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State Aid

State aid investigation opened into VAT amendments for customers of data centres in Iceland



Today, the EFTA Surveillance Authority decided to open a formal state aid investigation into amendments to value added tax (VAT) legislation in Iceland applicable to customers of Icelandic data centres.

The amendments were notified by the Icelandic authorities on 2 September 2011. By the time the amendments were notified to the Authority they had already entered into force. The following changes were made to the Icelandic VAT Act:

  • Non-imposition of VAT on transactions involving services supplied electronically to non-residents;
  • Non-imposition of VAT on transactions involving supply of mixed services by data centres to non-residents;
  • VAT exemption for the import of servers and similar equipment by non-residents for use in data centres.

According to the Icelandic authorities, the objective of the amendments is twofold. Firstly, to enhance the competitiveness of the Icelandic data centres and make sure that the business environment of data centres in Iceland, in terms of VAT treatment, is comparable with their competitors operating in EU Member States. Secondly, the goal is to promote new use of Iceland's energy resources for the needs of the data centre industry.

With regard to the first measure, the Authority has concluded that it does not constitute state aid since it is in line with the export principle in the Icelandic VAT legislation, according to which VAT is not levied on goods and services provided abroad.

However, the Authority has preliminarily concluded that the two other measures may constitute state aid. Moreover, the Authority has doubts as to whether such aid may be considered justified under the EEA Agreement.

Should the Authority conclude that the VAT amendments are to be regarded as unlawful state aid, it would be obliged to require the national authorities to recover the aid from the recipients.

A public version of today's decision will be published on the Authority's website, normally within a month.


For further information, please contact:

Mr. Trygve Mellvang-Berg
Press & Information Officer
tel. (+32)(0)2 286 18 66
mob. (+32)(0)492 900 187

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