Income taxes for corporations

1. Rates

The income tax rate for corporations for 2009 is 15% on net income and 23,5% for partnerships with independent tax liability.

2. Local Income Taxes

None.

3. Capital Gains Taxes

Capital gains are added to other taxable income and taxed at the regular corporate rate.

4. Branch Profit Taxes

Branches of foreign corporations are taxed at the regular corporate rate of 15% on Icelandic sourced income.

5. Foreign Tax Relief

Double taxation relief is given for taxes paid by a resident of Iceland in those countries with which Iceland has double taxation treaties (see item 15). If a treaty does not exist a relief is given on the basis of domestic credit rules. No credit is granted for underlying corporate taxes paid in another country.

6. Classification of Corporations

There is no difference in tax rates based on classification of corporations, except for the difference in rates between corporations and partnerships described in item 1.

There are however two types of partnerships, one with independent tax liability, which pays the 23,5% income tax mentioned above, and the other, while not subject to tax liability, where income and assets are split between the partners and taxes are levied on them.

7. Payment of Taxes

All taxes are paid in the assessment year, which is the year after the operational year. The taxes are remitted in ten payments, due on the first day of each month, but no payments are made in January and in the month the assessment takes place.

Until the assessment takes place, which in recent years has been in October, a corporation must pay a proportion of the taxes levied in the previous year. In 2009, corporations must pay each month an amount equal to 8,5% of the tax levied for 2008 until assessment.