The draft law seeks to revise provisions impacting both individuals and businesses, covering areas such as income tax deductions, deadlines for infrastructure tax payments, child benefit rights under the BREXIT agreement, and compliance requirements for virtual asset service providers.

Iceland’s Minister of Finance and Economic Affairs has launched a public consultation on 15 October 2025 on a draft bill introducing various updates to existing tax laws.

The proposal seeks to revise provisions impacting both individuals and businesses, covering areas such as income tax deductions, deadlines for infrastructure tax payments, child benefit rights under the BREXIT agreement, and compliance requirements for virtual asset service providers.

The draft bill includes the following key proposed amendments:

Extension of stock purchase deductions

To help bolster access to capital for both growing smaller businesses and startups, the temporary provision granting tax deductions for stock purchases is proposed to be extended for two additional years, covering investments made through 2026.

The temporary increase in the deduction rate (from 50% to 75%) and the higher investment cap (from ISK 10 million to ISK 15 million) are also being extended in parallel.

Virtual asset oversight

In line with Iceland’s participation in the international Crypto-Asset Reporting Framework (CARF) developed by the OECD, the bill mandates that virtual asset service providers must gather and submit transaction information as requested by the Director of Internal Revenue.

This is necessary to secure information exchange with other tax authorities globally. Crucially, tax authorities gain the power to impose daily administrative fines, ranging from 10,000 ISK to 1 million ISK, on financial institutions or virtual asset service providers who neglect their reporting duties.

Clarity on late payment penalties

An amendment is proposed to clearly separate the determination of surcharges, which are considered punitive measures, from the application of default interest for late remittance of withholding taxes, aligning this practice with the existing Value Added Tax law. Default interest must be paid to the Treasury if the withholding is delayed by more than one month from the due date.

BREXIT rights secured

A new temporary provision will be added to the Income Tax Act to explicitly safeguard the rights of individuals covered by the UK Withdrawal Agreement, especially concerning benefits like child allowances, ensuring that Icelandic law does not contradict their rights following the end of the transition period.

University lottery exemption

The proposal introduces an exemption for the University of Iceland Lottery from paying capital income tax.

Ending COVID-19 loan oversight

Given that all supplementary loans and the majority of support loans granted during the pandemic have been repaid, the bill proposes abolishing the specific legislation creating the special oversight committee for the implementation of these state-guaranteed loans.

Extending mixed bonded warehousing

The temporary provision permitting the operation of mixed bonded warehouses (where customs-cleared and uncleared goods are stored together) is to be extended for three years, until 2029. This is intended to give government and customs authorities ample time to conduct a thorough analysis of the arrangement’s impact and security requirements before making a permanent decision on its future suitability.

Lower vegetable tariffs extension

The temporary provision allowing lower import tariffs on certain types of vegetables is extended through 2026.

Stakeholders can submit their comments or suggestions through the government’s official website until 27 October 2025.