{"id":151090,"date":"2026-10-12T11:27:50","date_gmt":"2026-10-12T11:27:50","guid":{"rendered":"https:\/\/www.legal500.com\/guides\/?post_type=comparative_guide&#038;p=151090"},"modified":"2026-10-12T12:21:22","modified_gmt":"2026-10-12T12:21:22","slug":"iceland-tax-disputes","status":"publish","type":"comparative_guide","link":"https:\/\/www.legal500.com\/guides\/chapter\/iceland-tax-disputes\/","title":{"rendered":"Iceland: Tax Disputes"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-151090","comparative_guide","type-comparative_guide","status-publish","hentry","guides-tax-disputes","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:\/\/www.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:\/\/www.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 Tax Disputes 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\">Is it necessary for a taxpayer to register with the tax authority? Are separate registrations required for corporate income tax and value added tax\/sales tax?<\/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>A person or entity carrying on business in Iceland is required to register the business with the Register of Enterprises (<em>Icel. fyrirt\u00e6kjaskr\u00e1<\/em>). There is not a separate corporate income tax registration equivalent to VAT registration, because Icelandic companies and other legal entities become annual tax-return filers under their registration number issued by registration with the Register of Enterprises, and are taxed by reference to their status and filed returns.<\/p>\n<p>In contrast, businesses (including persons engaged in business) which are subject to VAT are subject to registration with the Icelandic Revenue and Customs, upon which they get issued a VAT-number. Such businesses must notify the tax authorities of their VAT-business no later than eight days before taxable operations begin.<\/p>\n<p>Similar to the VAT-registration, businesses (including persons engaged in business) that pay wages must register with the Employer Register of the Icelandic Revenue and Customs. Registration is required no later than eight days before the operation begins.<\/p>\n<p>As a general rule, a person or entity that registers for VAT will generally also need to register in the Employers Register if it has employees or other wage-withholding obligations.<\/p>\n<p>Other registration might also be necessary, depending on the industry, such as financial institution sector or hotel\/cruise ship operators in domestic voyages.<\/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\">In general terms, when a taxpayer files a tax return, does the tax authority check it and issue a tax assessment, or is there a self-assessment system where the taxpayer\u2019s own assessment stands unless the tax authority intervenes?<\/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 tax system is self-assessed based and relies substantially on taxpayer self-reporting but preserves broad tax-authority intervention powers before and after assessment. Taxpayers must provide correct and complete information in their tax returns, and taxes are generally assessed on the basis of the information provided by the taxpayer and other information available to the authorities.<\/p>\n<p>Tax assessment takes place on the basis of the tax returns filed by taxpayers during the year following the tax year. However, the Icelandic tax law framework allows the Icelandic tax authorities to correct obvious errors, seek further explanations, assess or reassess tax, and further to estimate income where the tax return or is missing. The taxpayer\u2019s filed position therefore does not become immune from review after submission<\/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\">Can a taxpayer amend their return after it has been filed? If so, are there any time limits for doing so?<\/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>A taxpayer can seek correction of a prior filing or assessment, generally for up to six years. In practice, a taxpayer wishing to amend a return can submit a reasoned request to the Revenue and Customs and provide the documents needed to support the correction.<\/p>\n<p>If the issue is still within the ordinary assessment or complaint framework, the taxpayer may also use the ordinary appeal route of the Revenue and Customs. Following such appeal, the Revenue and Customs issues a formal ruling on that appeal, which can subsequently be appealed to the Internal Revenue Board within three months.<\/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\">Please summarise the main methods by which a tax authority may challenge the amount of tax a taxpayer has paid by way of an initial assessment\/self-assessment. Does the tax authority need any justification to commence such a challenge?<\/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 main challenge mechanisms are correction during assessment, estimation of income and assets where tax returns have not been filed, a written request for explanations and documents, post-assessment reassessment, and, in more serious cases, tax investigation.<\/p>\n<p>Once the taxpayer files a tax return, the Revenue and Customs can correct obvious errors, subject to notifying the taxpayer of such changes. Following, taxes are assessed based on the tax return. Once assessment is completed, the tax authorities can only challenge the assessment by reassessing the taxpayers\u2019 taxes following certain administrative proceedings.