Iceland: Transfer pricing assessment upheld based on incomplete taxpayer documentation (Court of Appeals decision)
Iceland’s first transfer pricing case
April 21, 2026
In Iceland’s first transfer pricing case, the Court of Appeals upheld a tax reassessment largely because the taxpayer’s documentation was incomplete.
The court held that under article 57(3) of the Income Tax Act, the taxpayer bears the burden of proving that related‑party transactions comply with the arm’s length principle. It concluded that the taxpayer had failed to substantiate its transfer pricing methodology with adequate documentation and evidence.
KPMG observation
Although the court’s findings regarding the inadequacy of the taxpayer’s documentation were not surprising, the tax authority explicitly rejected the taxpayer’s comparability study as unreliable yet proceeded to base its reassessment on that same analysis without determining whether it complied with OECD standards. It seems questionable to base an assessment on evidence the tax authority itself deemed unreliable.
For more information, contact a KPMG tax professional in Iceland:
Gréta Stefánsdóttir | gretastefansdottir@kpmg.is