In support of the startup community in Norway, Startup Weekend Stavanger (SWS) were invited to do an exclusive interview with KPMG’s legal accounting team. Read on to find out what they advise from the most common accounting mistakes that startups make in year one to the key tax issues to consider when starting a new business.SWS: What is the most common accounting mistakes that new businesses make in year one of their startup business?
KPMG: The most common mistake is that new businesses underestimate the value of good routines for bookkeeping. If you do not establish routines, and get behind with this, you will have big challenges even though you have the greatest business idea. We often see lack of knowledge and competence connected to accounting and to the legal framework, especially for small enterprises with few employees and lack of people with economic background. However, good order and systems will sometimes even be more important than knowledge and competence. New businesses must also be aware of the liquidity. When expanding, it might take some time until you see the income, however, salary costs and other costs will apply continuously.
SWS: What are the key tax issues to consider when starting a business in Norway?
KPMG: The overall main issue is to act in accordance with reporting requirements and tax reporting deadlines from the first day. If you start failing on this, it might be time consuming and expensive to align afterwards. Of course, it is of importance to investigate which tax rules that will apply for you, based on how your business is organized. For example, there is a beneficial rule named “SkatteFUNN” that might lead to reduced taxes for businesses conducting research and development.
If you sell goods and/or services to other countries, please note that such business activity might lead to tax- and reporting obligation in the other country.
If you hire employees, it is important, among others, to make the required registrations, establish a separate bank account for withholding tax, and establish the required pension scheme (OTP) Incidentally, we recommend that you hire an accountant to handle the above, potentially with assistance from a tax adviser.
SWS: For simplicity and cost savings, many startups begin their business as a sole proprietorship. What advice would you give from an accounting and tax perspective when starting a business under this company form?
KPMG: The advantage of establishing a Sole Proprietorship is that it is easy to establish. However, please note that you are personal responsible. A Private Limited company will in principle limit your risk to the share capital. A private Limited company will also often be perceived as more professional in the market.
SWS: Many startups get confused about VAT, such as knowing when to charge VAT and knowing when to register themselves as a VAT registered business. What is your advice to startups to avoid any tax and accounting issues with VAT?
KPMG: From the time you exceed a turnover of NOK 50 000, you are obliged to register for VAT. However, some business are exempt, for example financial services, health and education. Some advice that could imply a significant benefit is to apply for an advance registration in the VAT register. This is possible if you have had investments exceeding NOK 250 000 including VAT, and it means that you are permitted to deduct VAT even if you have no turnover. It is also important to be aware of the possibility of exception within some industries, for example the petroleum industry.
SWS: In the first year of a business, startups often don’t have the funds to employ a professional accountant or lawyer to assist them with their business activities. What is your advice to startups in this situation?
KPMG: We fully understand that the main focus is to build up the business, and that you do not want to spend much money on compliance. Nevertheless, as mentioned above, it is very important to handle at least the minimum requirements for tax and reporting. There is no doubt that it will save you from concerns and costs if you handle this correctly from the start. We also recommend to contact some advisers that you can contact when you need it.
SWS: Are there specific accounting practices in Norway that differ from other markets that startups need to be aware of? Where can startups learn more about these accounting laws?
KPMG: The rules will in general be the same. However, within some industries there might be separate rules and principles, for example within oil and gas and within some manufacturing enterprises.
If you need more information, please read about KPMG Accounting’s services on the following link here. [In Norwegian].
SWS: With thanks to the following KPMG representatives for their time and advice for this article:
- Marius Basteviken, Partner, Attorney at law and Business Economist at KPMG Law. Specialist in corporate tax and Transfer Pricing
- Anne Tengs-Pedersen, Attorney-at-Law at KPMG Law, and specialised in individual taxes and employment law for Norwegian employees as well as for cross border workers.
- Marit Opstad, Associate Attorney-at-law at KPMG law, specialised in VAT
See KPMG‘s website for more information on their services.