| Status | Draft Bill |
| Law | Draft Minimum Tax Bill of June 5, 2025 |
| Effective Date | Accounting periods beginning after December 31, 2025 |
| IIR | Yes (2026) |
| UTPR | No |
| QDMTT | Yes (2026) |
| Filing Deadlines | Standard |
| Safe Harbours | Simplified Calculations Safe Harbour, QDMTT Safe Harbour |
On June 5, 2025, Iceland opened a consultation on a draft bill to implement an IIR and QDMTT under the OECD Pillar 2 GloBE rules.
GLOBE APPLICATION
General
The Draft Bill is based on the EU Minimum Tax Directive and the Explanatory Notes to the Bill states that the translation of the EU directive from English into Icelandic was prepared by the Translation Centre of the Ministry of Foreign Affairs and reviewed by the Ministry of Finance and Economic Affairs, without any changes to the content in order to avoid the risk of misinterpretation from the original text.
As such, whilst the Draft Bill implements the IIR and QDMTT aspects of the OECD Model Rules, it does not currently include aspects of the OECD Administrative Guidance (aside from currency conversion, and some elements of the QDMTT and Safe Harbours).
Administrative Guidance
The only aspect of the OECD Administrative Guidance included in the Draft Bill (aside from QDMTT an Safe Harbour aspects) is the provision in Section 42 of the Bill for Rebasing monetary thresholds in the GloBE Rules, which reflects Article 1 of the February 2023 OECD Administrative Guidance.
No other aspects of the February 2023, July 2023, December 2023, June 2024 or January 2025 OECD Administrative Guidance are currently included in the Draft Bill.
Safe Harbour and Penalty Relief Guidance
Section 28 of the Draft Bill provides for a Safe Harbour if one of the following conditions is met for the relevant jurisdiction on the basis of simple calculations in accordance with rules to be issued:
-The MNE Group’s Profit or Loss before Income Tax in a jurisdiction is equal to or less than the Substance-based Income Exclusion amount as calculated under the GloBE Rules, for constituent entities resident in that jurisdiction;
-The MNE Group reports Total Revenue of less than EUR 10 million and a Profit (Loss) before Income Tax of less than EUR 1 million in a jurisdiction
-The effective tax rate in the jurisdiction, is equal to or higher than the minimum tax rate.
No further detail is provided on the nature of the simplified calculations, including on the use of CbCR data and the Transitional CbCR Safe Harbour.
However, as noted above rules are to be issused for further detail on this and the Explanatory Notes to the Draft Bill does refer to the Transitional CbCR Safe Harbour and notes that the simplification rules will be discussed in more detail in the discussion of Article 28 of the bill as part of the consultation process.
Section 28 of the Draft Bill applies the QDMTT Safe Harbour, and includes some of the Switch-Off rules contained in the OECD Guidance, including where:
-A QDMTT jurisdiction decides not to impose a QDMTT on Flow-through Entities created in its jurisdiction;
– A QDMTT jurisdiction decides not to impose a QDMTT on Investment Entities
– A QDMTT jurisdiction includes members of a JV Group (which includes Joint Ventures) within the scope of the QDMTT but imposes the liability on Constituent Entities of the main group instead of directly on the members of the JV Group.
ELECTIONS
Elections in the OECD Model Rules
All of the elections included in the OECD Model Rules are provided in the Law, including:
-Excluded Entity Election (Section 2 of the Draft Bill)
-Stock-Based Compensation Election (Section 12 of the Draft Bill)
-Election to use the Realization Method (Section 12 of the Draft Bill)
-Election to Spread Capital Gains (Section 12 of the Draft Bill)
-Consolidation Election (Section 12 of the Draft Bill)
-Unclaimed Accrual Election (Section 18 of the Draft Bill)
-GloBE Loss Election (Section 19 of the Draft Bill)
-Prior Year Adjustment Election (Section 21 of the Draft Bill)
-De-minimis Election (Section 26 of the Draft Bill)
-Substance-Based Income Exclusion Election (Section 24 of the Draft Bill)
-Taxable distribution Election (Section 39 of the Draft Bill)
-Tax Transparency Election (Section 38 of the Draft Bill)
-Distribution Tax Regime Election (Section 36 of the Draft Bill)
Elections in the Administrative Guidance
None of the elections in the OECD Administrative Guidance are included in the Draft Bill, this includes the:
-Excess Negative Tax Carry-Forward Election
-Debt Release Election
-Foreign Exchange Hedge Election
-Equity Investment Inclusion Election
-Portfolio Shareholding Election
New Elections
There are no new elections in the Draft bill.
