{"id":147150,"date":"2026-08-13T09:18:06","date_gmt":"2026-08-13T09:18:06","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=147150"},"modified":"2026-08-13T09:18:06","modified_gmt":"2026-08-13T09:18:06","slug":"iceland-transfer-pricing","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/iceland-transfer-pricing\/","title":{"rendered":"Iceland: Transfer Pricing"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-147150","comparative_guide","type-comparative_guide","status-publish","hentry","guides-transfer-pricing","jurisdictions-iceland"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">BBA Fjeldco<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/12\/BBALogo_FINAL.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">BBA Fjeldco<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/12\/BBALogo_FINAL.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Transfer Pricing laws and regulations applicable in Iceland<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the legal framework (legislation, regulations or administrative guidance) governing transfer pricing in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The primary legal framework governing transfer pricing in Iceland is found in paragraphs 3-12 of Article 57 of the Icelandic Income Tax Act No. 90\/2003 (l\u00f6g um tekjuskatt) (the &#8220;ITA&#8221;). Article 57 empowers the Icelandic tax authorities (Iceland Revenue and Customs, Skatturinn) to correct the taxable income of related parties where the terms of their transactions deviate from what would have been agreed between independent parties at arm&#8217;s length.<\/p>\n<p>Supplementary rules are found in Regulation No. 1180\/2014 on transfer pricing and documentation (regluger\u00f0 um skj\u00f6lun og milliver\u00f0lagningu \u00ed vi\u00f0skiptum tengdra l\u00f6ga\u00f0ila), which sets out documentation requirements for related-party transactions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">To what extent are the OECD Transfer Pricing Guidelines incorporated into or relied upon in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Article 57 of the ITA does not contain a direct reference to the OECD Transfer Pricing Guidelines. Direct reference is made to the OECD Transfer Pricing Guidelines in Regulation no. 1180\/2014 on transfer pricing and documentation. The OECD Transfer Pricing Guidelines are regarded as an important interpretive source in Icelandic transfer pricing practice. While the OECD Guidelines are not formally enacted into Icelandic law, they are relied upon when interpreting Article 57 of the ITA and regularly cited in tax rulings and in decisions of the Internal Revenue Board (yfirskattanefnd), which is a tax specific appeals board, when resolving transfer pricing disputes.<\/p>\n<p>Regulation No. 1180\/2014 on transfer pricing and documentation explicitly references OECD standards. In practice, the Icelandic tax authorities are expected to apply the arm&#8217;s length principle in a manner consistent with the OECD Guidelines, and taxpayers are expected to follow OECD methodologies when preparing transfer pricing documentation and benchmarking analyses.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are \u201crelated parties\u201d and \u201ccontrol\u201d defined in your jurisdiction, and how do these concepts affect the application of the arm\u2019s length principle and the scope of the transfer pricing rules?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Article 57 (4) of the ITA, the transfer pricing rules apply to transactions between related parties (tengdir a\u00f0ilar). The concept of relatedness encompasses entities connected through direct or indirect ownership, control, or management. Specifically, parties are considered related where one party has a direct or indirect controlling interest in another, or where both are under common control or ownership.<\/p>\n<p>The threshold for control is generally set at direct or indirect ownership of over 50% of share capital or voting rights. Family and personal relationships may also give rise to related-party status under article 57 (4).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do transfer pricing rules apply to both cross-border and domestic transactions?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In part. The arm\u2019s length principle applies equally to cross-border and domestic transactions between related parties. The specific transfer pricing compliance obligations, and in particular the obligation to prepare and maintain transfer pricing documentation, apply only to cross-border transactions between related entities. It should also be noted that the general arm\u2019s length and anti-avoidance rule in Article 57(1)\u2013(2) of the ITA long predates the transfer pricing provisions and applies to related-party transactions irrespective of whether they are domestic or cross-border.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any exemptions or exclusions from the transfer pricing rules in your jurisdiction (for example, for small and medium\u2011sized enterprises, specific transaction types, or materiality thresholds)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no exemption from applying the arm\u2019s length principle, but small enterprises (under 1 billion ISK in total revenue or assets) are exempt from the documentation requirements related to cross-border transactions with related entities. Additionally, transactions that are immaterial are exempt from documentation requirements as per Article 12 of Regulation No. 1180\/2014 on transfer pricing documentation. This exemption is subject to evaluation on a case-by-case basis as it does not contain any materiality thresholds nor has there been any formal practice regarding what constitutes an immaterial transaction.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any notable deviations from OECD principles in local law or practice?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>At the legislative level, Iceland&#8217;s transfer pricing framework is broadly aligned with OECD principles, and neither Article 57 of the ITA nor Regulation No. 1180\/2014 contains material deviations from the OECD Transfer Pricing Guidelines. In practice, however, the divergence is more pronounced, principally in the readiness of the tax authorities to disregard or re-characterise related-party transactions and to proceed by way of discretionary assessment or non-recognition.