Other Icelandic debt securities - relief at source - rates, eligibility, documentation, deadlines etc.

09.01.2018

Pro-rata temporis

Clearstream Banking is applying the “pro-rata temporis” tax calculation method to all coupon payments, transactions and redemptions relating to Icelandic debt securities, excluding zero-coupon securities.

Consequently, the tax to be applied on coupon payments, transactions and redemptions will be calculated according to the period of holding and the respective (maximum) tax rate as determined by the successive laws, as follows:

Before 1 September 2009

0%

1 September 2009 to 31 December 2009

15%

1 January 2010 to 31 December 2010

18%

1 January 2011 to 31 December 2011

20%

1 January 2012 to 31 December 2017

10% (non-residents of Iceland) / 20% (Icelandic residents) a

As of 1 January 201812% (non-residents of Iceland) / 22% (Icelandic residents) a

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a. Clearstream Banking is applying the 12% non-resident withholding tax by default on coupon payments, transactions and redemptions from such debt securities for periods as of 1 January 2012.

Pre-requisites

To ensure the accurate calculation of tax, 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 clean price and the dirty price.

Important note:

If the beneficial owners are not identified within the settlement instruction, tax will be calculated and applied at account level and the maximum rates are applied.

Due to the “first in, first out” (FIFO) method and the reporting requirements imposed by the RSK, tax is calculated and applied at account level with the first non-allocated purchase remaining on the account.

In addition, if the respective clean and dirty prices are not provided, the market closing price of the day before trade date (or, if this is not available, the latest available price before trade date) is used for the calculation.

Refer to the Creation Link Guide - Iceland for full details regarding the instruction requirements for the Icelandic market to ensure you comply with the requirements.

When a customer settles debt securities in their own books

If Icelandic debt securities held in the customer account were transferred from one beneficial owner to another without a settlement instruction being forwarded to us, the customer is requested to submit to us, on the effective settlement date of the transfer a Report of Internal Transfers of Beneficial Ownership.

Withholding tax

Standard rate of withholding tax

Refer to the above “Pro-rata temporis” table

Holding restrictions

No

The standard rate of withholding tax, on coupon and redemption payments from other Icelandic debt securities (not falling under 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 as defined in the above “Pro-rata temporis” table.

Eligible beneficial owners

Relief
at source

Quick
refund

Standard
refund

Non-Residents of Iceland

Yes

N/A

N/A

Residents of Double Taxation Treaty (DTT) countries

Yes

N/A

Yes

Tax exempt entities

Yes

N/A

No

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

YesN/ANo
Icelandic residentsNoN/ANo

Who can obtain relief at source?

Relief or exemption at source from withholding tax on coupon and redemption payments from above debt securities is available through Clearstream Banking to the following types of beneficial owners:

Beneficial owner types

Interest

Non-resident beneficial owners

12%

Non-residents of a Double Taxation Treaty (DTT) country

DTT rate

Tax exempt entities

0%

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

0%

Icelandic beneficial owners

22%

Undisclosed beneficial owners

22%

Documentation requirements

Clearstream Banking applies 12% non-resident withholding tax by default (or "pro-rata temporis” tax calculation method, whenever applicable) on coupon and redemption payments from above debt securities. Customers are therefore requested to take the following actions depending on their own residency and the residence of the underlying beneficial owners.

Clearstream Banking customers that are non-residents of Iceland

Non-resident customers holding on behalf of the following beneficial owners types, including themselves if applicable, must provide the following documentation in order to have the relevant withholding tax applied on coupon payments:

1. Non-resident beneficial owners

No certification or tax instruction is required in order to obtain the applicable rate of 12% (or relevant "pro-rata temporis" tax rate, whenever applicable) on coupon and redemption payments, as Clearstream Banking applies 12% non-resident withholding tax by default (or relevant "pro-rata temporis” tax rate, whenever applicable).

Important note:

When no certification is provided and the beneficial owner's information is not completed in the settlement instruction, tax will be calculated and applied at account level.

