Data center investments in Iceland to benefit from recent VAT amendments

The Icelandic parliament has recently approved amendments made to the Value-Added Tax Act, which will consequently benefit the data center storage industry in Iceland. The amendments will put data center services in Iceland on the same footing as European competitors regarding VAT on exported services and equipment owned by clients.

Katrin Juliusdottir, Iceland’s Minister of Industry, Energy and Tourism, described this as an important development, and said when the bill was passed that it marked the beginning of a promising new green industry for Iceland, based on know-how, skills and sustainable energy.

“These amendments will illiminate what was hindering the development of the data centre industry in Iceland and consequently the industry will be a lot more competitive. The tax law basically levels out the playing field and puts us on the same level as our European competitors. This also means that Iceland will be able to use its natural advantages and attract business to the country,” commented Fridrik Snorrason, Chairman of the ICEDC (Icelandic Data Center Association).

Executive Vice President of Verne Global, Isaac Kato also commented, “Verne believes the approval of the VAT reform legislation by the Icelandic Parliament was an essential step in establishing Iceland as a mainstream Data Center hub in Europe. Without the Act, Data Centers located in Iceland would not have been competitive with providers in other countries in the EU. Iceland’s tremendous natural resources offer major cost savings and carbon reduction opportunities for Data Center users, and we look forward to helping companies in the U.S. and Europe enjoy these benefits that are so important to CIOs today.”

Emphasis has been placed on the fact that this does not constitute as state aid in the sense of Article 61 of the EEA Agreement. This is because the Iceland data storage industry has only been set on the same competitive footing as its competitors in other countries.

Furthermore, in order to avoid infringement of the procedural rules of the EFTA Surveillance Authority (ESA), and also to give the Government time to inform ESA of the changes and receive its confirmation, the amendments will not take effect until 1 May 2011.

Further details and information about data storage and investments in Iceland can be accessed at www.invest.is