<\/p>\n<p>Published Icelandic case law on transfer pricing is very limited, and a substantial part of domestic practice is contained in unpublished rulings of the tax authorities. In few of the published cases that have been observed , issues with the taxpayer&#8217;s transfer pricing documentation can generally lead to discretionary assessments by the Directorate of Internal Revenue which does not necessarily base its adjustments on a more complete application of the OECD Transfer Pricing Guidelines or the methods described therein.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What transfer pricing methods are recognised under local law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Article 9 of Regulation No. 1180\/2014 specifically addresses applicable transfer pricing methods. It requires that transfer pricing documentation explain the methods used for pricing related-party transactions and justify why the selected method leads to arm&#8217;s length pricing. Article 9(2) lists the following methods, with reference to the OECD Transfer Pricing Guidelines:<\/p>\n<p>(a) the Comparable Uncontrolled Price method (samanbur\u00f0ara\u00f0fer\u00f0in);<br \/>\n(b) the Cost Plus method (kostna\u00f0ar\u00e1lagningara\u00f0fer\u00f0in);<br \/>\n(c) the Resale Price method (endurs\u00f6lua\u00f0fer\u00f0in);<br \/>\n(d) the Profit Split method (hagna\u00f0arskiptingara\u00f0fer\u00f0in); and<br \/>\n(e) the Transactional Net Margin Method (nett\u00f3\u00e1lagningara\u00f0fer\u00f0in).<\/p>\n<p>Iceland Revenue and Customs generally accepts the use of any of these methods provided the chosen method is the most appropriate for the transaction in question.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a prescribed hierarchy or priority among the transfer pricing methods?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no formal statutory hierarchy among transfer pricing methods in Icelandic law. However, consistent with OECD guidelines, the CUP method is likely to be preferred by Iceland Revenue and Customs if it is applicable.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are arm\u2019s length ranges determined in your jurisdiction, and do domestic tax rules, guidelines, or case law prescribe specific statistical methodologies or calculation approaches for interquartile ranges?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Icelandic law does not prescribe specific statistical methodologies for determining arm&#8217;s length ranges. In practice the interquartile range is commonly used as the standard measure for defining the arm&#8217;s length range in benchmarking analyses.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">To what extent are comparability adjustments permitted in your jurisdiction, and which types of adjustments are most commonly applied or rejected by tax authorities?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Comparability adjustments are permitted in practice and are a part of transfer pricing practice in Iceland, consistent with OECD guidance. They are also referenced in article 10 of Regulation no. 1180\/2014 on transfer pricing and documentation and any such adjustments should be documented thoroughly. Due to limited practice, it is difficult to state with any certainty what types of adjustments are most commonly applied or rejected by the tax authorities.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to year end transfer pricing adjustments in your jurisdiction, particularly in relation to statutory accounting requirements and their recognition for tax purposes?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Icelandic law does not contain specific statutory rules governing year-end transfer pricing adjustments. In practice, taxpayers routinely make year-end adjustments to align intercompany pricing with arm&#8217;s length outcomes, while also ensuring the adjustments are properly documented and consistently applied.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are secondary adjustments applied\/included in the legislation in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Icelandic tax legislation does not contain specific provisions on secondary adjustments. Article 57 of the ITA provides for primary adjustments to taxable income where related-party transactions deviate from arm&#8217;s length terms. The absence of specific secondary adjustment provisions means that such characterisations, where they arise, would need to be grounded in the general provisions of the ITA.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What statutory provisions, regulations, or administrative guidance govern the transfer pricing treatment of transactions involving intangibles in your jurisdiction, including any specific references to OECD Transfer Pricing Guidelines Chapter VI?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no specific statutory provisions in Iceland that separately address the transfer pricing treatment of intangibles. Regulation No. 1180\/2014 requires that transfer pricing documentation address the nature and terms of intangible-related transactions, but does not prescribe specific valuation methods or approaches beyond those recommended by the OECD.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does your jurisdiction apply the DEMPE concept (Development, Enhancement, Maintenance, Protection, and Exploitation) when determining entitlement to intangible\u2011related returns?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Iceland does not have specific domestic legislation codifying the DEMPE concept. However, in practice taxpayers can be expected to apply the DEMPE concept when determining entitlement to intangible-related returns and both taxpayers and Iceland Revenue and Customs have used and referenced DEMPE.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What legal or administrative criteria determine which entity is entitled to intangible related returns (e.g., entities controlling economically significant DEMPE related risks)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As noted above, Icelandic law does not contain specific statutory criteria for determining entitlement to intangible-related returns.