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(Aug 24, 2010) In June 2010 Iceland's Parliament (Alþingi) approved several measures related to taxation. Temporary legislation approved on June 15 makes concessions available for direct investment in the country. It will remain in effect until December 31, 2013 (except as otherwise agreed to by the investor concerned and the Ministry). Companies that seek to invest directly in Iceland must submit an application for tax concessions to the Ministry of Industry, Energy and Tourism. The concessions will be available, for example, in the areas of "fixed income tax rates, exemption from industrial charges, permission for accelerated depreciation of assets and lower social security contributions on wages, in relation to their investment." (Hjordis B. Gunnarsdottir, Tax Concessions for Direct Investments Introduced (Aug. 16, 2010), TAX NEWS SERVICE, IBFD online subscription database; Lög um ívilnanir vegna nýfjárfestinga á Íslandi (Law No. 99, June 29, 2010), Alþingi website, http://www.althingi.is/altext/138/s/1379.html.)
A June 16 amendment of the Income Tax Act allows a temporary tax credit to the taxpayer for the construction and renovation of his or her primary residence. The tax credit against the taxpayer's national tax liability, available in the tax years 2010 and 2011, will be 50% of the remuneration paid for the construction, renovation, or repair. The total tax credit allowed is an annual maximum amount of ISK200,000 (about US$1,664), or ISK300,000 (about US$2,496) for couples taxed jointly. (Hjordis B. Gunnarsdottir, Temporary Tax Credit for Constructing and Renovating Taxpayer's Primary Residence Introduced (Aug. 16, 2010), TAX NEWS SERVICE, IBFD online subscription database; Lög um breyting á lögum nr. 90/2003, um tekjuskatt, með síðari breytingum (ívilnun vegna endurbóta og viðhalds) (Law No. 92, June 25, 2010), Alþingi website, http://www.althingi.is/altext/138/s/1411.html.)
Another amendment to the Income Tax Act, approved by the Parliament on June 24, grants a partial tax exemption for income that arises from forgiveness of a debt, which, before the revision of the Act, "was generally regarded as taxable income for the debtor." (Hjordis B. Gunnarsdottir, Partial Tax Exemption for Income Arising from Forgiveness of Debt Introduced (Aug. 16, 2010), TAX NEWS SERVICE, IBFD online subscription database.) For individuals, forgiven car loans are tax exempt for debt forgiveness that occurs in the tax years 2009-2011, at the following rates: 100% tax exemption for debt forgiven in an amount up to ISK15 million (about US$124,800); 50% exemption for forgiven debt amounts of ISK15-30 million, and 25% for amounts above ISK30 million; for couples taxed jointly, the permitted amounts are double. Individuals also have the option of postponing for two years the declaration of taxable debt forgiveness of car loans and declaring it in equal amounts over the five subsequent years. (Id.)
In the case of companies and entrepreneurs who experience financial difficulties in the period 2009-2011, a tax exemption of 50% of income from forgiveness of a debt in the amount of up to ISK50 million, and of 75% of such income in excess of that amount, is available as long as the debt arose from general business operations. Companies and entrepreneurs may also amortize or depreciate assets by the amount of forgiven debt they have declared as taxable income; in the absence of such assets, a company may "declare the taxable amount of the forgiven debt in equal amounts over the following 3 years." (Id.; Lög um breyting á lögum nr. 90/2003, um tekjuskatt, með síðari breytingum (skattaleg meðferð á eftirgjöf skulda) (Law No. 104, July 2, 2010), Alþingi website, http://www.althingi.is/altext/138/s/1441.html.)
|Author:||Wendy Zeldin More by this author|
|Topic:||Taxation More on this topic|
|Jurisdiction:||Iceland More about this jurisdiction|
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Last updated: 08/24/2010