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PR(01)29: The EFTA Surveillance Authority decides to open formal investigation procedures on taxation of international trading companies in Iceland

16.9.2002

By decision of today, the EFTA Surveillance Authority has decided to open a formal investigation procedure regarding taxation of International Trading Companies (ITCs) in Iceland.

The Authority has become aware that Iceland has introduced a bill offering favourable tax treatment for ITCs. The favourable tax treatment applies only to undertakings, which fulfil the condition in the Icelandic Act on ITCs. According to the Act, ITCs have to be public limited or private limited companies and there are various limitations on which activities ITCs can be involved in. Commencement of the operation of an ITC requires the issuing of an operating license. The main difference in fiscal treatment of ITCs, compared to other undertakings with limited liability, is that the income tax is 5 per cent instead of the general tax rate of 30 per cent. The 5 per cent corporate income tax is a deferral of taxation until profits are distributed as dividends.

Based on the information submitted and the arguments presented by the Icelandic Government the Authority takes the view that the tax measure concerning ITCs may imply State aid. The decision to open proceedings is without prejudice to the final decision of the Authority.

The Icelandic Government has been invited to forward its comments to the opening decision and is also reminded of the fact that unlawful aid may be recovered from the recipients should the Authority find the tax measures contrary to the EEA Agreement.

The Authority will inform interested parties by publication of this decision in the EEA Section of the Official Journal of the European Communities and the EEA Supplement thereto. Interested parties will be invited to submit their comments within one month of the date of such publication.

For further information pleas contact Mr. Amund Utne, telephone 02 286 18 50, or Mr. Frode Kristiansen, telephone 02 286 18 53.

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