On 18 February 2020, the Ministry of Finance and Economy submitted a draft bill to the parliament regarding new penalties for failing to comply with transfer pricing documentation requirements. The draft law also includes an amendment to clarify that transfer pricing requirements apply to transactions between a legal person and its permanent establishment.
According to the law, the Director of Internal Revenue is authorized to impose the administrative penalties up to ISK 3 million per year for failing to submit documentation within 45 days of request; and up to ISK 1.5 million per year if the documentation submitted is incomplete and not resolved within 45 days. The penalties will be imposed without considering the offense is committed intentionally or negligently.
The penalty for incomplete documentation can also be applied retrospectively for up to six years, subject to a maximum fine of ISK 6 million. It is also envisaged that fines will be reduced by 90% if non-compliance is remedied within 30 days after the date of a decision, 60% if remedied within two months and 40% if remedied within three months.
