Developments in the Member States

Part II

dividends paid to resident and non-resident companies is the same at 10 %; the withholding 10 % tax on dividends
paid to EEA member state countries is reimbursable. In the beginning of 2012 withholding tax on interest paid to
non-resident legal entities was reduced from 20 % to 10 %. I
c
VAT and excise duties e
In 2011, the standard VAT rate is 25.5 %, while the reduced VAT rate is 7 %. Also in 2011, the parliament l
approved an amendment to the VAT Act. Accordingly, the VAT rate on the supply of electronic books and music a
(without images), including the sale of printed notes, would be subject to a reduced VAT rate of 7 % (previously
subject to the general VAT rate of 25.5 %). The amendment became effective on 1 November 2011. In addition,
n
the VAT Act is amended so that the financial institutions belonging to the scope of the Financial Activities Tax d
will no longer be obliged to calculate VAT on goods and services that they produce exclusively for their own use
in competition with taxable parties.

In 2012 excise duties on alcohol and tobacco are increased.

Wealth and transaction taxes

Net wealth tax was abolished in 2006 but reintroduced temporarily in 2010-2012. The rate is 1.25 % and the tax
exempt amount is ISK 90 million (€ 543 000) for individuals and ISK 120 million (€ 724 000) for couples. In 2012
a new tax rate of 2 % is introduced for net wealth over ISK 150 million (€ 924 425) for individuals and ISK 200
million (€ 1 232 391) for jointly taxed couples; net wealth between ISK 75 million (€ 462 212) and ISK 150
million (€ 924 425) for individuals and between ISK 100 million (€ 616 380) and ISK 200 million (€ 1 232 391)
for jointly taxed couples is taxed at the rate of 1.5 %. Property tax is levied annually by municipalities on the basis
of assessed value as registered in a government agency's database, and subject to a maximum of 0.5 % on
residential housing or 1.32 % on hospitals, schools, industrial and commercial buildings. The sale of a home,
owned for at least 2 years by the taxpayer, is exempt of taxes. No special tax is levied on the transfer of property,
shares, bonds and other securities. Inheritance tax is imposed at a rate of 5 %. Stamp duties are levied on legal
documents, varying between 0.25 % and 2 %.

Local taxes
The flat municipal income tax rate ranges from 11.24 % to 13.28 % and the average rate in 2010 is 13.12 %.

Social contributions
Social security contributions are levied on gross wages and paid by employers. In 2010 the rate was raised to
8.65 %. In the beginning of 2012, social security contribution imposed on all remunerations paid for dependent
personal services decreased by 0.86 %.

Taxation trends in the European Union 175