September 28, 2006
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Treasury Announces Negotiation of Bilateral Income Tax treaty with Iceland

The Treasury Department today announced the conclusion of the negotiation of a proposed new bilateral income tax treaty with the Government of Iceland to replace the existing tax treaty from 1975 between the two countries.

The proposed treaty modernizes the tax treaty relationship between the United States and Iceland by taking into account many changes in the law and policies of both countries since the current treaty was signed. For example, to conform to Iceland's current tax treaty policy, the proposed treaty provides for a positive rate of withholding on certain cross-border royalty payments. To conform to the current tax treaty policy of the United States, the proposed treaty contains a comprehensive limitation on benefits provision that aims to ensure that only residents that satisfy the conditions of that paragraph shall enjoy the benefits of the treaty.

The Treasury Department and the Government of Iceland hope that the proposed new tax treaty will be signed and brought into force as soon as possible

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