In general, a Mutual Agreement Procedure (MAP) may be requested where there is a risk of double taxation. It is not necessary for the Icelandic or foreign tax authorities to have already taken action. It is sufficient that double taxation may occur.

A Mutual Agreement Procedure cannot, however, be requested solely on the grounds that a taxpayer considers their rights to have been violated under domestic law.

Examples of cases where a Mutual Agreement Procedure may be requested include:

• Transfer pricing cases.

• Determining whether a permanent establishment exists.

• Attribution of profits to a permanent establishment.

• Determining the tax residence of individuals and companies.

• Determining whether an individual’s income should be taxed as employment income or business income.

• Taxation of pensions.

• Taxation of capital income.

• Tax incorrectly withheld at source.

• Incorrect application of the non-discrimination provisions of a double taxation agreement.

A Mutual Agreement Procedure may also be requested while the same case is being dealt with under domestic law, for example through a request or appeal to Iceland Revenue and Customs, an appeal to the Internal Revenue Board or proceedings before the courts. In such cases, it is important to state that the matter is also being considered through other proceedings and to specify the order in which the taxpayer wishes the proceedings to be resolved.

As a general rule, a request for a Mutual Agreement Procedure must be submitted within three years from the date on which the taxpayer became aware, or should have become aware, that their income would be subject to double taxation. Some agreements provide for a longer period, such as the Nordic Convention.

How to Request a Mutual Agreement Procedure

As a general rule, a request for a Mutual Agreement Procedure (MAP) should be submitted to the competent authority of the country where the taxpayer is resident. If the taxpayer is resident in Iceland, the competent authority is Iceland Revenue and Customs.

If the taxpayer is resident in both countries, the request should be submitted to the competent authority of the country in which the taxpayer considers themselves to be resident. However, some double taxation agreements allow the taxpayer to submit the request to the competent authority of either country.

Iceland has also signed the Multilateral Instrument (MLI). For double taxation agreements covered by the MLI between Iceland and other countries that have also signed it, a taxpayer may submit a MAP request to the competent authority of either country.

List of countries that have signed the Multilateral Instrument

A request for a Mutual Agreement Procedure must be submitted in writing to Iceland Revenue and Customs, Katrínartún 6, 105 Reykjavík, Iceland, or by email to skatturinn@skatturinn.is.

The request must include:

• The taxpayer’s name, address, Icelandic identification number (kennitala), email address and telephone number.

• The name, email address and telephone number of the taxpayer’s representative, if applicable.

• The income years covered by the request.

• Details of the income concerned and which, in the applicant’s opinion, has been or will be taxed contrary to the provisions of a double taxation agreement.

• A reference to the relevant provision of the double taxation agreement.

• A detailed description of the facts of the case and relevant supporting documents, such as copies of tax returns, tax assessment notices and/or decisions.

• If a request concerning the same case has also been submitted to the foreign competent authority, a copy of that request.

• If the taxpayer considers that a comparable case has been decided differently, for example by a court, the Internal Revenue Board or another authority, a copy of the relevant decision or judgment.

• If the same case is being considered by more than one authority at the taxpayer’s request, copies of the relevant request, appeal or court documents must be provided, as applicable. The taxpayer must also state the order in which they wish the proceedings to be resolved.

• A declaration confirming that all information and documents submitted with the MAP request are correct and that any additional information or documents requested by Iceland Revenue and Customs will be provided within a reasonable period.

It is important to include all necessary documents with the request. Iceland Revenue and Customs may request additional information or documents if necessary. Please note that the documents submitted with the MAP request, as well as any additional documents requested by Iceland Revenue and Customs at a later stage, will be shared with the foreign competent authority as part of the Mutual Agreement Procedure.

If the taxpayer intentionally or through gross negligence provides incorrect or incomplete information, or refuses to provide requested information, Iceland Revenue and Customs may reject the request for a Mutual Agreement Procedure.

Before rejecting a request on these grounds, Iceland Revenue and Customs will give the taxpayer a reasonable period to provide the missing information or documents. The length of this period will depend on factors such as the complexity of the case, the type of documents requested, whether they need to be obtained from abroad and whether the taxpayer is likely to already have them.