DEVIATIONS FROM THE OECD MODEL RULES/EU GLOBAL MINIMUM TAX DIRECTIVE
Whilst the OECD Model Rules apply to multinational groups, the EU Minimum Tax Directive also applies the global minimum tax to domestic groups.
As Iceland is a member of the EEA and not the EU it is not bound by the EU Directive, however, it intends to take a similar approach and apply the global minimum tax to purely domestic groups (eg where a UPE is resident in Iceland, the IIR will apply to both Icelandic and foreign group entities).
Section 45 of the Draft Bill includes the Initial Phase of International Activity exemption, but does not include the optional anti-inversion rule in Article 9.3.5 of the OECD Model Rules.
DOMESTIC MINIMUM TAX
General
Section 10 of the Draft Bill includes a domestic minimum tax intended to be a QDMTT. The intention is for the design of the domestic minimum tax to meet the requirements of a QDMTT so that the top-up tax paid is creditable against the top-up tax imposed under the GloBE rules.
QDMTT Design Features
Section 10 of the Draft Bill provides that the method of calculation is to take the general top-up tax calculation (or additional top-up tax from a prior year). However, this is then effectively recalculated taking account of some adjustments that are provided in the OECD Administrative Guidance
Push-Down Taxes
Tax paid or incurred by a Constituent Entity-owner under a CFC Tax Regime that is pushed down to a domestic Constituent Entity in the GloBE Rules must be excluded, as provided in the OECD Administrative Guidance. This is included in Section 10 of the Draft Bill.
This preserves Iceland’s primary right to tax income accruing to an Icelandic member entity which is also a CFC. If there were no statutory derogation from the general GloBE rules for the calculation of the domestic minimum tax, and the CFC tax paid by the controlling company abroad were included in the included taxes of the Icelandic CFC, the effective tax rate would be increased. Therefore, excluding the CFC tax from the Icelandic CFCs covered taxes allows Iceland to tax low-taxed income at a higher rate than would be the case under an IIR.
Section 10 also prevents the pushdown of tax to hybrids, PEs and for taxes on distributions (except for Icelandic withholding tax on dividends).
Accounting Standard
The QDMTT applies the general GloBE rules to determine the accounting standard used. As such, the domestic minimum tax is calculated using the financial accounting standard of the UPE, and, if that is not practicable, on the basis of an accepted accounting standard or an approved accounting standard, if:
-the constituent entity’s financial statements are prepared in accordance with that standard,
-the information contained in the financial statements is reliable; and
-permanent differences of more than EUR 1 million are conformed with the UPEs accounting standard.
Initial Phase of International Activity Exemption
The UTPR exclusion for MNEs in their initial phase of international activity does not need to be included in a QDMTT, however, it can be included. The Second Set of OECD Administrative Guidance provides jurisdictions with three options regarding the temporary UTPR exclusion in their QDMTT legislation.
Option one allows the jurisdiction not to adopt it.
Option two allows the jurisdiction to adopt it but limits it to cases where no Parent Entity is required to apply a Qualified Income Inclusion Rule with respect to Constituent Entities of an MNE Group located in the QDMTT jurisdiction.
Option three allows the jurisdiction to adopt it without any limitations.
The Draft Bill suggests Iceland will apply option one.