<\/p>\n<p>These proceedings call for the authority to obtain written explanations and documents from the taxpayer, where the return or supporting documents are inadequate, unclear, suspicious or otherwise require further explanation. Under these proceedings, the tax authorities can examine the accuracy of filings before and after assessment, real-time control of business operators, and other measures designed to ensure compliance with statutory reporting and information duties.<\/p>\n<p>The tax authorities do not need to prove fraud or incorrect tax filings merely to start reassessment inquiry. It is up to the Revenue and Customs to decide if the authority deems necessary to request information or documents from taxpayers.<\/p>\n<p>Ordinary reassessment and administrative inquiries carry different procedural protection, as tax investigations are subject to principles of criminal procedures. If reasonable suspicion of a punishable offense arises during tax assessment or tax inquiries, the case is required to move into the tax-investigation track.<\/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 time limits for a tax authority to commence a challenge to the taxpayer\u2019s assessment\/self-assessment (disregarding any override of these limits to comply with obligations to provide relief from double taxation under a tax treaty)? Does a tax authority have any options to challenge a self-assessment after expiry of the relevant time limit?<\/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 reassessment rule is that the authority may reassess tax for the six income years immediately preceding the year in which the reassessment takes place. Thus, if a reassessment takes place in 2026, the tax authorities can reassess taxes for the income years 2020-2026. The six year reassessment rule is based on the calendar year, thus, on January 1<sup>st<\/sup>, 2027, the income year 2020 falls outside of the general six year reassessment period.<\/p>\n<p>A shorter two-year rule may apply where the taxpayer provided all information necessary for a correct assessment in or with the relevant return. The two-year rule is significant because it may restrict the tax authority\u2019s ability to reassess where the relevant facts were adequately disclosed.<\/p>\n<p>Where a tax investigation is initiated, the reassessment period is calculated from the beginning of the calendar year on which the tax investigation was initiated. For income and assets connected to low-tax jurisdictions or offshore structures, the reassessment period is extended to the ten income years immediately preceding the year in which the reassessment takes place.<\/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 is tax fraud defined under the laws of 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>Tax fraud is generally understood as intentional or grossly negligent conduct involving false, misleading or omitted information material to tax determinations. Although the Income Tax Act references tax fraud, the act does not define the term separately. However, the act references Regulation on the Conduct of Tax Control and Tax Investigations, which defines the term. Under the regulation, tax fraud generally exists where a person intentionally or through gross negligence gives false or misleading information intended to serve as the basis for tax determinations, or where a person neglects to provide information that may be significant, whether in relation to that person\u2019s own tax affairs or the tax affairs of others.<\/p>\n<p>Serious tax offenses may also fall within the Icelandic Penal Code. Major offenses against the Income Tax Act can potentially be subject to Penal Code. Not every reassessment, filing error or legal interpretation dispute constitutes tax fraud. Icelandic rules distinguish between ordinary errors or disputes, administrative surcharge cases and intentional or grossly negligent conduct that may justify tax investigation or criminal treatment.<\/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 is tax fraud treated? Will the tax authority conduct a criminal investigation with a view to seeking prosecution and a custodial sentence?<\/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 distinguishes ordinary tax control from tax investigations. If defects in tax filings appear attributable to intentional or grossly negligent conduct and are likely to support a conviction, the matter should generally be treated as a tax-investigation matter rather than an ordinary audit. Further, if reasonable suspicion of a punishable offense arises during ordinary tax control, any further information and documents should not be obtained from the taxpayer under the ordinary control process, and the matter is processed as a tax investigation.<\/p>\n<p>A tax investigation is a criminal investigation in which the taxpayer has the legal status of an accused person. The process is governed by the Icelandic Act on Criminal Procedure. The Director of Revenue and Customs may conclude a tax investigation by imposing a fine of up to ISK 100,000,000. Fines range from double to ten times the amount of tax evaded. In serious cases \u2013 where amounts exceed these limits, where offenses are repeated, or where there is determined criminal intent \u2013 the matter may be referred to the police for potential criminal proceedings before the general 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\">Does the tax authority have to abide by any standards or a code of conduct when carrying out audits? Does the tax authority publish any details of how it conducts audits in 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>The tax authority must comply with general Icelandic administrative-law principles, special administrative-procedure rules in the Income Tax Act, and published procedural framework for tax control and tax investigations.