Project account reports for SkatteFUNN projects

Go directly to:

• The real costs count
• What is the framework for the tax deduction?
• How to enter hours and costs?
  • Example: Calculation of hourly rate for your employees
• Patenting costs
• Activities that cannot receive support
• Use of an auditor
• Read more about the rules for tax deductions

The real costs count

The budget submitted in the application was not binding, but we wanted a realistic estimate. When you fill in the tax return, you must use the actual costs you have incurred in the project. These costs may be higher or lower than what you budgeted for in the application. The most important thing is that the costs are directly related to the approved project as described in the application.

What is the framework for the tax deduction?

You can apply for a tax deduction for 19 per cent of the costs of a research and development project, with the upperlimit for costs being NOK 25 million.

The limit applies to both costs per project per year (total costs across companies) and costs per company (taxpayer) per year. This means that

• if one company has several SkatteFUNN projects, the upper limit applies to all the projects together. Companies that have several approved projects at the same time must therefore be aware that the framework applies per company per year
• if two or more companies collaborate on the same SkatteFUNN project and have received SkatteFUNN approval for their part of the project, then the limit applies to the project as a whole, across the companies

You must claim the deduction via the Tax Administration's tax return. Payment/reduction in tax comes via the tax assessment.

How to enter hours and costs?

You must keep project accounts for all costs that must be included in the tax claim. You must also keep timesheets for all working hours that are to be included in the project accounts. Such work must be documented for employees in the applicant company and in related companies working on the project.

Keep this in mind

Record costs for the whole year

The approval of a SkatteFUNN project is valid for the entire calendar year. This means that you can claim a tax deduction for all project costs you have in the same calendar year for which the approval applies, as long as you follow the documentation requirements.

Start recording hours as soon as possible

Start early with your timesheets. The requirement for time registration also applies to hours that have been entered before you receive the actual approval. Therefore, you must have a system and routines for recording hours and signing them before you start working on the project. Project costs that have been incurred after the planned project completion can also be entered if they are from the calendar year for which you have approval.

You cannot claim a tax deduction for expenses that are from before or after the calendar year for which your project have been approved.

What about interest on loans?

You can claim a tax deduction for interest on loans that are linked to the project. Borrowing costs to cover salaries are not included. You can read more in the Norwegian Tax Administration's Tax-ABC for Research and Development Costs – SkatteFUNN under the chapter on financing costs/interest on debt.

Download a sample of project accounting.

Everyone must document hours

You calculate personnel costs based on the number of hours that the total R&D personnel work on the project. You must document all working hours: Both R&D personnel and the Project Owner must sign the timesheets at least every quarter. This is an absolute requirement.

You can often use the same system that you use for regular timekeeping, but you must check that the system meets the requirements. The timesheets must show the following for each day:

1. name of the person working with research and development (R&D person)
2. how many hours the person has worked
3. what sub-goals or work packages the person has worked on

See the Tax Administration's Tax ABC or contact the Tax Administration to find out more about expense recognition.

Example: Calculation of hourly rate for your employees

A maximum of 1850 hours can be entered per addition per year. The hourly rate for eligible employees is limited to 1.2 per thousand of the agreed and actual annual salary at the end of the project period or income year. The hourly rate may not exceed NOK 700 per hour.. This limit also applies when you buy research and development from companies with which you have close ties.

Example of timekeeping

Per works 80 % in the company, and has a nominal salary of NOK 332,000.
He works 158 hours on the project during a year.

Anne works 100 % in the company, and has a nominal salary of NOK 600,000.
She works 1850 hours on the project during one year.

Calculation Per:
Per's salary must first be converted to a full-time position, which gives NOK 415,000.
Hourly rate: 415,000×1.2 ‰=498.
The costs for Per in the project account are: 498×158=78,684.

Calculation Anne:
Hourly rate: 600 000×1.2 ‰=720.
You can enter a maximum hourly rate of 700.
The costs for Anne in the project account are: 700×1850=1 295 000.

You must not include unpaid work effort

You can only include actual paid wages, what we call actual costs. You cannot therefore include unpaid work input.

Sole proprietorships and other enterprises that do not have employees cannot enter salary expenses as a basis for tax deductions. This means that project work carried out by people associated with the company who do not have an employment relationship and a documentable agreed salary is counted as unpaid work input.

Subcontractors/work performed by others must also submit timesheets

Work carried out in the project by what is defined as a related company has the same requirements for keeping signed timesheets as work carried out in the applicant company. The right to deduct is limited to the purchase of R&D services from countries within the EEA and countries with which Norway has a tax treaty or information exchange agreement.

Patenting costs

Small and medium-sized enterprises (SMBs) may charge expenses for the patenting of the first gong, in accordance with  Section 16-40-6, paragraph 4 of the SkatteFUNN Regulations:

Small and medium-sized enterprises are entitled to a deduction for costs associated with first-time patenting. The deduction applies to all costs prior to the grant of the right in the first jurisdiction, including costs related to the preparation, filing and follow-up of the application as well as the costs of renewing the application before the right is granted.

The size of the company has an impact on how much total public support a project can receive.

Activities that cannot receive support

Support for operations and production

SkatteFUNN is support for research and development and not support for operation and production. Section 16-40-2 (3) of the SkatteFUNN Regulations provides examples of activities that, for this reason, cannot receive support through SkatteFUNN.

Commissioned research

No deductions are given for costs related to research stones that are sold.

Application for approval

Costs in connection with the application for approval of the project and auditor confirmation in an attachment to the tax return cannot be included in the basis for the deduction.

Use of an auditor

Everyone who claims a tax deduction in the SkatteFUNN scheme must have an auditor's certification of the project accounts on which the figures in the tax return are based. This means that the auditor must certify the costs and attest to the information on public aid. This applies regardless of whether the taxpayer is subject to the audit obligation or not.

Figures that must be included in the annual status report or in the final report to the Research Council by 1 March each year do not require auditor approval. Enter as good figures as possible from the project accounts at the time of reporting. We use these speeches to assess the progress of the projects and for statistical purposes. You must enter the tax claim itself in the tax return.

The Norwegian Association of Public Accountants recommends that companies get an auditor for their project as early as possible. If you wait too long to get an agreement with an auditor, it can be difficult to find someone who will say yes, due to the large scope of the assignment.

Read more about the rules for tax deductions

In order to claim a tax deduction for your research and development (R&D) expenses in the approved project, you must include them in your tax return. The deduction must be based on auditor-approved project accounts and timesheets.

Information on which expenses can be included in the deduction basis, definition of what is considered a related company and other clarifications can be found in the SkatteFUNN regulations and the Taxation Act §16-40, regulations for SkatteFUNN, section 16-40-3 or at Skatteetaten.

See also the Tax Administration's Tax ABC for Research and Development Costs – SkatteFUNN.