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Ministry for Foreign Affairs

Screening Meeting on Taxation concluded

Screening meeting with the European Union on Chapter 16 – Taxation – was concluded in Brussels on 4 March 2011. At the meeting, which was the latter one of two, experts from Iceland and the EU compared the Icelandic legislation with the EU legislation falling under the Chapter. The Icelandic team was headed by Ms. Marianna Jonasdottir, chairperson of the Financial Affairs negotiation team.

The EEA-Agreement does not cover taxation and therefore the whole chapter is subject to negotiations. The acquis on taxation can mainly be divided into two. Firstly the acquis covers direct taxation, mainly corporate taxes, but also of individuals, but legislation on direct taxation within the EU is only harmonized to a certain extent. Secondly the acquis on taxation covers extensively, some areas of indirect taxation, namely value-added tax (VAT) and excise duties on alochol, tobacco and energy products.

EU membership would have some significant effects on the Icelandic value-added tax system, though the Icelandic VAT is built on similar principles as the EU rules. Changes have to be made on the legislation itself and also on the information technology environment of the tax authorities and the business sector.
At the latter screening meeting, the Icelandic experts placed emphasis on maintaining the current ratios of the excise tax on alcohol, tobacco and energy products. This view is in accordance with the Opinion of the majority of the Foreign Relations Committee of the Parliament on the application for membership of the European Union.
Other significant issues raised in the gap analysis presented by the Icelandic team and which can be subject to discussions with the European Union concern goods and services which are exempt from VAT-rules or are at lower VAT level in Iceland. A note was also made on duty free shops at arrivals and stamp duties levied on shares, bonds and loan agreements. Also, the VAT reimbursment system in Iceland on housing maintenance, repair or acquisition by individuals or public bodies, such as local governments, is not in accordance with EU law.


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