<\/p>\n<p>The Administrative Procedures Act applies when public authorities decide rights or obligations, and it includes core duties of guidance, reasonable speed, adequate investigation, equal treatment, proportionality, the right to be heard, and access to case documents. These general rules are supplemented in tax matters by specific provisions of the Income Tax Act, including Article 95 on assessment and corrections and Article 96 on requests for explanations, supporting documents, accounting records and reassessment where a return or supporting materials are incomplete, unclear, suspicious or unreliable. These special tax-procedure rules set out the statutory steps the authority must follow when challenging a return or reassessing tax, including notifying the taxpayer and giving the taxpayer an opportunity to provide explanations and documents before estimation or reassessment is made.<\/p>\n<p>Regulation No. 808\/2022 provides a published procedural framework for tax control and tax investigations. It requires Iceland Revenue and Customs to assess whether a case should be treated as ordinary tax control or as a tax investigation, to treat comparable cases consistently, and to distinguish administrative tax-control measures from cases involving suspected criminal conduct. Ordinary tax-control cases are generally handled as administrative-law matters on the basis of objective data, with the authority required to clarify the matter adequately, including by obtaining the taxpayer\u2019s explanations before deciding how the case should proceed. If a reasonable suspicion of a punishable offense arises during ordinary tax control, the matter should be moved into the tax-investigation track rather than continuing under ordinary audit procedures, as further described in Q7 above.<\/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 the tax authority have the power to compel the production of information? Does this extend to emails? Is there a right of appeal against the use of such a power?<\/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 tax authority has broad statutory information-gathering powers regarding information or documents which may be relevant to tax control or tax investigation. This extends to electronic data, such as emails.<\/p>\n<p>Data collection in tax-control matters is based on statutory information duties and control powers, including Article 94 of the Income Tax Act, further set out in Regulation no. 808\/2022. The Income Tax Act grants broad information-gathering powers for tax control, tax collection purposes and tax-investigations. The Director of Revenue and Customs may require parties subject to filing obligations to submit their accounting records and supporting documentation for examination, as well as other documents concerning their operations, including correspondence and contracts. Tax authorities further have access to the business premises and storage facilities of such parties and may take statements from any person who may reasonably be expected to provide relevant information.<\/p>\n<p>A dispute about the information duty can be brought before the district court under the Income Tax Act framework. Information-gathering measures can reach search, seizure or similar coercive action, especially in tax-investigation cases, and, if deemed appropriate in retrospect of the underlying review or investigation, such measures can be carried out on the basis of a court order.<\/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 the tax authority have the power to compel the production of information from third parties? Is there a right of appeal against the use of such a power?<\/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>Yes, the Icelandic tax authorities have the authority to compulsory request and obtain information and documents from any person or entity, whether that person or entity is subject to tax filings in Iceland or not, free of charge and in the form requested by the authorities, regardless of whether the information or document requested concern the person to whom the request is addressed or others.<\/p>\n<p>Should a dispute arise regarding a party&#8217;s obligation to provide documents or information, the tax authorities may apply to the district court and, where appropriate, obtain a ruling requiring the submission of such documents or information. Failure to comply with the obligation to provide information may result in tax control or tax-investigation matter being referred to the police for investigation.<\/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 it possible to settle an audit by way of a binding agreement, i.e. without 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>Icelandic tax law does not provide for negotiated binding audit settlements with tax authorities. However, prior to a planned transaction, taxpayers may request a binding tax ruling on how the respective transaction will be treated from a tax perspective.<\/p>\n<p>In tax investigations, the taxpayer may amend previous tax filings in accordance with the findings of the investigation, and doing so may result in a reduction of the imposed fine. See Question 7 for further information on how fines are determined.<\/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\">If a taxpayer is concerned about how they are being treated, or the speed at which an audit is being conducted, do they have any remedies?