2018 amendments to Icelandic domestic tax legislation . 15. janúar 2018 Lög The following are the main changes which are applicable to the income year of 2018: The most notable change is the increase of the tax rate for Capital Income Tax by 2%, irrespective of whether a taxable person or a company is subject to unlimited or limited tax liability in Iceland. As a result taxpayers with unlimited tax liability in Iceland are now subject to 22% tax on any dividends, interest, capital gains and rental income arising. Non-resident persons with limited tax liability in Iceland are now subject to withholding tax of 22% on dividends, capital gains and income from immovable property (on half the income if leasing residential housing). Non-resident companies with limited tax liability in Iceland shall be subject to 20% withholding tax on dividends, capital gains and 22% on royalties. Furthermore, both non-resident persons and non-resident companies will be subject to 12% withholding tax on any interest accrued, exceeding the amount of ISK 150,000. The aforementioned rules will be applied unless otherwise provided for by exemption from taxation or a reduced withholding tax rate in an applicable Double Taxation Agreement which Iceland has concluded with other countries. With regard to legal entities other than limited liability companies, such as partnerships, either subject to unlimited or limited tax liability in Iceland, the tax rate for business profits has also been increased from 36% to 37.6%. Otherwise such entities are affected by the same tax law changes, as limited liability companies, as described above. Other changes include the increase of the Carbon Tax levied on parties that manufacture or import carbon products (e.g. gas, gasoline, diesel oil, jet fuel) either for resale or for their own use by 50%, instead of the previously intended 100% increase provided for in the 2018-2022 Icelandic Government’s Fiscal Budget Plan. Furthermore, the Carbon Tax will supposedly rise in coming years on account of Iceland’s environmental obligations. Moreover, the temporary exemption from Value Added Tax on environment-friendly motor vehicles (such as electric and plug-in hybrid vehicles) has been further extended for three years. Since a new Icelandic government took effect last December various other tax changes are supposedly to be considered during their first year in office, e.g. reduction in VAT on Icelandic written language, music, and books. As well as tax changes being considered with respect to the taxation of the media and taxation of royalties.