Iceland: Amended tax procedure for Icelandic equities
Further to Announcement A20081, concerning the approved proposal to amend the Withholding Tax Act No. 45/1987 with effective date 13 May 2020, Clearstream Banking1 is pleased to inform customers that, effective
immediately
a new simplified tax procedure will be applicable for capital gains and dividend distributions resulting from Icelandic equities on or after 13 May 2020, which has been enabled as a result of our ongoing collaboration with the Icelandic authorities.
Important note: The new tax procedure exempts LuxCSD from certain reporting and withholding tax responsibilities in regard to capital gains tax.
Customers/ beneficial owners are therefore strongly recommended to seek advice from their own tax advisor to ensure they are fully aware of their responsibilities and liabilities towards the Icelandic Tax Authorities or other authorities, as applicable.
Holding restrictions
Icelandic equities, held on Clearstream Banking’s account at LuxCSD S.A. (via Nasdaq CSD), may only be held by the following:
- Non-resident beneficial owners; and
- Clearstream Banking customers that are Icelandic intermediary banks complying with Article 3.2 of Act no. 94/1996; or
- Icelandic resident beneficial owners, if held via a Clearstream Banking customer, that is an Icelandic intermediary bank complying with Article 3.2 of Act no. 94/1996.
Positions that are held on behalf of Icelandic beneficial owners, may not be held via Clearstream Banking in any other cases.
Withholding tax
Default rate of withholding tax applied in Clearstream Banking | 22% |
The default rate of withholding tax on dividend payments from Icelandic equities is 22% at Clearstream Banking.
Relief at source
Relief at source from withholding tax on dividends from Icelandic equities is not available through Clearstream Banking and the maximum rate of 22% withholding tax is applied by default.
Capital gains tax
Default capital gains tax rate applied in Clearstream Banking | 0% |
There is no capital gains tax withheld through Clearstream Banking on equities held in Clearstream Banking. Capital gains tax may however be payable on specific gains. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.
Disclosure requirements
To comply with Icelandic disclosure and reporting requirements, Clearstream Banking is requested to provide:
- On a monthly basis, the name and transaction details of the Clearstream Banking customer to the Icelandic tax authorities; and
- Upon request, disclosure of the positions of the ultimate beneficial owners on a specified date in a given security to the tax or any other relevant authorities in Iceland.
Customers are kindly requested to refer to the CBL Disclosure Requirements - Iceland for full details of the disclosure requirements
Standard refund
A standard refund of withholding tax on dividends from Icelandic equities is available for the following beneficial owners:
Eligible beneficial owners
Beneficial owner types | Applicable tax rate | Tax refund available |
Non-resident beneficial owner – legal entity | 20% | 2% |
Non-resident beneficial owner of a DTT country | DTT | 22% minus DTT rate |
Non-resident tax exempt entity (international or supranational organizations) | 0% | 22% |
Documentation requirements
In order to benefit from a standard refund of withholding tax on dividend from Icelandic equities, customers must submit the following documentation, depending on the beneficial owner type:
Beneficial owner types | Type of document |
Non-resident beneficial owner – legal entity |
- Power of Attorney, if applicable
|
Non-resident beneficial owner of a DTT country |
|
Non-resident tax exempt entity (international or supranational organizations) |
|
Forms description
The requested tax forms must be completed and provided to Clearstream Banking as follows:
Type of document | Description | Copy/ original | Frequency |
Form RSK 5.42 – Application under Double Taxation Agreement for an Exemption or partial relief from Icelandic Taxation | Only the document “entitled for the Icelandic Tax Authorities” is to be sent to the Clearstream Banking. It must in addition also be dated, signed and stamped, by the local tax authority of the beneficial owner. | Original | Every five years with the first reclaim application. If the refund is granted, the Form RSK 5.42 is valid for five years as of approval month; meaning no additional Form RSK 5.42 will be required to be included with further reclaim applications, during that period. is required For example: Application approved on 15.10.2020 is valid for the period of 1.10.2020 - 31.10.2025. |
Form RSK 5.43 – Application under Double Taxation Conventions for a Refund of Taxes Paid | Only the document “entitled for the Icelandic Tax Authorities” is to be sent to the Clearstream Banking. | Original | Per reclaim request |
Power of Attorney | Required if the reclaim forms are completed by a third party on behalf of the beneficial owner. | Original | Per reclaim request |
Credit Advice | The Credit Advice should be provided by all customers wishing to introduce a Standard reclaim. The full chain of credit advices from the final beneficiary to Clearstream banking must be provided. It identifies income payment details including the security type, gross amount of payment, date of payment and amount of tax withheld. It must be under the letterhead of the customer or of the customer’s agent and include the respective Clearstream Banking account number. | Original or certified copies | Per reclaim request |
Letter of Request to Clearstream Banking for Reclaim of Icelandic Withholding Tax | The Letter of Request should be provided by all customers wishing to introduce a standard reclaim. It authorises Clearstream to process the reclaim with the Icelandic Tax Authorities on the customer’s behalf. Additionally, it specifies the payment details and beneficial owner information | Original | Per reclaim request |
Request to the Icelandic tax authorities for a refund | The form, must be used by beneficial owners for which there is no official reclaim form (no DTT) and must be dated and signed by the beneficial owner or its legal representative under power of attorney and detail the reclaim request. | Original | Per reclaim request |
Certificate of incorporation or other official document proving the status | The certificate of incorporation of the beneficial owner must be enclosed with the reclaim application, by entities not claiming DTT, to prove the status of the foreign entity. | Original or certified copy | Per reclaim request |
The templates of the forms are available on our Tax Forms to use section.
Statutory deadline
The statutory deadline to reclaim withholding tax on income from Icelandic securities is six years after the date on which the tax was withheld. The deadline by which Clearstream Banking must receive the documentation is at least two months before the statutory deadline. All standard refund applications received after this deadline will be processed by Clearstream Banking on a best efforts basis. However, in such cases, Clearstream Banking will apply an extra charge and will accept no responsibility for forms that have not reached the Icelandic Tax Authorities by the date considered as the statute of limitations deadline.
With respect to tax reclaims in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer’s responsibility to determine any entitlement to a refund of tax withheld, to complete the required documentation correctly and to calculate the amount due.
Receipt of refunded amounts
The estimated time for receiving a standard refund is six to twelve months from the date on which the standard refund application was received by the Icelandic Tax Authorities, although this can vary depending on when the application was filed and the complexity of the information supplied in the reclaim form.
Notes on tax reclaims
Customers warrant the completeness and accuracy of the information they supply to Clearstream Banking.
It is the customer's responsibility to determine any entitlement to a refund of tax withheld, to complete the forms required correctly and to calculate the amount due. Clearstream Banking is under no obligation to carry out any investigation in respect of such information.
With respect to tax reclaims in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country.
Impact on customers
In accordance with the amended tax procedure, customers are requested to comply with the above procedure immediately.
Further, customers/ beneficial owners are strongly recommended to seek advice from their own tax advisor to ensure they are fully aware of their responsibilities and liabilities towards the Icelandic Tax Authorities or other authorities, as applicable.
Further information
Detailed information will be provided as it becomes available.
For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.
------------------------------------------
1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.