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does local law or administrative guidance provide specific rules for hard to value intangibles, including whether ex post outcomes may be used as presumptive evidence for testing ex ante assumptions?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Icelandic law does not contain specific provisions addressing hard-to-value intangibles (HTVI). Generally it can be expected that Iceland Revenue and Customs will follow the OECD Transfer Pricing Guidelines and given the limited domestic guidance and practice, taxpayers dealing with HTVI transactions should ensure that their projections and assumptions are well-documented and supported by contemporaneous evidence.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does local law or administrative guidance expressly recognise cost sharing or cost contribution arrangements for the development or use of intangibles, and what requirements must such arrangements meet under applicable rules?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Icelandic law does not contain specific provisions expressly recognising or regulating cost-sharing or cost-contribution arrangements (CCAs).<\/p>\n<p>In practice, CCAs are expected to meet the general requirements set out in the OECD Guidelines, including that each participant&#8217;s contributions must be consistent with what an independent party would have agreed to contribute, having regard to the expected benefits from the arrangement. Iceland Revenue and Customs has pursued such arrangements, with one such case currently being litigated through the courts.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What transfer pricing information may be exchanged cross\u2011border, and subject to what legal conditions or limitations?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Iceland exchanges transfer pricing information through several mechanisms:<\/p>\n<p>(a) Double tax treaties: Iceland&#8217;s network of bilateral tax treaties, most of which follow the OECD Model Tax Convention, include exchange of information provisions (Article 26). These allow the competent authorities to exchange information relevant to the application of the treaty, including transfer pricing-related information, subject to confidentiality protections and limitations on the use of the information.<\/p>\n<p>(b) Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Iceland is a party to this convention, which provides a broad framework for the exchange of tax information, including automatic exchange, exchange on request, and spontaneous exchange.<\/p>\n<p>(c) Country-by-Country Reporting (CbCR): Iceland has implemented the OECD&#8217;s CbCR framework, and CbC reports filed in Iceland may be exchanged with treaty partners through the Multilateral Competent Authority Agreement on the Exchange of CbC Reports.<\/p>\n<p>All exchanges are subject to confidentiality requirements, and the information received may generally only be used for the tax purposes specified in the applicable agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">To what extent may exchanged information be relied upon in transfer pricing assessments or litigation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Information received through exchange of information mechanisms may be used by Iceland Revenue and Customs in transfer pricing assessments, subject to the conditions and limitations set out in the applicable treaty or agreement. Due to limited practice, it is unclear what evidential weight such information would hold before the Internal Revenue Board or the courts, it would likely be assessed on a case-by-case basis.<\/p>\n<p>With respect to country-by-country reports specifically, Article 7 of Regulation No. 766\/2019 provides that the tax authorities may use the information contained in such reports for the purpose of assessing general transfer pricing risk and other risks of base erosion and profit shifting, including the risk of non-compliance with transfer pricing rules by members of a multinational group, and for carrying out statistical and economic analyses. All information received under the regulation is confidential and subject to the same rules as information exchanged under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What statutory or regulatory transfer pricing documentation requirements apply in your jurisdiction (including any master file, local file, or country\u2011by\u2011country reporting obligations)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The general transfer pricing documentation requirements in Iceland are governed by article 57 of the ITA and regulation No. 1180\/2014. They implement a documentation framework that is broadly consistent with the information expected to be contained in a Master File and Local File according to the OECD Guidelines on Transfer Pricing. However, presenting transfer pricing documentation through a dedicated Master and Local File is not a legal requirement, although largely the same information as is expected to be contained in a Master and Local File should be turned in to the Tax Authorities upon request. The documentation must demonstrate that intercompany transactions are conducted at arm&#8217;s length and must be available for submission to the tax authorities within 45 days from request by Iceland Revenue and Customs. The documentation can be prepared in both Icelandic and\/or English.<\/p>\n<p>Country-by-country reporting obligations are governed by Article 91(A) of the ITA and Regulation No. 766\/2019 on country-by-country reporting. The reporting obligation applies to multinational groups whose consolidated group revenue in the preceding financial year was at or above EUR 750 million. Icelandic constituent entities of such groups must notify the tax authorities of the identity and tax residence of the reporting entity.