On 15 June 2021, Iceland published Law 61/2021 in the Official Gazette introducing new rules for the imposition of fines on taxpayers who fail to comply with transfer pricing documentation requirements for related party transactions, whether intentional or careless. The documentation must be submitted within 45 days of the request and required to prepare if the total income or assets exceed ISK 1 billion.
According to new rules an administrative fine up to ISK 3 million for each year will be charged if a taxpayer has failed to fulfill the documentation requirements in full or in part. If the taxpayer does not fulfill its obligation to document within 45 days of request from the tax authority, the fine will be ISK 3 million. If documents are submitted but found unsatisfactory, the fine is 1.5 million ISK if the taxpayer does not correct the documents within 45 days of the director’s request for correction. Fines can be imposed for a maximum of 6 years with a maximum of 6 million ISK.
The penalty may be reduced if the taxpayer meets tax office obligations within following time limits: (i) If the requirement is met within 30 days of the ruling, the fine will be reduced by 90%; (ii) If the obligation is met within two months of the ruling, the fine will be reduced by 60%; and (iii) If the obligation is met within three months of the ruling, the fine will be reduced by 40%.