Elections
As required in the OECD Administrative Guidance, Section 10 of the Draft Bill also requires that any GloBE election made (or revoked) is taken into account for QDMTT purposes.
Registration
Not included.
Filing
The relevant aspects of the submission of a GloBE Information Return (GIR) are included, as provided in the EU Directive.
The proposed approach is that every Constituent Entity located in Iceland will have an obligation to file a GIR in Iceland. However, this obligation can be discharged if the GIR is filed by:
-The Ultimate Parent Entity, or
-The Designated Filing Entity.
Where the GIR is being filed by either the Ultimate Parent Entity or the Designated Filing Entity, the Constituent Entity, must file a notification with the Revenue.
The notification must contain:
-Details of the entity that is filing the GIR, and
-The jurisdiction in which such an entity is located.
Where the GIR is filed by the Designated Local Entity it needs to outline the Constituent Entities that it is filing on behalf of.
Both the GIR and associated notifications must be filed no later than 15 months after the end of the fiscal year (with an 18-month deadline for the Transition Year).
Payment
Detailed payment provisions are not included in the Draft Bill.
Penalties
Section 43 of the Draft Bill includes penalty provisions. In particular, failure to file the GloBE Information Return will be subject to a penalty of up to 100,000 euros. This is reduced by 90% if it is filed within 30 days, 60% within 2 months and 40% if filed within 3 months.
None issued.
| Iceland | |||
|---|---|---|---|
| Effective Date: | Accounting periods beginning after December 31, 2025 | ||
| Section/Article | |||
| First Set of OECD Administrative Guidance | |||
| 1.1 | Rebasing monetary thresholds in the GloBE Rules | 42 – draft bill | |
| 1.2 | Deemed consolidation test | ||
| 1.3 | Consolidated deferred tax amounts | ||
| 1.4 | Sovereign wealth funds and the definition of Ultimate Parent Entity | ||
| 1.5 | Clarifying the definition of ‘Excluded Entity’ | ||
| 1.6 | Meaning of ancillary for Non-Profit Organisations | ||
| 2.1 | Intra-group transactions accounted at cost | ||
| 2.2 | Excluded Equity Gains or Loss and hedges of investments in foreign operations | ||
| 2.3 | Excluded Dividends- Asymmetric treatment of dividends and distributions | ||
| 2.4 | Debt release Election | ||
| 2.5 | Accrued Pension Expenses | ||
| 2.6 | Covered Taxes on deemed distributions | ||
| 2.7 | Excess Negative Tax Carry-forward guidance | ||
| 2.8 | Substitute Loss carry forwards | ||
| 2.9 | Equity Gain or loss inclusion election | ||
| 2.9 | Qualified Ownership Interest/Flow through entity | ||
| 2.1 | Allocation of taxes arising under a Blended CFC Tax Regimes | ||
| 3.1 | Application of Taxable Distribution Method Election to Insurance Investment Entities | ||
| 3.2 | Exclusion of Insurance Investment Entities from the definition of Intermediate Parent Entity and Partially-Owned Parent Entity | ||
| 3.3 | Restricted Tier 1 Capital | ||
| 3.4 | Liabilities related to Excluded Dividends and Excluded Equity Gain or Loss from securities held on behalf of policyholders | ||
| 3.5 | Simplification for Short-term Portfolio Shareholdings | ||
| 3.6 | Application of Tax transparency election to Mutual insurance companies | ||
| 4.1 | Deferred tax assets with respect to tax credits under Article 9.1.1 | ||
| 4.2 | Applicability of Article 9.1.3 to transactions similar to asset transfers | ||
| 4.3 | Asset carrying value and deferred taxes under 9.1.3 | ||
| Second Set of OECD Administrative Guidance | |||
| 1 | Currency conversion rules | ||