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Who is required to prepare transfer pricing documentation, and what thresholds or conditions trigger the obligation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Entities that are part of a group and that engage in cross border related-party transactions are required to prepare transfer pricing documentation if they exceeded 1 billion ISK in revenue or total assets in the previous financial year. It is however uncertain, due to lack of practice, if the entity should continue to maintain documentation in case its revenue\/assets are ever reduced below the threshold.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the timing requirements for preparing and submitting transfer pricing documentation, and must documentation be contemporaneous?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While the regulations do not prescribe a specific deadline for having documentation fully prepared, taxpayers are strongly encouraged to maintain contemporaneous documentation, as documentation prepared after the fact may be viewed with greater scepticism by the tax authorities. Therefore, it should generally be in place by the time the tax return is filed for the relevant fiscal year. Documentation is not required to be filed with the tax return but must be available for submission to Iceland Revenue and Customs within 45 days from request.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What penalties or sanctions apply for failure to prepare, maintain, or submit compliant transfer pricing documentation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Article 57(6) of the ITA, Iceland Revenue and Customs may impose administrative fines (stj\u00f3rnvaldssekt) on any entity that fails, in whole or in part, to document its related-party transactions as required. The fine may be imposed regardless of whether the failure is intentional or negligent.<\/p>\n<p>The fine may amount to up to ISK 3 million for each fiscal year in which the entity has failed to comply with its documentation obligations. Where an entity has not fulfilled its documentation obligations within 45 days, the fine shall be ISK 3 million. Where a legal entity has submitted documentation deemed insufficient and has not remedied the deficiencies upon request by Iceland Revenue and Customs within 45 days, the fine shall be ISK 1.5 million. Penalties may be imposed for up to six fiscal years preceding the year in which the penalty decision is made, up to a maximum of ISK 6 million collectively.Fines may be imposed in respect of up to six fiscal years preceding the year in which the penalty decision is made, subject to an aggregate cap of ISK 6 million across all such years.<\/p>\n<p>If the entity remedies the deficiencies within 30 days of the penalty decision of Iceland Revenue and Customs, the fine shall be reduced by 90%. If remedied within two months, the reduction is 60%, and if within three months, 40%.<\/p>\n<p>These penalties have rarely, if at all, been used in practice, as failure to submit compliant transfer pricing documentation provides the Tax Authorities with significant leeway when adjusting the taxable income.<\/p>\n<p>Separately, and in practice of greater financial significance than the documentation fines, the tax authorities may impose a surcharge (\u00e1lag) of 25% under Article 108(2) of the ITA on any understatement of the tax base resulting from a transfer pricing adjustment.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there specific transfer pricing reporting requirements in relation to the filing of the corporate tax return (e.g. specific forms on intra group transactions or special disclosures on compliance)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Icelandic corporate tax return includes a form named RSK 4.28 which contains disclosures relating to related-party transactions. Taxpayers are required to disclose whether they have engaged in transactions with related parties and to provide summary information on the nature and value of such transactions. The form requires the taxpayer to categorize the transactions by counter party, type of transaction, amounts involved and the nature of the entities relationship.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are advance pricing agreements (APAs) available under the laws or administrative guidance of your jurisdiction, and what is their legal basis?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Iceland has not implemented a formal, legislatively established APA programme. There is no specific statutory provision authorising the conclusion of advance pricing agreements with taxpayers.<\/p>\n<p>Taxpayers seeking certainty on transfer pricing matters may instead seek a binding advance ruling from the tax authorities under Act No. 91\/1998 on Binding Advance Rulings in Tax Matters (l\u00f6g um bindandi \u00e1lit \u00ed skattam\u00e1lum), which in certain cases may have an effect broadly comparable to that of a unilateral APA. Such opinions are however unlikely to be granted by Iceland Revenue and Customs for questions directly related to pricing or terms, making the binding opinion process a niche usage case which should not be relied upon as a substitute for an APA.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What types of APAs are permitted (unilateral, bilateral, and\/or multilateral), and are there any statutory or treaty based limitations on their use?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As noted above, Iceland does not have a formal APA programme established through legislation, and there is accordingly no domestic basis for unilateral, bilateral or multilateral APAs as such.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the safe harbour rules or simplified measures available for certain transactions or taxpayers, if any?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Iceland does not currently have formal safe harbour rules or simplified transfer pricing measures for specific transaction types or categories of taxpayers. There are no prescribed safe harbour interest rates for intercompany loans, no deemed mark-ups for low-value-adding intra-group services, and no simplified approaches for specific routine transactions.<\/p>\n<p>The arm&#8217;s length principle under Article 57 of the ITA applies in principle to all cross-border related-party transactions. Two exemptions from the documentation obligation apply, as described above: the ISK 1 billion revenue or asset threshold, and the exemption for economically immaterial transactions. Neither operates as a safe harbour since the arm\u2019s length principle continues to apply in full to the transactions concerned.