The Directorate of Tax Investigations in Iceland

 

The Directorate of Tax Investigations in Iceland investigates cases where there is suspicion of tax fraud and other violations of tax law. 

The objective of an investigation is twofold:

  • That the conclusions of the investigation be a basis for tax assessment
  • That the conclusions of the investigation be a basis for criminal proceedings

More specifically, the Directorate of Tax Investigations investigates violations of tax law and laws regarding other duties levied by the Directorate of Internal Revenue or with the enforcement of which the Directorate of Internal Revenue is entrusted. In addition, the Directorate of Tax Investigations investigates violations of the Accounting Act and the Financial Statements Act. Taxes or duties levied by other authorities than the Directorate of Internal Revenue thus fall outside the scope of activity of the Directorate of Tax Investigations. 

Upon the conclusion of the investigation of a case, the Directorate of Tax Investigations decides whether criminal proceedings shall be initiated. Should the Directorate of Tax Investigations determine that there are grounds for criminal proceedings, the Directorate can initiate such proceedings in three ways:

1.  By offering the taxpayer to undergo a fine and conclude the criminal proceedings by agreeing to a fine levied by the Directorate of Tax Investigations.

2.  By presenting a claim for payment of a fine before the State Internal Revenue Board.

3.  By referring the case to the Police.

The severity of the alleged violations primarily determines what route is taken in any given case.

The procedure in the handling of cases by the Directorate of Tax Investigations is governed by the legal provisions applicable to the Directorate, i.e. Article 103 of Act no. 90/2003, on Income Tax, Article 39 of Act no. 50/1988, on Value Added Tax, Article 26 of Act no. 45/1987, on the Withholding of Public Levies at Source, and Article 16 of Act no. 94/1996, on Withholding of Tax on Financial Income.

Regulation no. 373/2001, on the Execution of Tax Control and Tax Investigations, contains detailed provisions regarding the handling of investigations, including document and information gathering. The same regulation also stipulates the handling of criminal proceedings and on what grounds decision thereon is based.


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