| 2 | MTTCs | ||
| 3 | SBIE Rules | ||
| – Foreign rules | |||
| Stock-based compensation election | |||
| Leases | |||
| – Impairment losses inc in tangible asset value | |||
| 4.1 | QDMTT Safe Harbour | 28 – draft bill | |
| 4.2 | UTPR Safe Harbour | ||
| Third Set of OECD Administrative Guidance | |||
| 1 | Transitional CbCR – Purchase Accounting Adjustments (consistent reporting condition, goodwill impairment adjustment) | ||
| 2.2.1 | Transitional CbCR – JVs | ||
| 2.3.1 | Transitional CbCR – Same Financial Statements/Local Financial Statements for Statutory Reporting | ||
| 2.3.2 | Transitional CbCR – Using different accounting standards | ||
| 2.3.3 | Transitional CbCR – Adjustments to Qualified Financial Statements/Dividend Mismatches | ||
| 2.3.4 | Transitional CbCR – MNEs not required to file CbC Reports | ||
| 2.3.5 | Transitional CbCR – Qualified Financial Statements for PEs | ||
| 2.4.2 | Transitional CbCR – Treatment of Taxes on income of PEs, CFCs, and Hybrid Entities | ||
| 2.6 | Transitional CbCR – Treatment of hybrid arbitrage arrangements | ||
| 3.1 | Identifying Consolidated Revenue | ||
| 3.2 | Mismatch between Fiscal Years of the UPE and another Constituent Entity | ||
| 3.3 | Mismatch between Fiscal Year and Tax Year of Constituent Entity | ||
| 4.2.1 | Blended CFCs -multiple GloBE Jurisdictional ETRs | ||
| 4.2.2 | Blended CFCs – not required to calculate an ETR | ||
| 4.2.3 | Blended CFCs – income of non-GloBE Entities | ||
| 5.3 | 30 June 2026 Filing deadline | ||
| 6 | NMCE Simplified Calcs | ||
| Fourth Set of OECD Administrative Guidance | |||
| 1.2.1 | Aggregate DTL Category basis | ||
| 1.2.1 | Exclusion of certain types of GL accounts and separate tracking | ||
| 1.2.1 | Exclusion of GL accounts that generate standalone DTAs | ||
| 1.2.1 | Exclusion of swinging accounts and separate tracking | ||
| 1.2.2 | FIFO/LIFO Basis | ||
| 1.2.3 | Aggregation of Short-term DTLs | ||
| 1.2.2 | Reversal of DTLs that accrued before the Transition Year | ||
| 1.2.2 | 5 year unclaimed accrual election | ||
| 2.1.2 | Recalculated deferred tax where GloBE carrying value differs from accounting carrying value | ||
| 2.1.2 | GloBE and accounting carrying values and the Transition Rules | ||
| 2.1.2 | Additional provisions for Intragroup transactions accounted for at cost | ||
| 2.1.2 | Exclusion of GloBE carrying value from SBIE | ||
| 3.1.3 | General rules for allocating cross-border, current taxes under a cross-crediting corporate tax system: 4 Steps | ||
| 3.1.3 | Specific rules for foreign PEs/CFCs, Hybrids/rev hybrids with domestic source income | ||
| 3.1.3 | Cross-crediting between Permanent Establishments and distributions from foreign subsidiaries | ||
| 4.1 | Extension of the Substitute Loss Carry-forward DTA to PEs, hybrids and rev hybrids | ||
| 4.2 | Allocation of deferred tax expenses and benefits from a Parent Entity to a CFC, PE Hybrid or Rev Hybrid: 5 step process | ||
| 4.2.2 | Five-Year Election to exclude the allocation of all deferred tax expenses and benefits to CFCs, PEs, Hybrids and Rev Hybrids | ||
| 4.2.3 | Exclusion of deferred tax assets or liabilities arising under a Blended CFC regime from transition rules | ||
| 5.2.2 | Determining GloBE status when a Flow-through Entity is held directly by another Flow-through Entity | ||
| 5.3.2 | Non-group owners: Partially owned Flow-through Entities | ||
| 5.3.5 | Non-group owners: Indirect minority ownership | ||
| 5.4.2 | Taxes allocated to a flow-through entity | ||
| 5.5.2 | Hybrid entities – Taxes pushed down include indirect owners | ||
| 5.5.4 | Hybrid entities – Entities located in jurisdictions without a Corporate Income Tax system | ||
