Treaty detail
United States - IS tax treaty
A practical treaty page built around the official treaty text, key withholding categories, permanent-establishment rules, and article-level summaries.
Signed
2007-10-23
Effective
2008-12-15
Articles seeded
6
Withholding snapshot
Dividends
Individual rate: 15% · Corporate rate: 5%
The 5 percent corporate rate generally depends on direct ownership of at least 10 percent of the voting stock of the dividend payer, with holding-period and treaty-qualification rules applying. Article-level review is required.
Interest
Rate: 0%
IRS Treaty Table 1 reflects a general zero-percent result for qualifying interest, with beneficial ownership and article scope still controlling.
Royalties
Rate: 0%
The Iceland treaty generally eliminates source-country withholding on most royalty categories. Article text continues to control for borderline software and know-how payments.
Permanent establishment
Construction threshold: more than 12 months
Dependent-agent analysis remains important where a person habitually exercises authority to conclude contracts on behalf of the enterprise under the treaty wording.
Other treaty flags
Pension treatment generally follows a residence-state framework, with government-service pensions handled under distinct provisions.
Seeded article summaries
Article 4
Residence
Defines treaty residence and is the gateway to reduced withholding or treaty protection.
Residence under the Iceland treaty matters for the small but growing group of U.S. expatriates and Icelandic professionals working in the U.S. Tie-breaker rules apply where domestic rules would otherwise produce dual residence.
Article 5
Permanent Establishment
Sets the business-presence threshold that permits source-country taxation of business profits.
The Iceland treaty follows a modern OECD-style PE definition with a 12-month threshold for construction and installation projects. Dependent-agent and preparatory-activity rules still require article-level review.
Article 7
Business Profits
Generally reserves business profits to the residence state unless a permanent establishment exists in the other state.
This article matters for U.S. firms operating in Iceland's energy, fisheries, and growing tech sectors. Article 5 PE analysis must be completed before reliance on Article 7 protection.
Article 10
Dividends
Provides treaty limits on source-country dividend withholding in qualifying cases.
The dividend article's 5 percent and 15 percent ceilings are the quick snapshot, but ownership thresholds and Icelandic domestic withholding interactions control the practical outcome.
Article 11
Interest
Generally removes source-country withholding on qualifying interest.
Interest is one of the cleaner outcomes under this modern treaty, with a general zero-percent result on the IRS table. Beneficial-ownership and documentation analysis still control practical reliance.
Article 12
Royalties
Generally removes source-country withholding on qualifying royalties.
The royalty article generally produces a zero-percent outcome across the major copyright, patent, and know-how categories. Software classification can still create edge-case complications.
Official text
Other treaties involving these jurisdictions
Computed from the cross-reference graph. Links open the related entity on this site.
This entry cites
- TreatyUS–GB treaty
- TreatyUS–CA treaty
- TreatyUS–DE treaty
- TreatyUS–FR treaty
- TreatyUS–JP treaty
- TreatyUS–NL treaty
- TreatyUS–AU treaty
- TreatyUS–KR treaty
Primary sources
- Iceland treaty documents pageVerified 2026-05-20
- Official U.S.-Iceland treaty PDFVerified 2026-05-20
- IRS Tax Treaty Table 1Verified 2026-05-20
- Iceland technical explanationVerified 2026-05-20
Important disclaimer
This library is for general tax education only. Always verify filing obligations, due dates, and tax consequences against the cited primary source or with a qualified tax professional.