Documents must be submitted in Icelandic, English, Danish, Swedish or Norwegian. If documents are submitted in another language, Iceland Revenue and Customs may require them to be translated at the taxpayer’s expense. Translations must be prepared by an authorised translator.

When Iceland Revenue and Customs receives a request for a Mutual Agreement Procedure (MAP), it assesses whether the request meets the applicable requirements. This includes assessing:

• whether the case concerns circumstances covered by a double taxation agreement

• whether the request has been submitted by the appropriate taxpayer

• whether the request has been submitted to the appropriate competent authority

• whether the request has been submitted within the applicable time limit

• whether the request contains sufficient information and relevant supporting documents

Once the request has been assessed, the taxpayer will be informed whether the case will be handled under the Mutual Agreement Procedure or in another manner.

Iceland Revenue and Customs always informs the foreign competent authority when a request for a Mutual Agreement Procedure is received. A request will not be rejected due to insufficient information or because it is considered invalid without involving the foreign competent authority.

If a request is submitted to Iceland Revenue and Customs, it determines when the MAP case is considered to have started. Other remedies or proceedings initiated by the taxpayer may affect this decision. It may therefore be important to request a Mutual Agreement Procedure before other proceedings have been concluded if the deadline for submitting a MAP request is approaching and it is uncertain whether those proceedings will be completed before the deadline expires. Other proceedings may include a request or appeal to Iceland Revenue and Customs, an appeal to the Internal Revenue Board or proceedings before the courts.

Once Iceland Revenue and Customs has determined that the request should be handled under the Mutual Agreement Procedure, it will first consider whether the case can be resolved satisfactorily in Iceland. If so, Iceland Revenue and Customs will take steps to correct the taxpayer’s tax assessment.

If the case cannot be resolved unilaterally in Iceland, Iceland Revenue and Customs and the foreign competent authority will endeavour to reach a mutual agreement. The aim is to resolve the case so that the taxpayer is not subject to taxation that is contrary to the applicable double taxation agreement.

Any reassessment of taxes and/or refunds resulting from a mutual agreement will be implemented as soon as possible. As a general rule, such adjustments are processed within one month.

If a mutual agreement results in an increase in the taxpayer’s tax base, Iceland Revenue and Customs must follow Article 96 of Act No. 90/2003 on Income Tax and notify the taxpayer of the proposed increase in taxes. The taxpayer is given 15 days to submit comments. The reassessment is implemented once this period has expired.

An appeal to a higher administrative authority does not suspend the legal effect of a reassessment made following a mutual agreement. If assessed taxes are not paid on time, surcharges and late-payment interest may be added, as applicable, under the provisions of the Income Tax Act, the Act on Withholding of Public Levies and the Capital Income Tax Act. A surcharge under Article 108 of Act No. 90/2003 on Income Tax may also be applied, where applicable.

As noted above, a taxpayer may request that Iceland Revenue and Customs seek a mutual agreement with a foreign competent authority even if domestic legal remedies have also been used, such as submitting a request or appeal to Iceland Revenue and Customs, appealing to the Internal Revenue Board, or bringing the case before the courts.

It is generally not appropriate for two authorities to decide the same case at the same time. The different proceedings therefore need to be coordinated. The taxpayer must decide which remedies they wish to use, while Iceland Revenue and Customs determines the appropriate procedure under the rules governing the Mutual Agreement Procedure (MAP) and when the MAP process is considered to have started.

If a Mutual Agreement Procedure is requested while a tax assessment is also appealed to Iceland Revenue and Customs, the appeal will generally be decided first, in accordance with the provisions of the Income Tax Act. An appeal to Iceland Revenue and Customs is also likely to be resolved more quickly than reaching a mutual agreement with a foreign competent authority. If appropriate, the taxpayer may subsequently request that Iceland Revenue and Customs amend its decision on the appeal following the outcome of the Mutual Agreement Procedure.

If an appeal must be decided first, the Mutual Agreement Procedure is put on hold until a decision on the appeal has been made. If the taxpayer still considers that the taxation is contrary to the applicable double taxation agreement after the appeal has been decided, Iceland Revenue and Customs will begin processing the case under the Mutual Agreement Procedure.

If the case is brought before the courts, the Mutual Agreement Procedure will remain on hold until the court proceedings have been concluded.