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Iceland Adopts Legislation implementing 39% One-Off Stability Levy on Certain Financial Undertakings

On 3 July 2015, the Icelandic Ministry of Finance and Economic Affairs announced the adoption of a 39% one-off stability levy on certain financial undertakings to be paid in four installments in 2016.

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The Icelandic parliament Althingi today passed the Bill of the Minister of Finance and Economic Affairs on a stability levy, concerning which a political consensus was achieved in the Althingi. The new Act on a Stability Levy introduces a one-off levy, with the objective of creating the premises for removal of the capital controls introduced in Iceland in the wake of the financial system collapse of 2008.

The objective of the Act is to contribute to the removal of capital controls with economic stability and the interests of the general public the primary concern, by means of a levy which is intended to meet the negative impact in connection with the settlements and fulfillment of obligations by taxable entities following their winding-up proceedings. There was consensus on this matter in the Althingi and the Bill was adopted unanimously.

The newly adopted legislation will impose a levy of 39% on those financial undertakings which previously operated as commercial banks or savings banks and are currently in winding-up proceedings pursuant to the Act on Financial Undertakings or have completed them following a Ruling by a District Court that they are to be placed in liquidation.  If these estates have not concluded composition agreements before the end of this year which satisfy conditions set by the authorities for stability, this tax will be levied on them.

The levy will also be assessed on undertakings which previously operated as commercial banks or savings banks and have concluded their winding-up proceedings but have not been able to fulfill their obligations due to restrictions on foreign currency transactions and cross-border capital movements. The base of the levy is the total assets of the undertakings as of 31 December 2015. From the levy as assessed specified investments by taxable entities in foreign currency may be deducted.

This will be a one-off levy assessed on 15 April 2016 and payable on four due dates spread over that year: 1 May, 1 June, 1 July and 1 August 2016.

The Bill on a Stability Levy was submitted to the Althingi on 8 June this year, following the announcement by the Prime Minister and Minister of Finance and Economic Affairs of a comprehensive action plan for removal of capital controls.  This Bill was drafted in the Ministry of Finance and Economic Affairs in collaboration with the Prime Minister's Office, the Central Bank of Iceland and the Directorate of Internal Revenue.

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