2. Non-residents of Double Taxation Treaty (DTT) countries

  • One-time Certificate for Icelandic Securities;
  • Registration of Beneficial owner Information for Icelandic Tax Purpose; and
  • A Certificate of Residence
    Note: The Certificate of Residence, which must mention that the beneficial owner is considered resident for the purposes of the DTT between its country of residence and Iceland, will remain valid for five years. If, during this period, the beneficial owner’s circumstances change, the Certificate of Residence must be replaced accordingly.

3. Tax exempt entities

  • One-time Certificate for Icelandic Securities; and
  • Registration of Beneficial owner Information for Icelandic Tax Purpose; and in addition for:

A. Tax exempt international organisations:

  • Letter from the Icelandic Tax Authorities confirming the exempt status of the entity.

B. Foreign states and other official or public entities claiming exemption from Icelandic tax:

  • Certificate from the respective tax authorities confirming that the beneficial owner is exempt from tax in its country of residence; and
  • Letter from the Icelandic Tax Authorities confirming the exempt status of the entity.

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

  • One-Time Certificate for Icelandic Banks complying with Article 3.2 of Act no. 94/1996, which remains 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.

5. Icelandic beneficial owners

  • A Per payment Breakdown via formatted SWIFT MT565 or CreationOnline, indicating the following information:
    • ISIN/Common Code of the security;
    • Payment date;
    • 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 and Icelandic TIN of the beneficial owner.

6. Undisclosed beneficial owners

  • A Per payment Breakdown via formatted SWIFT MT565 or CreationOnline, indicating the following information:
    • ISIN/Common Code of the security;
    • Payment date;
    • 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).

Deadlines for receipt of the required documentation by Clearstream Banking

The deadlines for receipt of the required documentation are as follows:

Document

Deadline for receipt by
Clearstream Banking

One-time Certificate for Icelandic Securities

Two business days before the first coupon/redemption payment date at 10:00 CET.

Registration of Beneficial owner Information for Icelandic Tax Purpose

Two business days before the first coupon/redemption payment date at 10:00 CET.

Certificate of Residence

Two business days before the first coupon/redemption payment date at 10:00 CET.

Letter from the Icelandic Tax Authorities

Two business days before the first coupon/redemption payment date at 10:00 CET.

Certificate from the respective tax authorities

Two business days before the first coupon/redemption payment date at 10:00 CET.

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

Two business days before the first coupon/redemption payment date at 10:00 CET.

A Per payment Breakdown

Two business days before coupon/redemption payment date at 10:00 CET.

Report of Internal Transfers of Beneficial OwnershipOn the effective settlement date.

Important note:

If the requested documentation and the required settlement information have not been provided before the relevant Clearstream Banking deadline, interest and redemption payments on the above Icelandic debt securities will be taxed with the non-resident rate of 12% (or as per "pro-rata temporis” tax calculation method, whenever applicable).

Clearstream Banking reminds customers that it is 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 rates.

Standard refund

Beneficial owners eligible to receive Icelandic coupon and redemption payments 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

In Iceland, any gains realised on debt securities are considered for tax purposes as interest payments.

Standard rate of withholding tax

Refer to the above “pro-rata temporis” table

Holding requirements/restrictions

No

The standard rate of capital gains tax, on gains realised on transactions from Icelandic debt securities (not falling under 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 as defined in the above “pro-rata temporis” table.

Eligible beneficial owners

Relief
at source

Quick
refund

Standard
refund

Non-Residents of Iceland

Yes

N/A

No

Residents of Double Taxation Treaty (DTT) countries

Yes

N/A

Yes

Tax exempt entities

Yes

N/A

No

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

YesN/ANo
Icelandic residentsNoN/ANo

Who can obtain relief at source?

Relief or exemption at source from capital gains tax on transactions from above debt securities is available through Clearstream Banking to the following types of beneficial owners:

Beneficial owner types

Interest

Non-resident beneficial owners

0% a

Residents of Double Taxation Treaty (DTT) countries

DTT rate b

Tax exempt beneficial owners

0% b

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

0%

Icelandic beneficial owners

22%

Undisclosed beneficial owners

22%

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a. Sale transactions in Icelandic debt securities can be fully exempt of tax if both the selling and buying parties are non-residents of Iceland for tax purposes.
b. Applicable for transactions where the procedure for exemption on transactions between non-resident parties is not applicable, either because the buying counterparty is not a disclosed non-resident or because the Clearstream Banking customer has not provided the One-Time Declaration for Tax Exemption.

