As from 1 July 2024, the “lock-in” period in Norway to avoid having to repay a proportionate amount of deducted input VAT on the purchase of passenger cars and small vans is increased to eight years. This change will have a significant impact on businesses that rent out or lease cars and those involved in the transport of people, as these businesses are entitled to deduct the input VAT paid on the purchase of the vehicles.
Previously, the lock-in period for deducted input VAT was four years. The first year carried the highest depreciation. If the use of the car changed, or if the car was sold within the four-year period, the input VAT had to be repaid based on a predefined template. Under the new eight-year lock-in period, repayment of deducted input VAT will be based on the value of the car at the time of the change in use or sale.
Knut Andreassen
Richard Haave Hanssen
BDO in Norway
Previously, the lock-in period for deducted input VAT was four years. The first year carried the highest depreciation. If the use of the car changed, or if the car was sold within the four-year period, the input VAT had to be repaid based on a predefined template. Under the new eight-year lock-in period, repayment of deducted input VAT will be based on the value of the car at the time of the change in use or sale.
Impact on affected industries
As noted above, the change will particularly affect the leasing and car rental sector and the taxi industry. Typically, a car leasing period in Norway is three to four years. Under the old system, no repayment of deducted input VAT was required if the car was sold after four years. Under the new regime, if a car is sold within the eight-year period at 55% of its original price, 55% of the deducted input VAT must be repaid. Although the taxi industry will also be affected, taxis usually have a lower resale value due to high mileage, and they are often sold after two to three years.BDO insight
The extension of the lock-in period to eight years for input VAT on cars represents a substantial change for businesses in the leasing, rental and taxi sectors. Companies will need to adjust their financial planning to accommodate the new VAT repayment calculations based on the car's value at the time of sale or change in use. BDO Norway’s initial calculation indicates that an EUR 80,000 car may be at least EUR 80 more expensive to lease per month under the new rules. When the partial VAT exemption for electric cars is phased out, the impact will be even greater.Knut Andreassen
Richard Haave Hanssen
BDO in Norway