Double Taxation Treaties
Double Taxation Agreements (DTA´s) are treaties between two or more countries on how to avoid double taxation of income and property. The Icelandic DTA model is largely based on the OECD model developed by the Organisation for Economic Co-operation and Development. DTA´s enter into force once they have been ratified by both contracting states and are usually implemented from the beginning of the next calendar year following ratification.
Following the adoption of the Base Erosion and Profit Shifting (BEPS) Action Plan presented by the OECD and the G20 states, the objectives and purpose of double taxation treaties has been under review. The main purpose of BEPS is to combat tax planning strategies, especially among multinational companies, that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity. This leads to a shift in profits by companies from high tax areas to low tax areas.
The solution to combat these strategies when it comes to DTA´s is two-fold. Firstly, DTA´S in force will be amended by a multilateral instrument (MLI), which sets certain minimum requirements based on BEPS. The provisions of the MLI will take precedence over specific provisions of the DTA´s of those countries that have agreed to apply the MLI. Iceland signed the MLI in early June 2017. Secondly, there are various derivative changes resulting from BEPS and the MLI, which have found their way into the OECD model that will affect future DTA´s. The main purpose of the changes is to remove any doubt that DTA´s are not intended to enable minimum or no taxation - or double taxation - but to counter tax evasion of any kind. A new DTA model was released by the OECD at the beginning of March 2018. Work has already begun on reviewing the Icelandic DTA model, taking into consideration the changes made by the OECD model along with various amendments to domestic tax legislation in line with BEPS.
More information on DTA´s, BEPS and the MLI is available from the OECD website:
Information on double taxation agreements on the website of the Directorate of Internal Revenue
List of existing double taxation treaties
- Convention between the Government of Iceland and the Government of Barbados for the Avoidance of Double Taxation, stjornartidindi.is (English version below)
- Agreement between the Government of Iceland and the Government of the Republic of Cyprus for the avoidance of double taxation, stjornartidindi.is (English below).
- Convention between the Republic of Iceland and the Republic of Estonia for the avoidance for double taxation, (Only available in Icelandic)
- Convention between Iceland and France on the avoidance of double taxation (only available in Icelandic)
- Convention between the Republic of Iceland and Germany on the avoidnace of double taxation (In Icelandic and German)
- Convention between Iceland and Greenland for the Avoidance of Double Taxation, stjornartidindi.is
- Auglýsing nr. 3/2016 um tvísköttunarsamning við Liechtenstein, stjornartidindi.is
- Convention between Iceland and Malta for the Avoidance of Double Taxation, stjornartidindi.is
- Agreement between the Government of the Republic of Iceland and the Government of the Republic of Poland for the Avoidance of Double Taxation, stjornartidindi.is
- Protocol between the Government of the Republic of Iceland and the Government of the Republic of Poland amending the agreement for the avoidance of double taxation, stjornartidindi.is (English version below)
- Convention between Iceland and Romenia for the Avoidance of Double Taxation, stjornartidindi.is
- Convention between Iceland and the United Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation, stjornartidindi.is (English below)
- Auglýsing nr. 8/2008 um tvísköttunarsamning við Bandaríkin, stjornartidindi.is