| 5.6.2 | Extension of taxes pushed down to include Reverse Hybrids | ||
| 6.1.4 | Option to exclude a Securitization Entity from scope of QDMTT | ||
| 6.1.4 | Option to not impose top-up tax liabilities on SPVs used in securitization transactions | ||
| 6.1.4 | Amendments to the Switch-Off rule | ||
| 6.1.4 | New definition: Securitization Entity | ||
| 6.1.4 | New definition: Securitization Arrangement | ||
| January 2025 OECD Administrtive Guidance | |||
| 1 | Articles 8.1.4 and 8.1.5 | ||
| 1 | Amendments to CbCR Safe Harbour for 9.1 | ||
| 1 | Amendments to QDMTT Safe Harbour for 9.1 | ||
| 1 | Article 9.1 of the GloBE Rules | ||
| 1 | Central Record of Legislation with Transitional Qualified Status |
| Note | Iceland | |
|---|---|---|
| QDMTT?(Enacted/Draft) | Is there a QDMTT in the Legislation? | Draft Bill |
| Effective Date: | Accounting periods beginning after December 31, 2025 | |
| Administrative Guidance/Safe Harbour Guidance? | Are the provisions of the OECD Administrative Guidance and Safe Harbour Guidance reflected in the current legislation? | Generally No |
| Separate/Transposed QDMTT | Is the QDMTT a Separate QDMTT or a Transposition of the GloBE Rules (with Amendments) | Transposed |
| Domestic Groups | A QDMTT can also apply to purely domestic groups. | Yes – section 10 |
| Scope Definitions | The definitions of Ultimate Parent Entity, MNE Group, and Constituent Entity correspond with the definitions in the GloBE Rules. | Yes – section 10 |
| Income and covered taxes of Constituent Entities | The QDMTT must compute the tax liability for the jurisdiction by taking into account the income and covered taxes of Constituent Entities under the GloBE Rules. | Yes – section 10 |
| Separate ETRs | A QDMTT must determine a separate ETR and Top-up Tax amount for MOCEs, Joint Ventures and JV Subsidiaries. | Yes – section 10 |
| Charging | A QDMTT must impose a Top-up Tax on one or more domestic Constituent Entities on the Excess Profits of all domestic Constituent Entities, including the domestic Parent Entity. | Yes – section 10 |
| Enforceability | The legal liability for the domestic top-up tax needs to be enforceable against at least one Constituent Entity in the jurisdiction. | Yes – section 10 |
| Different Accounting Standard? – Optional | Is the use of a local accounting standard optional? | No |
| Different Accounting Standard? – Mandatory | Is the AG2 guidance followed? | No |
| Different Accounting Standard? – Default GloBE rules | Do the general GloBE rules apply for the QDMTT accounting standard? | Yes – section 10 |
| Require 100% ownership? | The QDMTT )can require 100% ownership | No |
| Differences to GloBE Rules: tighter restriction is consistent with local tax rules | The QDMTT can be more restrictive than the GloBE Rules where the tighter restriction is consistent with local tax rules. | No |
| Differences to GloBE Rules: Not relevant to in the context of its domestic tax system | The QDMTT can exclude adjustments that are not relevant to in the context of its domestic tax system. | No |
| Income/Loss of a PE | The QDMTT must exclude the income or loss of a foreign Permanent Establishment from the income or loss of the Main Entity. | Yes – section 10 |
| Tax Transparency | A QDMTT must include certain tax transparent provisions. | Yes – section 10 |
| Adjusted Covered Taxes Consistency | The range of taxes included in Covered Taxes needs to be the same or narrower, as under the GloBE rules. | Yes – section 10 |
| GloBE Loss Election? | Not Required in QDMTT | Yes – section 10 |
