Browse by year:

State Aid

State Aid: Amendments to the Icelandic VAT Act found to involve unlawful state aid



After an in-depth investigation, the EFTA Surveillance Authority has concluded that certain amendments to the value added tax (VAT) legislation in Iceland, applicable to customers of Icelandic data centres, involved unlawful state aid.

The Authority notes, however, that shortly after it opened its investigation, the Icelandic authorities decided to change the VAT Act in order to repeal the problematic provisions.

Today, the Authority has ordered the Icelandic State to recover any aid that was granted on the basis of the said amendments before they were repealed, i.e. in the period from 1 May 2011 to 13 March 2013.

«Today's decision demonstrates the importance of respecting the stand-still obligation and that the EFTA States notify potential state aid measures to the Authority before they are implemented. The Authority will always ask the granting state for recovery of any incompatible aid that has not been notified and has been paid out in breach of the stand-still obligation,» Oda Helen Sletnes, president of the EFTA Surveillance Authority, said.

In January 2013, the Authority opened a formal state aid investigation into VAT amendments that had been notified by the Icelandic authorities. 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:

  • Transactions involving services supplied electronically to non-residents were exempted from the imposition of VAT;
  • Transactions involving supply of mixed services by data centres to non-residents were exempted from the imposition of VAT;
  • The import of servers and similar equipment by non-residents for use in data centres was exempted from VAT.

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

With regard to the first measure, the Authority 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, decided to investigate whether the two other measures constituted state aid and, if so, whether they could be considered justified under the EEA Agreement.

The Authority has now concluded that the provisions of the Icelandic VAT legislation addressed in the formal investigation entail incompatible state aid. Any aid granted under these provisions, including compound interest from the date when the aid was granted, must be recovered within four months.

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. Andreas Kjeldsberg Pihl
Press & Information Officer
tel. (+32)(0)2 286 18 66
mob. (+32)(0)492 900 187

Other EEA Institutions

This website is built with Eplica CMS