On 19 February 2026, Iceland’s Court of Appeal ruled on a transfer pricing dispute involving an Icelandic company and its Irish parent. The taxpayer argued its pricing met OECD arm’s-length standards, but the court found it failed to prove this. It confirmed that wages and depreciation must be included in the cost base and held that the taxpayer did not meet its burden of proof. As a result, the tax authorities were entitled to adjust the tax base, apply a 50% markup, and impose a surcharge.
To read more about the decision making, click here.
On June 5, Iceland’s Ministry of Finance initiated a public consultation on a draft law adopting the OECD’s global minimum tax rules under Pillar Two. The proposal applies to multinational groups that have earned above €750 in income in two of the last four years and imposes a minimum 15%. It includes a domestic top-up tax, the income inclusion rule, and detailed rules for calculating tax. The bill is also consistent with EU Directive 2022/2523 under EEA rules and outlines penalties for noncompliance. The ministry may possibly add a rule on undertaxed profits at a later date. The public was able to make comments until August 5.
On December 30, 2024 the Icelandic Directorate of Internal Revenue issued a Notice regarding country-by-country (CbC) reporting. The notice requires covered entities to notify the Directorate within one month after the end of the financial year in 2025. Notifications must include the group company responsible for tax reporting, the reporting company’s country of residence, and whether the company under the reporting obligation is the group’s parent company.
To read more on the Notice, click here.