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How has the nature of transfer pricing audits evolved in your jurisdiction over the past two to three years\u2014more targeted, or more expansive and data driven?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Transfer pricing audits in Iceland have become increasingly sophisticated over recent years, as Iceland Revenue and Customs has invested in building up its transfer pricing expertise and more guidance is provided by both the Internal Revenue Board and the courts. In general, during the first years of transfer pricing audits, which only really started in 2018, Iceland Revenue and Customs often went after what can be described as \u201clow hanging fruit\u201d. Taxpayers hadn\u2019t really started to take the relatively new transfer pricing legislation (in effect from 2015) properly into consideration and non-recognition was often utilized by Iceland Revenue and Customs instead of a complicated assessment of the transaction and the appropriate arm\u2019s length outcome.<\/p>\n<p>With recent caselaw establishing the significant leeway Iceland Revenue and Customs has for such discretionary assessments when transfer pricing documentation is either missing or found lacking, taxpayers have increasingly started to ensure proper documentation and Iceland Revenue and Customs has increasingly asked for documentation to be submitted in full for review.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How developed is domestic case law, and does it meaningfully shape practice, or are outcomes still driven primarily by tax authorities?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Domestic transfer pricing caselaw in Iceland is limited and can be said to still be in its infancy. There are relatively few published decisions from the Internal Revenue Board or the courts that deal specifically with transfer pricing issues, which reflects the relatively short period of time such rules have been in force in Iceland.<\/p>\n<p>The few publicly available decisions so far have sparked some debate over the appropriateness of the decisions and their adherence to the OECD Guidelines on Transfer Pricing, which some practitioners have noted seems to drift away from the guidelines when it comes to burdens laid on the tax authorities. Outcomes are primarily driven by the methodology applied by the tax authorities in each case and the caselaw has heavily focused on the burden of proof, the standard of evidence required for adjustments, and the permissible scope of the authorities&#8217; re-characterisation powers.<\/p>\n<p>The caselaw available has a significant effect on transfer pricing in practice in Iceland with some multinationals noting the increased risk from audits in Iceland, taking appropriate actions to limit such risks in light of the evolving caselaw.<\/p>\n<p>Practitioners and multinationals operating in Iceland should monitor developments in this area, as the growing focus on transfer pricing and the broad authority granted in practice to Iceland Revenue and Customs is likely to generate additional caselaw in the coming years.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What types of transactions or structures (e.g., IP migration, platform contributions, financing, residual profit allocations) have most frequently triggered transfer pricing adjustments or disputes with the tax authority?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Transfer Pricing rules and regulations are a relatively new addition to the Icelandic Tax Act. Transfer Pricing specific additions to article 57 were implemented and took effect in 2014. The cases observed so far have been of various nature and it is difficult to pinpoint one focus area for Iceland Revenue and Customs.<\/p>\n<p>However, some categories have seen repeated interest from the Tax Authorities, such as intra-group loan structures and financing transactions, management fees and other intra group services as well as transactions involving the sale of goods within the group.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Looking five years ahead, which development is likely to reshape transfer pricing practice most profoundly in your jurisdiction\u2014digital business models, fiscal and political pressure on tax authorities, administrative capacity, or other structural changes?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Several developments are likely to reshape transfer pricing practice in Iceland over the next five years:<\/p>\n<p>(a) Administrative capacity and digitalisation: The expected continued investment of Iceland Revenue and Customs in transfer pricing expertise and data analytics capabilities is likely to strengthen enforcement and increase the capacity of the team handling transfer pricing cases.<\/p>\n<p>(b) Caselaw developments: Currently transfer pricing cases are going through the court system, and with the limited available caselaw, the outcomes of those cases are likely to shape and further establish best practices in Iceland. Closely monitoring ongoing cases is essential for practitioners and multinationals operating out of Iceland, as already established practice is in many ways unique.<\/p>\n<p>(c) Digital business models: As digital services and platform-based business models become more prevalent, Iceland will face challenges in applying existing transfer pricing rules to these new economic realities.<\/p>\n<p>(d) Legislative developments: Legislative developments might also be a key source of changes to the transfer pricing environment in Iceland. Implementation of Pillar I &amp; II, updates to the current legislation and regulations governing transfer pricing are all likely to occur within the five year timeframe and they are likely to impact the transfer pricing practices of businesses operating out of Iceland.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">4001<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/147150","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=147150"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}