<\/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>Taxpayers may invoke administrative-law protections during tax audit. As a general rule, a taxpayer may lodge a formal complaint regarding unreasonable delay or other breaches of procedural requirements governing the conduct and timeliness of administrative proceedings. Such complaints are submitted to the authority competent to hear an appeal for the underlaying administrative decision, typically the Internal Revenue Board or, in certain cases, the Ministry of Finance.<\/p>\n<p>Under the Icelandic Administrative Procedures Act, authorities are required to conclude cases as quickly as possible, notify parties where foreseeable delays will occur, and explain the reasons for delays and when a decision may be expected. Further, the Act requires authorities to guide parties, investigate matters sufficiently, observe proportionality, give parties an opportunity to oppose proposed decisions of the authorities, and allow access to case documents subject to statutory exceptions.<\/p>\n<p>Taxpayers may also challenge decisions of the Icelandic Revenue and Customs through the administrative appeals process, generally before the Internal Revenue Board or the Ministry of Finance. Procedural objections may be raised as part of such appeals where the taxpayer believes that the authorities have failed to comply with applicable procedural requirements. In certain circumstances, material procedural defects may result in the invalidation of the underlying administrative decision, including decisions arising from tax audits.<\/p>\n<p>Additionally, the Parliamentary Ombudsman (<em>Icel. Umbo\u00f0sma\u00f0ur Al\u00feingis<\/em>) may review complaints about administrative handling by tax authorities. However, the Ombudsman generally requires that available administrative remedies be exhausted before accepting a complaint 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\">If a taxpayer disagrees with a tax assessment, do they have a right of appeal?<\/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>Yes, if a taxpayer disagrees with the tax assessment \u2013 including taxes or tax bases \u2013 they can submit an appeal to the Director of Revenue and Customs \u2013 the same administrative body as decides the tax assessment. The deadline for submitting such appeal is calculated from the date of the Director\u2019s public notice announcing the completion of the tax assessment and is three months for individuals but one month for entities.<\/p>\n<p>Following such appeal, the Director of Revenue and Customs issues a ruling on the assessment. If the taxpayer still disagrees with the ruling, it can be appealed to the Internal Revenue Board within three months from the date of the ruling.<\/p>\n<p>Certain customs and other decisions may have different first-stage complaint routes or ministry appeal routes, but ordinary tax merits disputes generally go to the Internal Revenue Board where a statutory right of appeal exists. The taxpayer may also bring disputes before the general courts, and the Ombudsman route discussed under Q12 remains available after administrative remedies have generally been exhausted.<\/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 the right of appeal to an administrative body (independent or otherwise) or to a judicial body (i.e. a tribunal or court)?<\/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 principal tax appeal route is administrative. The Internal Revenue Board is an independent committee and the supreme administrative appeals authority for cases regarding taxation, VAT and duties. The Board is independent of the Ministry of Finance. The Board rules on appeals of most tax authority decisions under special statutory authority. Thus, most decisions relating to taxation do not appeal through the ordinary ministerial appeal route.<\/p>\n<p>Judicial review remains available notwithstanding the administrative route. The Internal Revenue Board\u2019s ruling is the final decision at the administrative level, but it is possible to bring an action before the courts. The Icelandic route is therefore an administrative appeal followed, where necessary, by court proceedings.<\/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 the hearing in public? Is the decision published? What other information about the appeal can be accessed by a third party\/the public?<\/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>Internal Revenue Board proceedings are generally closed written administrative proceedings, not a public evidentiary hearing comparable to court litigation. Decisions are published selectively, as Icelandic law requires the Internal Revenue Board to publish its principal rulings that have precedential value on its website. The Board\u2019s website (<a href=\"http:\/\/www.yskn.is\">www.yskn.is<\/a>) contains a rulings section and search functionality for published decisions. Third-party access therefore depends primarily on published anonymized or edited rulings and general access-to-information rules, rather than full public access to the appeal file.<\/p>\n<p>When proceedings are taken to the general courts, the general rule is that court hearings are public.<\/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 the procedure mainly written or a combination of written and oral?<\/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 proceedings before the Internal Revenue Board are principally written, although parties are allowed to request oral arguments. The chair of the Board decides whether such request is approved and oral arguments take place. In complex, difficult, especially significant or fundamental tax or accounting matters the Board can decide on oral proceedings and arguments.