Property tax (eiendomsskatt) is a local tax that Norwegian municipalities can choose to impose on both residential and commercial properties. As of now, 323 municipalities have introduced property tax, meaning that many homeowners and businesses are affected. But what does this mean for you?
In this blog, we will take a closer look at what property tax is, how it is calculated, and how much you can expect to pay under Norwegian law. We will explore the differences between residential and commercial properties, as well as the key factors that influence tax rates. Whether you own a house, an apartment, or a larger commercial property, this guide will help you understand how property tax works in Norway and what you need to be aware of.
Municipal authority to levy property tax
Property tax is an optional municipal tax. The municipal council can decide whether to impose property tax on residential properties, holiday homes, and commercial properties. According to Statistics Norway (SSB), 323 municipalities had introduced property tax by 2024. While municipalities have great flexibility in structuring the tax, they must operate within the legal framework set by the Property Tax Act.
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Tax rates and exemptions
Municipalities have the authority to set property tax rates, but within legally established limits:
- The maximum rate is 7 per mille for commercial properties.
- The maximum rate is 4 per mille for residential and holiday properties.
- The property tax cannot exceed 1 per mille in its first year and can subsequently be increased by a maximum of 1 per mille per year.
Certain properties are always exempt from property tax, regardless of municipal decisions. These include:
- State-, county-, or municipally owned properties
- Healthcare institutions
- National parks and protected areas
Valuation — The basis for property tax
The valuation of a property determines the amount of tax payable. Different methods apply to residential and commercial properties.
Residential properties — Market value or municipal appraisal?
Municipalities can choose between two methods for valuing residential properties:
- Using the Tax Administration’s estimated market value, which is based on statistical housing prices.
- Conducting their own municipal appraisal.
Approximately 110 municipalities use the Tax Administration’s estimated market value instead of conducting their own valuations. This method calculates the value based on average housing prices in the area, adjusted for factors such as size, age, and standard. Municipal appraisals, on the other hand, involve an individual assessment of each property, often including physical inspections to evaluate its actual condition and location.
Additionally, the following applies:
- Mandatory reduction factor of 30%: The taxable value is reduced by 30% before calculating the property tax.
- Basic deduction: Some municipalities offer a deduction that lowers the taxable amount further, but the size of this varies.
- Right to appeal: If a homeowner believes their valuation is incorrect, they can file a complaint with the municipality for reassessment.
Commercial properties — Technical value or market value?
Valuing commercial properties is more complex than valuing residential properties. Municipalities must assess commercial properties based on the land and buildings, excluding production equipment and installations to ensure the valuation is detached from the business operations conducted on the premises.
The general rule: Commercial properties should be valued based on objective market value. Typically, this is determined by capitalized rental income, meaning the expected rental income the property could generate in the market. In some cases, technical value can be used, but only if it is "not possible" to determine market value, as stated in Section 8 A-2 of the Property Tax Act.
Important legal guidelines: In 2024, the Norwegian Supreme Court issued a landmark ruling (HR-2024-2345-A) in a dispute between INEOS Tyssedal AS and Ullensvang Municipality. The ruling clarified that the primary rule is objective market value, and technical value can only be used in exceptional cases. Municipalities cannot assess a property as part of an ongoing business operation but must evaluate the land and buildings separately. If a property could be repurposed, for example, as a warehouse or office space, this must be considered before applying technical value.
This ruling sets clear guidelines for how municipalities should assess commercial properties moving forward. It also limits the use of technical value as a default method, emphasizing that the threshold for determining that market value cannot be established is high.
What does this mean for you?
Even though municipalities have significant freedom in designing property tax, they are bound by guidelines from the Property Tax Act and the Supreme Court. By understanding the mechanisms of property tax, you can better plan your finances and ensure you pay the correct tax. This understanding will also help you assess whether the tax base determination is accurate and whether you should consider filing an appeal. We are here to assist you if you are uncertain!
QUESTIONS ABOUT PROPERTY TAX?
Our property lawyers are happy to assist. Contact us today!
