On 4 March 2025 the OECD issued a stage one simplified peer review report on Iceland under BEPS action 14. The report sets out the results of Stage 1 of the simplified peer review of the implementation of the minimum standard on making dispute resolution mechanisms more effective. The review concludes that overall Iceland meets most of the elements of the Action 14 minimum standard.

The peer review report notes that Iceland has a relatively large tax treaty network and an established mutual agreement procedure (MAP) programme; but has only modest experience with resolving MAP cases. All of Iceland’s tax treaties contain a provision relating to MAP, and the treaties mostly follow paragraphs 1 to 3 of Article 25 of the OECD Model in relation to the MAP. The treaty network is generally consistent with the minimum standard under action 14.

To be fully in line with the Action 14 minimum standard, the report notes that Iceland needs to update twelve of its tax treaties. Iceland signed and ratified the multilateral instrument (MLI) to include treaty-related BEPS provisions into its treaties, and six of its tax treaties have been modified to fulfil the requirements of the minimum standard. The other treaties will be updated by bilateral negotiations, though for a few of the treaties updates have not yet been planned.

The report notes that Iceland does not have a bilateral APA programme in place.

Iceland meets some of the requirements on the availability and access to MAP under the minimum standard. Access to MAP is provided in transfer pricing cases, cases where anti-abuse provisions are applied, and in situations where there has been an audit settlement. However, access to MAP could be denied in eligible cases where the issue under dispute has already been decided under domestic judicial procedures and the taxpayer submits a MAP request without new documents or information. Iceland does not have in place a documented bilateral notification process for situations where the competent authority considers the objection raised by taxpayers in a MAP request as not justified. There is however clear and comprehensive guidance on the availability of the MAP and how it is applied in practice.

In the period from 2019 to 2022 the average time necessary to close MAP cases was 8.94 months, which was within the targeted timeframe of 24 months. Iceland meets all the other requirements under the Action 14 Minimum Standard in relation to the resolution of MAP cases. The competent authority operates fully independently from the tax audit function, its organisation is adequate and appropriate performance indicators are used to perform the MAP function.

Iceland almost meets the Action 14 minimum standard in its implementation of MAP agreements. There is however a domestic statute of limitation for implementation of MAP agreements, and there is a risk that the agreements cannot be implemented if the applicable tax treaty does not contain a timeline for applications in line with the OECD Model. Iceland monitors the implementation of MAP agreements.