\u00a0 If special oral argument is not required, the Board may decide the case after receiving the documents and the taxpayer\u2019s comments where appropriate.<\/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 document discovery process?<\/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 separate common-law style document discovery process in Internal Revenue Board proceedings. Instead, the appeal procedure relies on the administrative file, supporting documents submitted by the taxpayer, the authority\u2019s original case documents, the authority\u2019s opinion, and any additional information requested by the Board. The Board may direct a party or authority to provide further documents or information where the matter is not sufficiently clarified. The taxpayer\u2019s separate right of access to case documents under administrative-law rules may also be relevant, subject to statutory exceptions.<\/p>\n<p>A taxpayer can and should submit all documents supporting the appeal. The procedure remains an administrative documentary process rather than party-driven discovery with depositions, interrogatories or broad adversarial production.<\/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 witnesses called to give evidence?<\/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>Witnesses are not ordinarily called to give evidence before the Internal Revenue Board. The procedure is mainly documentary, and the formal statutory process centers on written appeals, supporting documents, the relevant tax-authority\u2019s file and opinion, and written responses. A taxpayer may submit written statements from witnesses or other documentary material where helpful.<\/p>\n<p>The position changes if the dispute proceeds to the courts. Court proceedings follow judicial procedure, and factual disputes may be addressed through the evidentiary mechanisms available in civil or criminal proceedings as applicable. Witnesses are generally not called at the administrative appeal level, but ordinary evidentiary rules apply if the matter is litigated in court.<\/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 the burden of proof rest with the taxpayer on an appeal against an assessment?<\/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 burden of proof on the taxpayer. Generally, income declared on tax returns in a timely manner is presumed right unless disputed by the tax authorities. The tax authorities bear the burden of proof when reassessing taxes. Icelandic administrative law requires the tax authority and the Internal Revenue Board to ensure that a matter is sufficiently investigated before a decision is taken. Icelandic case law shows that a tax decision may be vulnerable where the tax authorities or the Board fail to comply adequately with the investigation principle. The burden cannot therefore be described simply as resting entirely on the taxpayer in every case.<\/p>\n<p>At the same time, the taxpayer bears the practical and often legal burden of substantiating factual assertions, deductions, exemptions, valuations and other matters within the taxpayer\u2019s knowledge or control. If the taxpayer fails to correct defects, provide answers, or produce adequate and reliable materials, the authority may estimate income and tax. Taxpayers may bear the practical consequences of failing to produce valuation evidence or other supporting proof at the administrative stage. The authority has an investigation duty, but the taxpayer must substantiate its return position and appeal grounds.<\/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 long does an appeal usually take to conclude?<\/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 statutory expectation is that the Internal Revenue Board will decide cases as quickly as possible and no later than six months after it receives the necessary documents from the appellant and relevant tax authority.<\/p>\n<p>In practice, duration will depend on complexity, completeness of the file, whether further information is required, and the Board\u2019s workload. Cases may take roughly four months to a year, particularly where the matter is complex. The statutory decision period is six months after the file is complete, while complex cases can take longer in practice.<\/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 the taxpayer have to pay the assessment pending the outcome of the appeal?<\/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>An appeal does not delay the obligation to pay the assessed tax or affect the legal validity of the assessment. Filing a tax appeal does not extend the payment deadline, establish a new due date, or relieve the taxpayer of any penalties or interest incurred as a result of non-payment. If the appeal is successful, whether in whole or in part, any overpayment will be refunded in accordance with the provisions of the Act on the Collection of Public Taxes and Charges.<\/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 restrictions on who may conduct or appear in the appeal on behalf of the taxpayer?<\/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>A taxpayer may use a representative in an Internal Revenue Board appeal. When a decision is reached, the Board sends the ruling to the taxpayer and the taxpayer\u2019s representative, if any, as well as to the relevant administrative office. Representatives are often lawyers, auditors or tax advisers, but Icelandic law does not confine representation in the administrative appeal exclusively to attorneys. The Icelandic administrative framework is based on the premise that citizens should be able to communicate directly with administrative authorities without the assistance of specialized representatives. Nevertheless, representation by tax advisors, lawyers, or other experts is common in matters brought before the Internal Revenue Board.