Making it easier for angels to deduct tax for startup investments: a new addition to /documents:

We constantly work to make it easier for Norway-based entrepreneurs to build great companies. A few years back we launched /documents, our collection of templates for building a startup, including everything from Shareholders Agreement to Non-Disclosure Agreement. Earlier this year, we introduced a new early-stage investment instrument called the SLIP, and today we’re adding two more documents to this collection.

A while back, Shifter wrote about how very few angel investors have taken advantage of the tax benefits available. From our view, this is not optimal — better utilized incentives would mean more investments in startups (obviously a good thing). When talking to our investors in StartupLab Founders, we learned one of the main reasons this tax benefit is not taken advantage of, is that it’s complicated to do after the investment has been made.

After the investment is made, it’s not obvious how many of the investors who were part of the investment that want to take advantage of the tax benefit (the benefit is only applicable for up to 1.5MNOK per company), and the workload required to resolve this is such a hurdle that many angel investors end up not doing anything about it.

This is why we are adding a new document to our documents-collection; a simple subscription form that makes it easier for angel investors to take advantage of this tax benefit. The process was proposed by one of our investors, and with the help from our legal partner SANDS we have created the paperwork to enable it. It goes as follow:

1. When raising money from angel investors, use our subscription form (you'll find it at /documents). The document, called “Request for tax deduction regarding investment in startups” allows any angel investor to report interest in using tax incentive scheme as part of their investment. The subscription form also says how the tax benefit will be distributed in case the company raises more than 1.5MNOK from investors wanting to use the tax benefit; either pro-rata or on a first-come first-serve basis.

2. When the company later submits its “Aksjonæroppgave” and lists number of shares for the company and per investor, they have to list how this tax benefit has been used under “Hendelsestype” — “Stiftelse/nyemisjon med skattefradrag” (see more details about how to do this in article 9 here). This way the tax benefit will show up on the investor’s tax statement.

We believe this will make it easier for more investors to take advantage of this tax benefit, which again will lead to more investments in startups. Which of course is a good thing!