Hired labour is covered by special rule on VAT

A hotel was rebuilt and refurbished with a view to conversion into flats. The work was carried out at the owner's expense and risk by use of hired labour. The Supreme Court's majority of four justices came to the conclusion that hired labour had to be equated with own employees under section 3-26 of the VAT Act, so that the owner was obliged to calculate output VAT on the value of the rebuilding and refurbishing work. The wording of the provision was clear, and certain linguistic formulations in the preparatory works suggesting the opposite could not lead to any other result. It was also emphasised that if hired labour fell outside of section 3-26, it could give an unfair competitive advantage to organise construction activities so that the work is carried out by hired labour instead of own employees. The Supreme Court found in favour of the State represented by the Tax Office. Dissenting opinions 4-1.

Read the whole judgment (Norwegian only)

Area of law: Tax law. VAT.

Key paragraphs: 39-40

Justices: Falkanger, Bull, Falch, Høgetveit Berg, Sæther