When you sell shares at a profit, or receive dividends from a company, the tax authorities want their share of the pie in the form of taxes. But the state also wants Norwegians to invest their money in businesses, instead of letting it rot in a bank account with low interest. That is why we have something called a shielding deduction.
The shielding deduction is your rightful tax-free portion. It works like this: Every year, the Tax Administration sets a shielding interest rate (for example 3 percent). If you bought shares for 100,000 kroner, you get a shielding deduction of 3,000 kroner that year. You can deduct this amount straight from your profit before the tax is even calculated!
Here comes the real magic: If you do not sell your shares, and also do not receive any dividends one year, the shielding deduction does not disappear. It accumulates! Next year you get a new deduction, and it is added on top of last years. Over many years, you can build up a huge shielding deduction that allows you to withdraw large profits completely tax-free in the future.