Iceland: Public consultation on draft legislation implementing Pillar Two global minimum tax rules
Comments are due by August 5, 2025.
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June 13, 2025
The Ministry of Finance and Economic Affairs on June 5, 2025, initiated a public consultation on draft legislation implementing the Pillar Two global minimum tax rules.
Key features include:
- General: Although Iceland is not an EU member state, the draft legislation is generally aligned with the EU Minimum Tax Directive and would introduce a domestic minimum top-up tax (DMTT) and income inclusion rule (IIR) for fiscal years beginning on or after December 31, 2025. No decision has been made on the introduction of the undertaxed profits rule (UTPR).
- OECD guidance: While the bill includes the IIR and qualified DMTT (QDMTT) aspects of the Pillar Two rules, it currently does not include most of the OECD Administrative Guidance. However, the bill provides for a QDMTT safe harbor (i.e., IIR and UTPR top-up tax are deemed to be zero in Iceland in relation to other jurisdictions that apply a QDMTT, subject to conditions). In addition, the bill includes a placeholder safe harbour provision, with more details expected to be issued at a later stage.
- DMTT: The DMTT would generally follow the regular global anti-base erosion (GloBE) rules for calculating the effective tax rate and top-up tax liability. However, cross-border taxes, such as controlled foreign corporation (CFC) taxes, as well as withholding taxes related to intragroup dividends, that would be allocated to domestic constituent entities under the regular GloBE rules, need to be excluded for DMTT purposes.
- Filing requirements: The GloBE information return (GIR) would need to be filed within 15 months after the end of the reporting fiscal year (with an exception for the first year when the deadline is 18 months after the end of the first reporting fiscal year). If a GIR is filed by a foreign constituent entity, a notification must be filed within the same deadline.
Comments are due August 5, 2025.
Read a June 2025 report prepared by the KPMG’s EU Tax Centre