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HMRC internal manual

Double Taxation Relief Manual

Iceland: Treaty Summary

The table summarises the provisions of the treaty in force. Where a percentage rate is shown, this rate is the ‘treaty rate’ and does not reflect taxes chargeable under the domestic law of either state before relief is given under the provisions of the treaty. The ‘treaty rate’ is the maximum rate at which the UK and Iceland are permitted to tax income in the relevant categories under the treaty. Rates chargeable under the domestic law of either state may be higher or lower.

In all cases other conditions for relief (e.g. beneficial ownership) will have to be met before relief is due under the treaty. The text of the treaty itself should be consulted for the full details.

Portfolio dividends 15% (note 1) Article 10
     
Dividends on direct investments 5% Article 10
Conditions for lower rate on dividends on direct investments The beneficial owner must be a company (other than a partnership) which holds directly at least 10 per cent of the capital of the payer Article 10
Property income dividends 15% Article 10
Interest 0% Article 11
Royalties 0/5% (note 2) Article 12
Government pensions Taxable only in Iceland unless the individual is a resident of, and a national of, the UK Article 18
Other pensions Taxable in Iceland (note 3) Article 17
Arbitration Yes Article 23

Note 1: Dividends beneficially owned by a pension scheme are taxable only in the state in which the pension scheme is resident.

Note 2: the 5% withholding tax applies to the following royalties

  • any information concerning industrial, commercial or scientific experience provided in connection with a rental or franchise agreement;
  • a trademark associated with an agreement referred to in sub-paragraph a); or
  • the copyright of a motion picture film or work on film or videotape or other means of reproduction for use in connection with television.

Note 3: UK pensioners in receipt of a pension immediately before the entry into force of this Agreement may make an irrevocable election for the provisions of Article 18 of the previous agreement (SI 1981 No.2879) to continue to apply. Article 18 of the previous agreement provided that Icelandic source pensions (other than government pensions) paid to residents of the UK were taxable only in the UK.