| No Pushdown to CFC or PE | A QDMTT must exclude: (1) tax paid or incurred by a Constituent Entity-owner under a CFC Tax Regime that is pushed down to a domestic Constituent Entity in the GloBE Rules and (2) tax paid or incurred by a Main Entity that is allocated to a PE in the jurisdiction. | Yes – section 10 |
| Exclude tax allocated to Hybrids | Second AG Guidance | Yes – section 10 |
| Exclude allocated net basis tax on dividends (except WHT) | Second AG Guidance | Yes – section 10 |
| UPE that is a Flow-Through Entity | Second AG Guidance | Yes – section 10 |
| UPE subject to Deductible Dividend Regime | Second AG Guidance | Yes – section 10 |
| Eligible Distribution Tax Systems | Second AG Guidance | Yes – section 10 |
| ETR Computation for Investment Entities | Second AG Guidance | Yes – section 10 |
| Investment Entity Tax Transparency Election | Second AG Guidance | Yes – section 10 |
| Taxable Distribution Method Election | Second AG Guidance | Yes – section 10 |
| Multi-Parented MNE Groups | Second AG Guidance | Yes – section 10 |
| Additional Top-Up Tax/Excess Negative Tax Expense | A QDMTT needs to have provisions for additional top-up tax where there is no Net GloBE Income and the Adjusted Covered are less than zero and less than the Expected Adjusted Covered Taxes. Amount. Excess Negative Tax Carry-forward rules also need to be in place. | Yes – section 10 |
| Modified Top-Up Tax Formula | The QDMTT top-up tax formula needs to be modified as the GloBE Rules subtract tax paid under a QDMTT from the current GloBE Top-up Tax. | Yes – section 10 |
| Same Approach As GloBE Rules | A QDMTT must require that top-up tax is taken into account by the relevant Constituent Entity at the same time and in the same manner as under the GloBE Rules (eg it can’t be carried forward). | Yes – section 10 |
| SBIE Included? | Not Required in QDMTT | Yes – section 10 |
| SBIE Rates same as GloBE? | Not Required in QDMTT | Yes – section 10 |
| De Minimis Rule Included? | Not Required in QDMTT | Yes – section 10 |
| Restructuring Rules? | A QDMTT needs to include restructuring rules as provided in the GloBE rules to the extent necessary to conform to the tax reorganization rules in the jurisdiction. | Yes – section 10 |
| Safe Harbours? | A QDMTT needs to contain GloBE safe harbours. | Yes – section 10 (but currently limited) |
| Deferred Tax Transition Rule? | A QDMTT must include the deferred tax starting point under Article 9.1.1 of the Model Rules. | Yes – section 10 |
| SBIE Transitional Rates? | Not Required in QDMTT | Yes – section 10 |
| Initial Phase of International Activity Exemption | Not Required in QDMTT | No |
| Elections? | Where the GloBE Rules permit an election, a QDMTT must generally also provide for the election and require the MNE Group to make the same election under the QDMTT as is made under the GloBE Rules. | Yes – section 10 |
| Deferred Tax transition: First time or refreshing rule? | Second AG | No |
| New transition year – amend tax attributes? | Second AG | No |
| Currency provisions? | Second AG | No |
| DTL Recapture rules – Aggregate DTL Categories | Fourth AG, 1.2.8 | No |
| DTL Recapture rules Unclaimed Accrual Five-Year Election | Fourth AG, 1.2.8 | No |
| Reverse Hybrid Pushdown | Fourth AG, 5.6.2 | No |
| Securitization Entities – A QDMTT may also exclude a Securitisation Entity from its scope | Fourth AG, 6.1.4 | No |
| Securitization Entities – A jurisdiction may allocate the QDMTT liability for any QDMTT top-up tax to another Constituent Entity (if any) that is located in the jurisdiction | Fourth AG, 6.1.4 | No |
| Note |
NA
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