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Legal ReferenceIncome Tax Act no. 90/2003, article 57, paragraph 2 and 3.

Legal ReferenceSee article 2, 3, 6, 7, 9 and 10 in Regulation no. 1180/2014.

The provisions of Article 57 Act no. 90/2003 do not contain a reference to the OECD TPG, but the provision takes into account the guidelines. Reference is made to the TPG in Regulation no. 1180/2014 on documentation and transfer pricing between related legal entities.

Legal ReferenceIncome Tax Act no. 90/2003, Article 57, paragraph 4.

Legal entities are considered related when: a) They are a part of a group according to Article 2 of the Annual accounts act nr. 3/2006 or are under direct/indirect majority ownership or administrative control of two or more legal entities within the same group. b) one legal entity has direct or indirect majority ownership over another legal entity. c) if legal entities are directly or indirectly majority owned or under the administrative control of individuals who are connected through family ties, for example people who are married or equivalent, siblings and individuals who are directly related (kids, parents, grandparents).

Legal ReferenceArticle 9 of Regulation no. no. 1180/2014.

The methods are put forth in Regulation nr. 1180/2014, not in the legislation itself. The box “other” is checked because the regulation leaves the door open for other methods to be used. For example, the EU code of conduct on transfer pricing documentation for associated enterprises in the European Union 2006/C 176/01 is referenced as a possible choice for legal entities in Article 15, paragraph 3 of the Regulation.

• CUP (provided)
• Resale Price (provided)
• Cost Plus (provided)
• TNMM (provided)
• Profit Split (provided)
• Other (provided)

• Hierarchy of methods (not selected)
• Most appropriate method (selected)
• Other (if so, please explain) (not selected)

There is no specific guidance in laws/regulations on this.

• For controlled transactions involving commodities, the guidance contained in paragraphs 2.18-2.22 of the TPG is followed. (selected)
• Domestic legislation mandates the use of a specific method for controlled transactions involving commodities (if so, please explain) (not selected)
• Other (if so, please explain) (not selected)

Legal ReferenceArticle 10 in regulation no. 1180/2014.

The analysis is prepared on the basis of internal and external comparative analysis with regard to the factors that have the most impact as described in the OECD TPG, characteristics of property/service, functional analysis, contractual terms, economic circumstances, business strategies.

The topic is not directly addressed in the legislation and because of that it is allowed but not required.

Comparability adjustmens would be required in practice by tax administrations. According to Article 10 in Regulation 1180/2014 such adjustments shall be reported and explained.

Legal ReferenceArticle 8 in Regulation no. 1180/2014.

Article 8 in Regulation 1180/2014 states that a party subject to documentation needs to declare all intangible assets within a group that affects related transactions. Information about ownership, use, development, and maintenance needs to be documented as well as probable resale price and the present value of their expected income. No guidance is however about the pricing of such transaction.

Legal ReferenceArticle 12, 33, 37 48 and 73 of the Income Tax Act no. no. 90/2003.

Accounting and tax treatment of costs incurred in creating intangibles is usually capitalized if it is not connected to income of the accounting year. Such capitalized intangible assets, as well as purchased intangibles, are considered depreciable assets, as noted in points 4 and 5 of Article 33 and Article 48. They are declared as assets at cost value cf. Article 12 and 73, and are depreciated on a straight line basis at 15-20% per year cf. Article 37.

Icelandic domestic legislation does not contain specific guidance on the pricing of controlled intra-group services transactions and tends to rely on the OECD TPG.

Icelandic domestic legislation does not contain specific guidance on the simplified approach for LVAS transactions and tends to rely on the OECD TPG.

Icelandic domestic legislation does not contain specific guidance on the pricing of controlled financial transactions and tend to rely on the OECD TPG.

Legal ReferenceIncome Tax Act no. 90/2003, Article 57. B.

Earning stripping rules are included in the Income Tax Act. The rules limit interest deduction to 30% of earnings before interest, taxes, depreciation, and amortisation (EBITDA). The rules apply in excess of ISK 100 million (approximately EUR 694 927) of interest expenses etc. The rules do not apply if: interest expenses are paid because of intra-loan transactions within a group that is authorised for joint taxation in accordance to the Icelandic Income Tax Act or if the group fulfils the requirements for joint taxation, when all companies are resident in Iceland; it is demonstrated that the equity ratio does not deviate more than 2% from the equity ratio of the group, or the taxpayer is a financial institution or insurance company, or a company owned by such parties and conducts similar operations.

