The US Treasury Department last month announced the signing of a new treaty relating to income tax. The treaty was singed by Deputy Secretary Robert Kimmitt and Icelandic Finance Minister Arni Mathiesen.
The signing ceremony was held in America and amends the former agreement between the two countries. The terms of the new treaty are more in line with America’s contemporary tax policies.
Although there were a number of changes, some elements of the bilateral agreement remain unchanged. Both the former and the current treaty withhold tax exemptions on interest payments and dividend payments made across borders, for example.
Icelandic taxes affected by the treaty are state and municipal taxes. In the United States the convention applies to federal income taxes and federal excise taxes.
Any new taxes which are imposed after the signing of the treaty but which are identical or relatively similar to those to which the convention applies will also be subject to the terms of the treaty. The governments of both Iceland and the US must notify each other of changes to their taxes which might affect the treaty.