The income generated from short-term rentals in Norway is considered taxable income for the property owner. The specific tax rate depends on the owner's overall income tax bracket. However, owners are responsible for reporting their rental income and paying taxes based on their marginal tax rate. The tax that affects short-term rental is summarized below;

SHORT-TERM LETTING OF YOUR HOME

In Norway, renting out your entire home for short periods (less than 30 days) comes with a specific tax treatment. Here's a breakdown of what you need to know:

Tax-Free Threshold: You can earn up to NOK 10,000 per year from these short-term rentals without paying any taxes. This is a total for the entire income year, not for each rental. So, if you rent out your home occasionally throughout the year and your total income stays below NOK 10,000, you're tax-free on that income.

Taxing Excess Income: However, if your income from short-term rentals surpasses NOK 10,000 in a year, only a portion of the excess gets taxed. Only 85% of the amount exceeding the NOK 10,000 threshold is considered taxable income. For example, if you earn NOK 15,000 from rentals in a year, you'd first subtract the tax-free amount (NOK 10,000) to get NOK 5,000. Out of this NOK 5,000, only 85% (around NOK 4,250) would be subject to taxation.

Tax Rate: The tax rate applied to this short-term rental income is 22%. This means you'll pay taxes on the calculated taxable amount (85% of the excess over NOK 10,000) at a rate of 22%.

No Deductions Allowed: An important point to remember is that you cannot deduct any expenses you incur while renting out your home, even if a portion of your income is taxed. This means you can't claim costs associated with cleaning, utilities, or wear and tear on your property when calculating your taxable income.

Becoming a Business: If you engage in very frequent short-term rentals of your entire home, the Norwegian tax authorities might consider your activity a full-fledged business. This could lead to a significantly higher tax rate of up to 50.6%. Exactly how often you rent out your home determines if you cross this line from casual rentals to business activity, but frequent rentals are generally the key factor. It's important to keep track of your rental frequency and income throughout the year to ensure you're complying with tax regulations.

SHORT-TERM LETTING OF OTHER DWELLINGS/HOLIDAY PROPERTIES

Rental income from the letting of dwellings or holiday homes that you don't live in/use for holidays or leisure will generally be tax-liable from the first krone. Typical examples of such properties are rental homes or cabins for rent.

Tax on All Income: Unlike renting out your entire primary residence, there's no tax-free threshold for income generated from short-term rentals of these properties. All income you earn from such rentals is considered taxable from the very first krone.

Tax Rate and Deductions: The tax rate for this income is the same as for your primary residence - 22% as capital income. However, there's a key difference: you are allowed to deduct any related expenses from your rental income before calculating the tax you owe. This means you can subtract expenses like cleaning fees, maintenance costs, utilities, and property taxes from your rental income to arrive at your taxable amount.

Potential Business Activity Status: There's a possibility that frequent rentals of these properties could be considered a business activity by the tax authorities. This could lead to a much higher tax rate of up to 50.6%. The decision hinges on an overall assessment that considers factors like the number of properties you rent out, the frequency of rentals, and the duration of each rental stay. Generally, if you own multiple rental properties or engage in very frequent rentals of a single property, you're more likely to be categorized as a business.