Iceland: Amended tax disclosure requirements for Icelandic debt securities

22.05.2019

Clearstream Banking1 informs customers that, effective

immediately

Clearstream is requested,  in order to comply with the Icelandic tax authorities (RSK) disclosure requirements, to provide, to the RSK, the details of the Clearstream customer (including the identity of the client, details of holdings, income received), in the event that the identity of a beneficial owner is undisclosed, when receiving income payments from Icelandic domestic debt securities, which are tax exempt for non-resident beneficial owners, according to Article 1 of Act no. 39/2013, Article 1 of Act no. 53/2014 and Article 1 of Act no. 107/2015.

Background

The standard rate of withholding tax on interest payments from Icelandic debt securities, falling under the scope of Article 1 of Act no. 39/2013, Article 1 of Act no. 53/2014 and Article 1 of Act no. 107/2015 is 22%. Clearstream Banking does however apply 0% non-resident withholding by default on interest payments from such securities and customers were therefore, previously, only requested to provide details about the underlying recipients, in the event the securities were held by the following recipients types:

  • Icelandic Banks complying with article 3.2 of Act no. 94/1996;
  • Icelandic beneficial owners;
  • Undisclosed beneficial owners.

However, in order to comply with the RSK requirements, customers are requested, with immediate effect, to follow the below updated procedure, when receiving interest payments from these securities.

Withholding tax rates

Withholding tax on interest distributions from the above mentioned debt securities, is applicable at the below rates through Clearstream Banking, to the following types of recipients:

Recipient type

Withholding tax rate

Non-resident beneficial owners

0%

Icelandic Banks complying with article 3.2 of Act no. 94/1996

0%

Icelandic beneficial owners

22%

Undisclosed beneficial owners

22%

Documentation requirements

Customers are requested to provide the following documentation depending on their own residency and the residence of the underlying beneficial owners.

Clearstream Banking customers that are non-residents of Iceland

1. Non-resident beneficial owners

  • A Per payment Breakdown via formatted SWIFT MT565, CreationOnline or Xact Web Portal message, indicating the following information2::
    • ISIN/Common Code of the security;
    • Corporate action ID;
    • Clearstream Banking customer account number;
    • Total holding position;
    • Position to apply the non-resident tax rate;
    • Tax rate to be applied (that is, 0% for non-resident beneficial owners);
    • Name, address, country of tax residence, TIN and OECD code (please refer to below list) of the beneficial owner:

Status

OECD code

Individual

01

Corporation

02

Partnership

03

Business other than corporation and partnership

04

Government or international organisation

05

Other

06

Unknown

07

    • Purchase date of the position linked to each beneficial owner.

2. Icelandic beneficial owners

  • A Per payment Breakdown via formatted SWIFT MT565, CreationOnline or Xact Web Portal message, indicating the following information2 :
    • ISIN/Common Code of the security;
    • Corporate action id;
    • Clearstream Banking customer account number;
    • Total holding position;
    • Position to apply the resident tax rate;
    • Tax rate to be applied (that is, 22% for Icelandic resident beneficial owners);
    • Name, address, country of tax residence (Iceland) and TIN;
    •  Purchase date of the position linked to each beneficial owner.

3. Undisclosed beneficial owners

  • A Per payment Breakdown via formatted SWIFT MT565, CreationOnline or Xact Web Portal message, indicating the following information2:
    • ISIN/Common Code of the security;
    • Corporate action id;
    • Clearstream Banking customer account number;
    • Total holding position;
    • Position to apply the undisclosed tax rate;
    • Tax rate to be applied (that is, 22% for undisclosed holdings).
    • Purchase date of the position linked to each beneficial owner

Clearstream Banking customers that are Icelandic Banks - complying with Article 3.2 of Act no. 94/1996

  • A One-Time Certificate for Icelandic Banks complying with Article 3.2 of Act no. 94/1996, which is valid until revoked.
    Note: Such entities are considered as Icelandic tax withholding agents, implying they must retain the appropriate tax amounts from their respective clients.

Deadlines for receipt of the required documentation by Clearstream Banking

Interest payments

Document

Deadline for receipt by
Clearstream Banking

A Per payment Breakdown

Five business days before interest payment date at 10:00 CET.

One-Time certificate for Icelandic Banks complying with article 3.2 of Act no. 94/1996

Five business days before interest payment date at 10:00 CET.

Important note

If the requested documentation and the required settlement information have not been provided before the relevant Clearstream Banking deadline, interest payments on the above Icelandic debt securities will be taxed with the non-resident rate of 0% by default and the details of the Clearstream customer (including the name and address of the client, details of holdings and income received) will be disclosed to the RSK.

Clearstream Banking reminds customers that it is furthermore the customer's full responsibility in all cases to ensure that final beneficial owners are eligible for the tax rates applied, including the Clearstream Banking default rate and that all information provided for tax purposes, including beneficial owner disclosure, is complete, accurate and up to date and that customers shall hold Clearstream Banking harmless of any loss or liability incurred by Clearstream Banking as a result of its breach of this responsibility

Impact on customers

In accordance with the amended guidelines from the RSK, customers are requested, to provide disclosure, as per procedure stated above, whenever receiving income payments from Icelandic domestic debt securities, which are tax exempt for non-resident beneficial owners, according to Article 1 of Act. no. 39/ 2013, Article 1 of Act no. 53/2014 and Article 1 of Act no 107/2015.

Further information

For further information, customers may contact the Clearstream Banking Tax Help Desk, Clearstream Banking Customer Service or their Relationship Officer.

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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.

2. For full formatting requirements of these instructions, customers should refer to the event notification, the Customer Handbook and Announcement C18050.