Tax law: The line between maintenance and upgrading - direct deduction or depreciation

Supreme Court judgment 22 October 2020, HR-2020-2018-A, (case no. 20-011264SIV-HRET), civil case, appeal against judgment 

Lyse Produksjon AS (Counsel Finn Backer-Grøndahl), Energi Norge (third-party intervener) (Counsel Bendik Christoffersen) v. The State represented by the Tax Office (The Office of the Attorney General represented by Nils Sture Nilsson), LVK (Counsel Caroline Lund) (third-party intervener)

Justices: Webster, Noer, Bull, Bergh, Steinsvik

A power producer had to enforce a large dam due to new regulations on dam security. The Supreme Court found that the costs accrued were not directly deductible as maintenance costs, see sections 6-1 and 6-11 of the Taxation Act, but had to be included and depreciated over 67 years as upgrading costs, see section 18-6 subsection 1. The measures had no effect on the power production under normal operating conditions. It was more natural to consider the increased security level created by the significant technical and physical changes as functioning improvement. It was also more natural to consider the changes as measures with the aim of future value creation, and thus as upgrading rather than maintenance.

Read the whole judgment (Norwegian only)

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