocks, options, and other derivatives, particularly within the EU/EEA, excluding for example American stocks.
Operational Costs and Considerations for AS
Operating an AS entails certain costs and regulatory requirements. For instance, registering an AS costs at least 5,570 NOK fees for the business registration and a minimum share capital of 30,000 NOK is required. Additionally, the AS must maintain robust accounting practices, often leading to an annual cost of at least 10,000 NOK. Smaller AS companies do not need an auditor unless they exceed specific financial thresholds.
| Aspect | Aksjesparekonto (ASK) | Aksjeselskap (AS) |
|---|---|---|
| Investment Type | Personal investment account for securities | Corporate entity for investments |
| Main Features | Buy, hold, and sell securities without immediate tax | Use of the exemption method; can hold unlisted stocks, options, derivatives |
| Advantages | Simplifies long-term personal investments; no immediate tax on trading; suitable for moderate-scale investments | Tax-free realization of gains under exemption method; reinvestment of business profits; suitable for significant, complex investments |
| Disadvantages | Limited to certain types of investments; not suitable for unlisted stocks and certain derivatives | Operational costs and complexity; tax on 3% of dividends; double taxation on certain investments |
| Taxation | Tax deferred until withdrawal; efficient for listed securities | 3% of dividends taxed; certain investments subject to regular taxation; potential double taxation |
| Operational Costs | Generally low or managed by broker | Registration and maintenance costs; accounting and reporting requirements |
| Suitable For | Individual investors with moderate-scale portfolios | Investors with substantial capital, seeking to invest in unlisted stocks or for business reinvestment |
Tax Implications and Exemption Method
In an AS, 3% of tax-exempt dividends are taxable, a rule that applies to both domestic and foreign companies. This method also covers different business forms, including foreign entities equivalent to qualified Norwegian companies. However, investments like real estate, bank deposits, and stocks outside the EU/EEA do not fall under this method and are subject to regular taxation.
Investment Suitability in AS
The AS is particularly suited for reinvesting business profits, as seen in practices of existing AS owners like consultants or dentists. Such reinvestments can defer tax liabilities until the profits are withdrawn. Notably, the combined tax rate for corporate and dividend taxes can reach about 51.5%, making personal investment accounts more suitable for certain assets.
Dividend and Salary Choices in AS
AS owners have the option to extract profits as salary or dividends. While salary is taxed as income and attracts social contributions, dividends offer tax-efficient withdrawal options. The choice depends on individual income levels and tax considerations. Get advice from one of our professionals today.
Investment Flexibility in AS
The AS structure allows for a certain degree of investment flexibility, including the potential inclusion of interest-bearing investments to balance portfolio risks. However, these investments should be carefully managed to avoid double taxation.
As of 2024, the choice between an ASK and an AS in Norway should align with the investor’s scale of investment, types of securities, and long-term financial goals. While the ASK offers simplicity and tax efficiency for individual investors, the AS provides a more suitable structure for larger and more complex investments, especially those seeking to leverage the tax benefits under the exemption method. This comprehensive understanding of both ASK and AS will guide investors in making informed decisions in Norway’s evolving investment landscape.
