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HMRC internal manual

Double Taxation Relief Manual

Iceland: Royalties

Article 12(1) provides that royalties arising in Iceland to a United Kingdom resident who is the beneficial owner of the income is taxable only in the United Kingdom. However, Iceland may tax the royalties if effectively connected (see INTM153110, fifth sub-paragraph) with a permanent establishment or fixed base which the United Kingdom resident recipient has in Iceland.

Paragraphs (6)-(8) of Article 12 provide that Iceland may, under the agreement, tax royalties paid to an unquoted United Kingdom resident company where the company is controlled by a person, or by two or more associated or connected persons acting together, who or any of whom would not themselves be able to claim exemption from Icelandic tax on the royalties under Article 12(1).