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PR(99)01: The EFTA Surveillance Authority has opened infringement proceedings against Iceland concerning restrictions on capital movements


The EFTA Surveillance Authority has on 15 February 1999 sent a letter of formal notice to Iceland for failure to comply with EEA rules concerning the free movement of capital; Article 40 of the EEA Agreement and the Capital Movements Directive (88/361/EEC)

Icelandic Law on income tax and net worth tax authorises taxable persons to deduct from their taxable income a certain amount, which has been allocated to increased investment in domestic shares.  

In the Authority's view the legislation restricts the free movement of capital by applying discriminatory tax treatment to investment in companies shares based on company's place of registration, and thereby also based on the place where capital is invested. The legislation therefor discourages investment in companies from other EEA States and puts that kind of an investment at disadvantage in comparison with corresponding domestic investment, which are eligible for deduction.

The Icelandic Government has been invited to submit its observations to the content of the letter of formal notice within two months upon their receipt.  In light of these observations the Authority will consider whether to proceed with the case.

For further information please contact Mr. Jónas Fr. Jónsson (Persons, Services and Capital Movements Directorate), telephone (32)-2-286-1865.

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