Monday, 27 June 2016

Iceland: Draft anti-tax evasion bill targets ownership in low-tax jurisdictions

Iceland’s Minister of Finance and Economic Affairs presented a draft bill to parliament on 25 May 2016 that contains measures to combat tax evasion with respect to ownership of entities in low-tax jurisdictions. The draft bill, which was prepared in response to the “Panama Papers,” would introduce substantial restrictions on the ability of Iceland residents to engage in transactions with parties in low-tax jurisdictions and expand the powers of the tax authorities to obtain information on such transactions.
The bill would introduce the following changes to Iceland’s tax laws:

  • Limits on the ability to change domicile/permanent residence or transfer assets to a lowtax jurisdiction;
  • Limits on the ability to deduct losses incurred by a company located in a low-tax jurisdiction; 
  • Limits on the ability to transfer a sole proprietorship to a private limited company in a low-tax jurisdiction; 
  • Limits on the ability to engage in cross-border mergers and divisions with a company in a low-tax jurisdiction;
  • Extension of the period in which the Iceland tax authorities tax can issue a reassessment of tax on income or assets located in a low-tax jurisdiction, from six to 10 years;
  • Extension of the statute of limitations from six to 10 years for the tax authorities to impose penalties on persons for providing incorrect or misleading information relating to assets in a low-tax jurisdiction; and 
  • Enhanced disclosure requirements for persons who provide tax or other services relating to companies, funds or institutions in low-tax jurisdictions; such persons would be required to provide the tax authorities with a list of persons to whom such services are provided, as well as details of the activities, assets and equity relating to such services. 
Source: Deloitte