<\/p>\n<p>If the matter is litigated before the ordinary courts, ordinary Icelandic civil or criminal procedure and rules on court representation apply. Administrative representation is flexible, while court representation is governed by the rules applicable to court litigation and limited to parties themselves or qualified attorneys.<\/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 cost-shifting system whereby the losing party pays the winning party\u2019s legal and professional costs of an appeal?<\/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>Internal Revenue Board appeals do not follow a cost-shifting regime where the unsuccessful party bears the other party\u2019s costs. There are no fees for making an appeal to the Internal Revenue Board. The Board may reimburse a taxpayer\u2019s expenses where the ruling is in the taxpayer\u2019s favor, in full or in part, but the taxpayer must claim reimbursement and provide supporting documents for the costs. Where the ruling is wholly or partly in favor of the party, the Board may award costs from the Treasury if a claim was made, the costs were reasonably incurred for the proceeding, and it would be unfair for the taxpayer to bear them.<\/p>\n<p>In practice, cost awards may not cover all adviser fees even where the taxpayer succeeds. The statutory standard is discretionary and reasonableness-based rather than automatic full indemnity. Partial cost recovery is possible for successful taxpayers, but full cost shifting is not guaranteed.<\/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 it possible to use alternative forms of dispute resolution, such as voluntary mediation or binding arbitration? Are there any restrictions on when such alternative forms of dispute resolution may be pursued?<\/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 ordinary tax alternative dispute resolution in Iceland. Disputes are resolved administratively and, if necessary, through the courts. Tax disputes proceed through administrative complaint and appeal channels, with the Internal Revenue Board serving as the supreme administrative appeals authority for taxation, VAT and duties. Its rulings are final at the administrative level, subject to court proceedings before the general courts where a party seeks judicial review.<\/p>\n<p>A taxpayer can correct returns, submit explanations, provide evidence and resolve issues during the audit stage. That process may avoid litigation, but it is not mediation or binding arbitration.<\/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 right of onward appeal? If so, what are the levels of onward appeal before the case reaches the highest appellate court?<\/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>After the Internal Revenue Board has ruled, the matter has reached the final administrative level. A taxpayer may then bring the dispute before the ordinary courts. The ordinary court hierarchy starts in the District Court (<em>Icel. h\u00e9ra\u00f0sd\u00f3mur<\/em>), may then proceed to the Court of Appeal (<em>Icel. Landsr\u00e9ttur<\/em>), and may ultimately reach the Supreme Court of Iceland (<em>Icel. H\u00e6stir\u00e9ttur<\/em>) where the conditions for Supreme Court review are met.<\/p>\n<p>The Internal Revenue Board\u2019s ruling is final within the administration, but it does not preclude a court action. Where the case reaches the courts, the rules of civil procedure and appeal permission determine whether and how the matter proceeds beyond the District Court and Landsr\u00e9ttur.<\/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 main penalties that can be applied when additional tax is charged? What are the minimum and maximum penalties?<\/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 main ordinary penalty in reassessment cases is a 25% surcharge on underreported tax bases. If a taxpayer corrects tax returns before tax assessment for that relevant year takes place, the surcharge shall not exceed 15%.<\/p>\n<p>In VAT and withholding-type cases, surcharges of up to 10% generally applies along with penalty interest. Penalty interest often make up a large portion of the claim as it accrues from the date on which the correct VAT or withholding tax was originally due.<\/p>\n<p>In tax-fraud or serious-offense cases, the exposure can be much higher. A taxpayer who intentionally or through gross negligence makes false or misleading statements material to income tax may be fined up to ten times the tax amount from the concealed base, and never less than double that tax amount. As a general rule, fines imposed following a tax investigation amount to double the tax amount (see Q7). In serious cases, the Penal Code may apply and imprisonment is possible.<\/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\">If penalties can be mitigated, what factors are taken into account?<\/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>Mitigation depends on the procedural track and type of penalty. For ordinary surcharges, reduction or elimination may be applicable where the taxpayer shows that it cannot be blamed for the deficiency in the return, though that threshold can be demanding in practice. Factors such as whether the taxpayer provided all relevant information, whether the issue involved a genuine legal interpretation dispute, and whether the taxpayer corrected or explained the position are important in practice. Mitigation is fact-sensitive rather than automatic.