Iceland has recently enacted its own transfer pricing legislation, which became effective from January 1, 2014. The transfer pricing rules are now regulated by Article 57 of Act No. 90/2003 on Income Tax based on the arm’s length standard. There were previously no specific transfer pricing provisions in Icelandic law although some provisions of the legislation could be used to challenge prices that were not at arm’s length.
Iceland’s tax authorities may use the provisions of the law to assess and adjust pricing between related parties. Iceland will follow the Organization for Economic Cooperation and Development (OECD) Guidelines, both for transfer pricing methods and documentation. The provision does not specify any one method or prioritize the methods in any way.
Icelandic businesses must prepare documentation if their turnover or assets in the preceding year exceeded ISK1bn (Approximately USD8.8m). If a company’s turnover exceeded this threshold in 2013, documentation must be prepared for the 2014 financial year. These documents should include:
- The nature and extent of transactions with related parties (including subsidiaries or permanent establishments)
- The nature of the related-party relationship
- The basis for the price(s) asserted
The document requirement also refers to the OECD transfer pricing guidelines.