Icelandic domestic legislation does not contain specific guidance on cost contributuin agreements and tends to rely on the OECD TPG.

Legal ReferenceIncome Tax Act no. 90/2003, Article 57, paragraph 5. Article 3 of regulation no. 1180/2014 – CBC report.

Master file and Local file are not required to be filed separately, there is no distinction made between the two in the legislation/regulations. The same information however needs to be filed but it does not need to come in the MF/LF form.

• Master file consistent with Annex I to Chapter V of the TPG (not selected)
• Local file consistent with Annex II to Chapter V of the TPG (not selected)
• Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
• Specific transfer pricing returns (separate or annexed to the tax return) (not selected)
• Other (specify): (selected)

Legal ReferenceArticle 13, 14 and 15 of regulation no. 1180/2014. Income Tax Act no. 90/2003, article 57, paragraph 5. Regulation no. 766/2019 on CBC reporting.

Transfer Pricing documentation shall be prepared for each financial year in Icelandic and/or English. Legal entities must be able to submit all documents if requested by the Tax Authorities within 45 days. Transfer pricing documentation shall be kept for seven years from the end of the financial year. CbC reports are to be filed within 12 months from the end of the financial year to the Tax Authorities. The report should be in English and on a specific form.

Legal ReferenceNot published yet in the Income Tax Act no. 90/2003 but has been entered into force as from May 31st 2021.

The Icelandic Parliament passed into law on 31 May 2021 changes to Article 57 of the Income Tax Act no. 90/2003 to introduce new rules that allow Iceland Revenue and Customs to impose administrative fines on taxpayers that fail to fulfil their transfer pricing documentation obligations as set out in paragraph 5 of Article 57 of the Income Tax Act. Fines can amount up to ISK 3 million for each financial year that taxpayer has failed to fulfil their TP documentation obligations within 45 days. The fine shall amount to ISK 1.5 million if the taxpayer has submitted documents that are considered unsatisfactory and the taxpayer has not complied with the Director of Internal Revenue’s demands for improvements within 45 days. A fine may be imposed for a maximum of six income years, immediately preceding the year in which the fine is made to the max amount of ISK 6 million. If a taxpayer rectifies deficiencies within 30 days the amount of the fine shall be reduced by 90%. If improvements are made within two months, the amount shall be reduced by 60%. If improvements are made within three months, the amount shall be reduced by 40%.

Legal ReferenceRegulation no. 1180/2014, Article 12.

The transfer pricing documentation obligation does not apply to minor transactions between related parties. A transaction is considered to be minor if it has limited economic scope and importance for the operation of the entity involved. They however need to be reported to the tax authorities. The exemption does not apply to transactions involving intangible assets. Please refer to Q27 for further information. Moreover, if the operating income of a legal entity in one financial year or if total assets at the beginning or at the end of the financial year is over ISK 1 billion the entity is required to file a CbCR.

Legal ReferenceIceland’s MAP Profile

Iceland has detailed guidance and information on MAP published online. Moreover, please refer to Iceland’s MAP profile for further information.

• Rulings (not selected)
• Enhanced engagement programs (not selected)
• Advance Pricing Agreements (APA) (not selected)
• Mutual Agreement Procedures (selected)
• Other (please specify): (not selected)

Legal ReferenceArticle 12 of Regulation no. 1180/2014.

Article 12 of Regulation no. 1180/2014 is an exemption for minor transactions between related parties. The obligation to document does not apply to a minor transaction between related parties. It only needs to be stated that such transaction has taken place and that they are considered minor. Minor transactions refer to measures within each operating year that have limited the economic scope and importance for the operations of the party subject to documentation. If a party subject to documentation takes advantage of the exemption, it shall upon submission of the declaration explain the nature and scope of the transaction and why it falls under the exemption. The exemption does not apply to transactions involving intangible assets.

There is nothing on this in the laws or the Regulation.

Legal ReferenceTvísköttunarsamningar | Skatturinn - skattar og gjöld

In 4 treaties and it is part of Iceland´s model tax treaty. If yes, how do you implement it in cases, where the old tax treaties do not contain the new version of Article 7 (OECD MTC 2010 and later): This issue has not come up in practice and it is unclear how it would be dealt with. Likely, Iceland will not be able to apply the AOA in cases where the tax treaty does not have the new wording.