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Iceland – Taxation

Candidate countries conduct negotiations with the European Union (EU) in order to prepare themselves for accession. The accession negotiations cover the adoption and implementation of European legislation (acquis) and, more specifically, the priorities identified jointly by the Commission and the candidate countries in the analytical assessment (or ‘screening’) of the EU’s political and legislative acquis. Each year, the Commission reviews the progress made by candidates and evaluates the efforts required before their accession. This monitoring is the subject of annual reports presented to the Council and the European Parliament.


Commission Report [COM(2011) 666 final – SEC(2011) 1202 final – Not published in the Official Journal].


The 2011 Report highlights the additional progress regarding taxation which needs to be made by Iceland before its accession to the European Union (EU).

EUROPEAN UNION ACQUIS (according to the Commission's words)

The acquis on taxation essentially covers the area of indirect taxation, which comprises VAT (value-added tax) and excise duties. It lays down scope, definitions and principles for VAT. Excise duties on energy products, tobacco products and alcoholic beverages are regulated by EU legislation. With regard to direct taxation, the acquis covers some aspects of the taxation of individuals’ savings and corporate taxes. Furthermore, Member States are required to comply with the principles of the code of conduct relating to corporate taxes, which seeks to abolish harmful tax measures. Administrative cooperation and mutual assistance between Member States aims at ensuring the smooth running of the internal market in the field of taxation and provides instruments for preventing intra-Community fraud and tax evasion. Member States must ensure that they have the necessary implementation capacities, specifically connectivity with the EU’s IT taxation systems.

EVALUATION (according to the Commission’s words)

The Commission notes the progress made by the country, even though Iceland’s taxation legislation remains only partially aligned with the EU acquis. The country continues to benefit from good administrative capacity in the field of taxation. However, a strategy should be defined to improve the interconnectivity and interoperability of the IT systems used in the field of taxation with the European IT systems.

Overall, the system of financial control is largely aligned to international standards and EU good practice. Limited legislative progress in this field is also noted.

Finally, targeted actions are required to complete the preparations, particularly the preparation of a public internal financial control policy paper, and to ensure the separation between internal and external audit. Preparations for the protection of the EU's financial interests must also be started.

Last updated: 12.10.2011

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