At NordicHQ, we often receive inquiries about the best way to manage vacation rental properties in Norway. Below is an example to illustrate the considerations you should think about when renting out such a holiday home in Norway.
Client Question:
I own a vacation home in Norway that I want to rent out through my holding company. Can I do this through my Dutch BV (private limited company), or do I need to start a Norwegian AS (limited company) under my holding company? I understood that a NUF (Norwegian registered foreign enterprise) is also an option. I would like some advice on this matter.
Our Answer:
In general, we would not recommend managing this through a Dutch BV. It’s preferable to use a Norwegian entity at minimum, as using a foreign company can lead to complex situations. That said, the Norwegian AS (limited company) could be a subsidiary of your Dutch BV, allowing you to channel profits to the BV (practically tax-free after paying corporate tax in Norway).
However, it’s worth noting that for a single vacation home, it’s unusual to use an AS. Typically, such rentals are managed privately. Let’s break down the considerations for when to rent privately versus through an AS in Norway:
Reasons to rent privately:
- If you’re renting out only one or a few properties.
- If you’re renting less than five residential units or less than 500 m2 of commercial space.
- If you want to use the rental income directly for personal expenses.
- If you want to avoid the administrative burden and costs associated with running a company.
Reasons to rent through an AS:
- If you’re renting five or more residential units (this is usually considered a business activity).
- If you can’t get a personal loan but can secure a business loan based on expected rental income.
- If you want to limit financial risk (with an AS, you’re only liable for the invested amount).
- If you plan to reinvest profits into other projects or businesses.
- If you want to set up a holding structure for further risk distribution and investment opportunities.
Tax considerations:
- With private ownership, you pay 22% tax on rental profits.
- With an AS, you pay 22% corporate tax, plus 37.8% tax on dividends if you want to use the money privately, resulting in a total tax of 51.5%. You can find a tax calculator on the Norwegian tax authorities’ website.
In conclusion, for most people renting out a single vacation home, private ownership is often more advantageous due to lower tax burden and less administrative work. An AS becomes more interesting if you have multiple properties, want to expand, limit risks, or reinvest profits.