Documentation requirements

Clearstream Banking applies 12% non-resident withholding tax by default (or “pro-rata temporis” tax calculation method, whenever applicable) on transactions from above debt securities. Customers are therefore requested to take the following actions depending on their own residency and the residence of the underlying beneficial owners.

Clearstream Banking customers that are non-residents of Iceland

Non-resident customers holding on behalf of the following beneficial owners types, including themselves if applicable, must provide the following documentation in order to have the relevant withholding tax applied on transactions:

1. Non-resident beneficial owners

  • One-Time Declaration for Tax Exemption on Transaction Sales of Icelandic Debt Securities confirming that:
    • The Icelandic debt securities held on the account are not held on behalf of underlying beneficial owners that are residents of Iceland;
    • The Icelandic debt securities will be sold in general to non-resident buyers; and
    • When sold to an Icelandic buyer (or a buyer that is undisclosed to the Clearstream Banking customer), the transaction and all necessary details will be reported to us so that the tax can be calculated and withheld.
      Note: Due to the “first in, first out” (FIFO) method and the reporting requirements imposed by the RSK, tax is calculated and applied at account level with the first non-allocated purchase remaining on the account.
  • Non-Exempted Transaction Report, if applicable.

2. Non-resident beneficial owners qualifying for DTT (and not qualifying for exemption)

  • One-time Certificate for Icelandic Securities;
  • Registration of Beneficial owner Information for Icelandic Tax Purpose; and
  • Certificate of Residence
    Note: The Certificate of Residence, which must mention that the beneficial owner is considered resident for the purposes of the DTT between its country of residence and Iceland, remain valid for five years. If, during this period, the beneficial owner’s circumstances change, the Certificate of Residence must be replaced accordingly.

3. Tax exempt entities

  • One-time Certificate for Icelandic Securities; and
  • Registration of Beneficial owner Information for Icelandic Tax Purpose; and

For tax exempt international organisations:

  • Letter from the Icelandic Tax Authorities confirming the exempt status of the entity; or

For foreign states and other official or public entities claiming exemption from Icelandic tax:

  • Certificate from the respective tax authorities confirming that the beneficial owner is exempt from tax in its country of residence; and
  • Letter from the Icelandic Tax Authorities confirming the exempt status of the entity.

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

  • One-Time Certificate for Icelandic Banks complying with Article 3.2 of Act no. 94/1996, which remains 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.

5. Icelandic beneficial owners

  • Non-Exempted Transaction report to be provided for taxable transactions that performed on behalf of a beneficiary that is resident of Iceland.

6. Undisclosed beneficial owners

  • Non-Exempted Transaction report to be provided for taxable transactions that are performed on behalf of a beneficiary that is undisclosed to the Clearstream customer.

Deadlines for receipt of the required documentation by Clearstream Banking

Document

Deadline for receipt by Clearstream Banking

One-time Certificate for Icelandic Securities

One business day before the requested settlement date of the transaction.

One-time Declaration for Tax Exemption on Sales of  Icelandic debt Securities

One business day before the requested settlement date of the transaction.

Registration of Beneficial owner Information for Icelandic Tax Purpose

One business day before the requested settlement date of the transaction.

Certificate of Residence

One business day before the requested settlement date of the transaction.

Letter from the Icelandic Tax Authorities

One business day before the requested settlement date of the transaction.

Certificate from the respective tax authorities

One business day before the requested settlement date of the transaction.

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

One business day before the requested settlement date of the transaction.

A Per payment Breakdown

One business day before the requested settlement date of the transaction.

Non-Exempt Transaction report

One business day before the requested settlement date of the transaction.

Report of Internal Transfers of Beneficial OwnershipOn the effective settlement date.

Important note:

If the requested documentation and the required settlement information have not been provided before the relevant Clearstream Banking deadline, gains realised on the above Icelandic debt securities will be taxed with the non-resident rate of 12% (or as per "pro-rata temporis” tax calculation method, whenever applicable).

Clearstream Banking reminds customers that it is 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 rates.

Standard refund

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

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