Iceland: Implementation of capital gains tax on equities and related relief/reclaim procedures
Further to our Taxflash LT13019, 19 March 2013, regarding the amended Icelandic tax law that implemented capital gains tax on equities transactions with effective date 1 April 2013, we hereby provide further information about the tax procedure via Clearstream Banking1.
Capital gains on equities transactions
Capital gains on equities transactions are calculated based on the average purchase price method and are taxable at the standard rate of 20%. An example of the calculation method is included in the documents attached below.
Settlement instruction requirements
In order to ensure the accurate calculation of capital gains tax on equities transactions, customers are requested to provide us with the following information for all internal and domestic settlement instructions (including free of payment instructions):
- The Tax Identification Number of the beneficial owner; and
- The trade price (Sales commission is deductible from the sales price).
Please refer to the Creation Link Guide - Iceland for further information about how to format the settlement instruction.
If the beneficial owner is not identified on the sale of the securities, capital gains tax will be calculated and applied at the account level at the maximum standard rate of 20%. If the initial purchase price is missing, the custodian will in addition be obligated to withhold capital gains tax from the full sale amount.
When a new trade is made
Before starting to trade in Icelandic equities and thus before Icelandic equities are first delivered to us, the customer should certify their account and register their beneficial owners with us by submitting the following documentation:
- A One-Time Certificate for Icelandic Equities Transactions;
- A Registration Request for Transaction Sales of Icelandic Equities.
Note: An Icelandic Tax Identification Number should be used when available. Otherwise, the customer should register the beneficial owner’s local Tax Identification Number or social security number.
When a customer settles equities in their own books
If Icelandic equities held in the customer account were transferred from one beneficial owner to another without a settlement instruction being forwarded to us, the customer is requested to submit to us, on the effective settlement date of the transfer, a Report of Internal Transfers of Beneficial Ownership.
Customers with a current portfolio
Customers with a current portfolio of Icelandic equities will be requested to do the following as soon as possible but no later than the date of the sale:
- Register all the beneficial owners (with the certification mentioned above); and
- Send a SWIFT MT599 or CreationOnline free-format message to us, for the attention of our Tax Services Department, listing all Icelandic equities in the portfolio. Beneficial owner and trade details (such as purchase price, purchase date and transaction reference) should also be included.
If registration is made no later than the date of the sale of the equity, tax will be calculated and applied at the beneficial owner level. If the beneficial owner is entitled to a reduced tax rate and provides the relevant certification before the deadline, the reduced rate can be applied at source (see “Relief at source” below).
Relief at source
Clearstream Banking customers that are non-residents of Iceland
Customers that are non-residents of Iceland can request relief at source for the following types of beneficial owner:
- Residents of Double Taxation Treaty (DTT) countries2;
- Tax-exempt entities granted exempt status by the Icelandic Directorate of Internal Revenue (RSK);
- Non-resident legal entities (18%);
- Icelandic residents (0%).
Clearstream customers that are residents of Iceland
Customers that are residents of Iceland can request relief at source when acting as one of the following:
- An Icelandic resident intermediary (0%);
- An Icelandic resident beneficial owner holding proprietary assets (0%).
Documentation requirements
To obtain relief at source from capital gains tax on Icelandic equities transactions through Clearstream Banking, documents must be submitted to us, before the respective deadlines (as detailed in "Deadlines for receipt of documents" below) as follows: For beneficial owners that are residents of DTT countries:
- One-Time certificate for Icelandic Equities Transactions, if not already provided;
- Registration Request for Transaction Sales of Icelandic Equities; if not already provided;
- Copy of the completed and certified form RSK 5.42 (Application under Double Taxation Conventions for an Exemption from Icelandic Taxation) per beneficial owner.
N.B.: The form RSK 5.42 must be sent to the RSK for approval and certification. It must be dated before the first relevant dividend payment and will remain valid for five years provided that there is no change in the residence status of the beneficial owner. For tax-exempt beneficial owners granted exempt status by the RSK:
- One-Time Certificate for Icelandic Equities Transactions, if not already provided;
- Registration Request for Transaction Sales of Icelandic Equities, if not already provided;
- Letter from the Icelandic Tax authorities confirming the exempt status.
Note: Eligible entities must apply for exemption by sending an application to rsk@ rsk.is or to:
Ríkisskattstjóri
Laugavegi 166
150 Reykjavík
Iceland For beneficial owners that are non-resident legal entities (18%):
- One-Time Certificate for Icelandic Equities Transactions, if not already provided;
- Registration Request for Transaction Sales of Icelandic Equities, if not already provided.
For Icelandic resident beneficial owners:
- One-Time Certificate for Icelandic Equities Transactions, if not already provided;
- Registration Request for Transaction Sales of Icelandic Equities, if not already provided;
- Certificate of Residence
Note: For Icelandic resident beneficial owners that are direct customers of Clearstream Banking, a Certificate of Residence is only to be provided upon request. For Icelandic resident intermediaries that are direct customers of Clearstream Banking:
- One-Time Certificate for Icelandic Equities Transactions, if not already provided.
Deadlines (CET) for receipt of the required documentation by Clearstream Banking (CBL)
| Document | Deadline for receipt at CBL |
| One-Time Certificate for Icelandic Equities Transactions | On the date of the sale |
| Registration Request for Transaction Sales of Icelandic Equities | On the date of the sale |
| Form RSK 5.42 | On the date of the sale |
| Certificate of Tax Exemption | On the date of the sale |
| Report of Internal Transfers of Beneficial Ownership | On the date of the internal transfer |
Important note:
If the requested documentation and the required settlement information have not been provided before the relevant Clearstream Banking deadline, capital gains on Icelandic equities transactions will be taxed at the maximum tax rate on the full sales proceeds (currently 20%).
Standard refund
Beneficial owners eligible to receive Icelandic capital gains on equity transactions at a reduced tax rate but for whom the documentation required to obtain relief at source was not submitted to us before the deadline for the taxable transaction can apply for a standard refund.
The procedure and documentation requirements are identical to those applicable to dividend distribution as described in our Announcement L12025, dated 26 July 2012. An adapted template of a Credit Advice is attached below.
Dividend distributions
There is no impact on dividend distributions and our current procedures will continue to apply.
Further information
For further information, customers may contact the Clearstream Banking Tax Help Desk on:
| Luxembourg | Frankfurt | |
| Email: | tax@clearstream.com | tax@clearstream.com |
| Telephone: | +352-243-32835 | +49-(0) 69-2 11-1 3821 |
| Fax: | +352-243-632835 | +49-(0) 69-2 11-61 3821 |
or Clearstream Banking Customer Service or their Relationship Officer.
------------------------------------------
1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).
2. Clearstream Banking will apply DTT rates under codes 731 (for legal entities) and 734 (for individuals) by default. It is the customer’s responsibility to advise us if another DTT rate is applicable. The current DTT list is available on the RSK website.
| As a registered customer, subscribe to our free email alerts service to receive immediate, daily and/or weekly notification of the latest customer publications on our website. Unsubscribe at any time; we respect your email privacy. |