<\/p>\n<p>For tax investigations concluded at the administrative level by the Director of Tax Investigations, fines may be reduced if the taxpayer corrects its tax reporting in accordance with the investigation findings. The fine may be further reduced if the reassessed tax is paid within the prescribed time limit and if the fine itself is paid on time.<\/p>\n<p>Where a case proceeds to criminal proceedings before the courts, general criminal law and sentencing principles apply, including the ordinary grounds for sentence reduction or mitigation under Icelandic criminal law such as seriousness, circumstances, method of violation, amounts of understated tax bases and repeated conduct .<\/p>\n<p>Matters involving mainly legal interpretation, timing of income recognition, or ordinary deduction disputes generally should not be treated as tax investigations unless the circumstances show intentional or grossly negligent falsification and substantial intended understatements.<\/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\">Within your jurisdiction, what areas do you think are most likely to be subject to challenge over the next 12 months?<\/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 Revenue and Customs publishes an annual report identifying the sectors and projects on which its control activities have focused. According to its 2025 annual report, priority areas included vehicle benefits, rental benefits, the making available of private limited company assets for the use of shareholders, tax reporting in respect of foreign deposits into bank accounts and card payments, and imputed remuneration. Other matters under review included loans from private limited companies to their shareholders, capital gains realized by individuals on share transactions between related parties, deferred capital gains of legal entities, and stock options. In addition, the departments responsible for the supervision of large entities focused on the construction industry and the wholesale sector, with a concerted effort to review inventory write-downs and the capitalization or expensing of interest costs.<\/p>\n<p>From our professional perspective, we anticipate continued or increased scrutiny in the following areas over the next 12 months:<\/p>\n<ul>\n<li><strong>Tourism and car rental sectors<\/strong>: These sectors remain under heightened attention due to rapid growth and complex VAT positions.<\/li>\n<li><strong>Large corporate taxpayers<\/strong>: Supervision of large entities continues, with particular focus on the construction industry, wholesale sector, inventory write-downs, and the capitalization or expensing of interest costs.<\/li>\n<li><strong>VAT-related matters<\/strong>: Input tax deductions, refund claims, and issues involving data centers are likely to attract attention.<\/li>\n<li><strong>Transfer pricing and related-party transactions<\/strong>: These remain key focus areas for larger corporate groups, with potential reassessments, documentation penalties, and surcharges where adjustments are made. The authorities are also likely to continue scrutinizing arrangements involving offshore ownership structures and related-party transactions that may give rise to tax avoidance concerns.<\/li>\n<li><strong>Shareholder-related matters<\/strong>: The annual report highlights ongoing attention to loans from private limited companies to shareholders, capital gains on share transactions between related parties, deferred capital gains of legal entities, and stock options.<\/li>\n<li><strong>Individual tax reporting<\/strong>: The 2025 annual report noted focus on vehicle benefits, rental benefits, the making available of private limited company assets for the use of shareholders, foreign deposits into bank accounts, card payments, and imputed remuneration.<\/li>\n<li><strong>Kilometer fee compliance<\/strong>: The recently introduced kilometer fee may generate compliance reviews and correction activity as both taxpayers and the authorities adapt to the new regime.<\/li>\n<\/ul>\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\">In your opinion, are there any areas that taxpayers are currently finding particularly difficult to deal with when faced with a challenge by the 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>The most difficult current areas appear to be VAT-intensive disputes, particularly VAT issues involving data centers, cruise ships in domestic voyages and car rentals, and disputes where documentation must be assembled quickly to support input VAT, deductions, transfer pricing or factual business positions. VAT refund claims based on questionable documents or related-party transactions are matters that may be investigated where the fraud criteria are met.<\/p>\n<p>Taxpayers may also find the combination of immediate payment obligations and potentially lengthy appeal timelines difficult. Appeals do not generally suspend payment, and the Internal Revenue Board has six months to decide after the necessary administrative documents are received. Complex cases may take longer in practice, which can create cash-flow and financial-statement uncertainty. A further practical difficulty is evidentiary: taxpayers must preserve accounting records, emails, valuation support and other contemporaneous evidence because inadequate documentation can lead to estimation, reassessment, surcharges or an unfavorable allocation of practical proof risk.<\/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\">5421<\/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:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/151090","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=151090"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}