Icelandic equities - relief at source - rates, eligibility, documentation, deadlines etc.

29.01.2018

Withholding Tax

Standard rate of withholding tax22%
Holding restrictionNo

The standard rate of withholding tax on dividends from Icelandic equities is 22% in Clearstream Banking.

Eligible beneficial owners

Relief at source or exemption from withholding tax on dividend from Icelandic equities is not available through Clearstream Banking:

Relief
at source

Quick
refund

Standard
refund

Non-Residents legal entity

No

N/A

No

Residents of Double Taxation Treaty (DTT) countries

No

N/A

Yes

Tax-exempt beneficial owners

No

N/A

No

Icelandic residentNoN/ANo

Standard refund

Beneficial owners eligible to receive Icelandic dividends at a reduced tax rate can apply for a standard refund.

The procedure and documentation requirements are available in the Standard refund section.

Capital gains Tax

Standard rate of withholding tax22%
Holding restrictionNo

Capital gains on Icelandic equities transactions are calculated based on the average purchase price method and are taxable at the standard rate of 22%.

Settlement instruction requirements

In order to ensure the accurate calculation of capital gains tax on equities transactions, customers are requested to provide us with the following information for all internal and domestic settlement instructions (including free of payment instructions):

  • The Tax Identification Number of the beneficial owner; and
  • The trade price (sales commission is deductible from the sales price).

For further information, refer to the Creation Link Guide - Iceland on how to format the settlement instruction.

If the beneficial owner is not identified on the sale of the securities, capital gains tax will be calculated and applied at the account level at the maximum standard rate of 22%. If the initial purchase price is missing, the custodian will in addition be obligated to withhold capital gains tax from the full sale amount.

Documentation requirements

When a new trade is made

Before starting to trade in Icelandic equities and thus before Icelandic equities are first delivered to Clearstream Banking, the customer should certify their account and register their beneficial owners with Clearstream Banking by submitting the following documentation:

  • One-Time Certificate for Icelandic Equities Transactions; and
  • Registration Request for Transaction Sales of Icelandic Equities
    Note: An Icelandic Tax Identification Number should be used when available. Otherwise, the customer should register the beneficial owner’s local Tax Identification Number or social security number.

When a customer settles equities in their own books

If Icelandic equities held in the customer account were transferred from one beneficial owner to another without a settlement instruction being forwarded to Clearstream Banking, the customer is requested to submit on the effective settlement date of the transfer the following documentations:

  • A Report of Internal Transfers of Beneficial Ownership

Customers with a current portfolio

Customers with a current portfolio of Icelandic equities will be requested to do the following as soon as possible but no later than the date of the sale:

  • Register all the beneficial owners (with the certification mentioned above); and
  • Send a SWIFT MT599 or CreationOnline free-format message to us, for the attention of our Tax Services Department, listing all Icelandic equities in the portfolio. Beneficial owner and trade details (such as purchase price, purchase date and transaction reference) should also be included.

If registration is made no later than the date of the sale of the equity, tax will be calculated and applied at the beneficial owner level. If the beneficial owner is entitled to a reduced tax rate and provides the relevant certification before the deadline, the reduced rate can be applied at source.

Eligible beneficial owners

Relief
at source

Quick
refund

Standard
refund

Non-Residents legal entity

Yes

N/A

No

Residents of Double Taxation Treaty (DTT) countries

Yes

N/A

Yes

Tax-exempt beneficial owners

Yes

N/A

No

Icelandic residentYes aN/ANo
Icelandic Banks complying with article 3.2 of Act no. 94/1996YesN/ANo

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a. Tax is withheld by way of assessment, meaning the income/tax must be declared via the Icelandic beneficial owner’s annual tax return.

Who can obtain relief at source

Relief or exemption at source from capital gains tax on transactions from Icelandic equities is available through Clearstream Banking for the following types of beneficial owners:

Beneficial owner types

Capital gains tax

Non-resident legal entity

20%

Resident of a Double Taxation Treaty (DTT) countries

DTT rate

Tax-exempt beneficial owner

0%

Icelandic resident

0% a

Icelandic intermediary banks

0%

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a. Tax is withheld by way of assessment, meaning any tax applicable must be declared/withheld via their annual tax return.

Documentation requirements

To obtain relief or exemption at source from capital gains tax on Icelandic equities transactions through Clearstream Banking, documents must be submitted to Clearstream Banking, before the respective deadlines (as detailed in "Deadlines for receipt of documents" below) as follows:

1. Beneficial owners that are non-resident legal entities (20%):

  • One-Time Certificate for Icelandic Equities Transactions, if not already provided;
  • Registration Request for Transaction Sales of Icelandic Equities, if not already provided.

2. Beneficial owners that are residents of DTT countries:

  • One-Time certificate for Icelandic Equities Transactions, if not already provided;
  • Registration Request for Transaction Sales of Icelandic Equities; if not already provided;
  • Copy of the completed and certified form RSK 5.42 (Application under Double Taxation Conventions for an Exemption from Icelandic Taxation) per beneficial owner.
    Note: The form RSK 5.42 must be sent to the RSK for approval and certification. It must be dated before the first relevant sale and will remain valid for five years provided that there is no change in the residence status of the beneficial owner.

3. Tax-exempt beneficial owners granted exempt status by the RSK:

  • One-Time Certificate for Icelandic Equities Transactions, if not already provided;
  • Registration Request for Transaction Sales of Icelandic Equities, if not already provided;
  • Exemption Letter from the Icelandic Tax authorities confirming the exempt status.
    Note: Eligible entities must apply for exemption by sending an application to rsk@ rsk.is or to:
    Ríkisskattstjóri
    Laugavegi 166
    150 Reykjavík
    Iceland

4. Icelandic resident beneficial owners:

  • One-Time Certificate for Icelandic Equities Transactions, if not already provided;
  • Registration Request for Transaction Sales of Icelandic Equities, if not already provided;
  • Certificate of Residence
    Note: For Icelandic resident beneficial owners that are direct customers of Clearstream Banking, a Certificate of Residence is only to be provided upon request.

5. For Icelandic resident intermediaries that are direct customers of Clearstream Banking:

  • One-Time Certificate for Icelandic Equities Transactions, if not already provided.

Deadlines for receipt of the required documentation by Clearstream Banking

Document

Deadline for receipt by Clearstream Banking

One-Time Certificate for Icelandic Equities Transactions

On the date of the sale.

Registration Request for Transaction Sales of Icelandic Equities

On the date of the sale.

Form RSK 5.42

On the date of the sale.

Certificate of Tax Exemption

On the date of the sale.

Report of Internal Transfers of Beneficial Ownership

On the date of the internal transfer.

Important note:

If the requested documentation and the required settlement information have not been provided before the relevant Clearstream Banking deadline, capital gains on Icelandic equities transactions will be calculated and applied at account level and taxed at the maximum tax rate on the full sales proceeds (currently 22%).

Standard refund

Beneficial owners eligible to receive Icelandic capital gains on equity transactions at a reduced tax rate but for whom the documentation required to obtain relief at source was not submitted to us before the deadline for the taxable transaction can apply for a standard refund.

The procedure and documentation requirements are available in the Standard refund section.