Iceland

Taxable period

The tax year is the calendar year. However, in certain circumstances and upon application, the Internal Revenue Directorate can allow a different fiscal year from the calendar year.

Tax returns

At the beginning of every year, the Internal Revenue Directorate determines the time limit for taxpayers to submit their tax returns and supporting documentation. The deadline for receipt of tax returns from corporations is generally 31 May each year. This deadline is extended upon application. Those who have their tax returns prepared by professional services can generally have the deadline extended until 30 September each year.

The final assessment must be completed no later than ten months after the end of the income year. Tax assessments for corporations will be available at the end of October.

Payment of tax

Advance tax payments are due on the first day of every month, except January and October. Corporations pay income tax in advance, which is in turn deducted from the final tax assessment in October each year. The advance tax is collected in the months of February to September and amounts to 8.5% of the income tax on each due date. In total, the advance tax payments amount to 68% of the income tax. Any deficit remaining when final tax is assessed must be paid in equal instalments by 1 November and 1 December.

Income tax payments on dividends and interest income are due every quarter. Due dates are 20 January, 20 April, 20 July, and 20 October, and the final deadline for payment is 15 days later.

Tax audit process

The Icelandic tax authorities select returns for examination using a variety of methods. Some returns are selected based on electronic selection; some are selected based on a formal supervisory plan. A tax audit can also be traced to information obtained by the tax authorities through efforts to identify participants of tax avoidance transactions.

The examination generally takes place by formal, written communication. The rules of the procedure are very strict, and the process can take from a few weeks to a year/years.

Appeal rights involve two administrative levels and also two judiciary levels.

Statute of limitations

Tax authorities in Iceland have the right to reassess tax returns for CIT six years prior to the year of the assessment (i.e. the statutory period of limitation is six years). The statutory period only reaches a maximum of two years in time if tax returns have been filled out properly and all necessary information presented for tax authorities to establish a correct assessment. This means that in the year 2024, tax authorities can, in theory, reassess the company's tax back to income year 2018.

However, the limitation has been prolonged to ten years in case of income and assets in low-tax jurisdictions.

Topics of focus for tax authorities

The topic of focus for tax authorities in Iceland is tax avoidance in general. It has been stated that they will increasingly focus on issues related to transfer pricing.