According to the Icelandic tax rules, companies in Iceland that undertake cross-border mergers within the EEA are required to pay tax on all capital gains relating to their assets and shares when they leave Iceland, even though these gains have not been realised. Icelandic companies merging with other companies within Iceland are under no such obligation. The Authority considers those rules to be a restriction on the freedom of establishment and the free movement of capital. The rules make it less attractive for companies to make use of their right to establish themselves in other EEA States. The Authority does not contest that Iceland may protect its right to tax gains accrued while a company was established in Iceland. However, Iceland should apply less restrictive measures to protect this right. Instead of requiring companies to pay tax on unrealised gains at the time of relocation, Iceland could, for example, offer companies the possibility of defering their payment of the tax.