Tax Payment Plans in Iceland (2026 Legal Guide) — Rules & Requirements
About this article
Sourced from Icelandic Acts of the Althingi, statutory instruments, and official guidance. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
If you owe taxes and cannot pay in full, you may be able to set up a payment plan:
- Conditions: All tax returns and the necessary documents must have been filed. The debt must be under 2,000,000 kr. for individuals (10,000,000 kr. for companies).
- Application: You can apply online through island.is.
- Interest: Default interest continues to accrue while the payment plan is in place.
- Limitation period: Signing a plan interrupts the limitation — a new 4-year period begins.
- No collection actions (seizure or enforcement) may have been started.
When does it apply?
- You have an unpaid tax debt and cannot pay the full amount immediately.
- Your tax debt is under 2,000,000 kr. (the individual limit).
What to do if you cannot pay your tax debt in full in Iceland
- File all outstanding tax returns first — you cannot get a payment plan if a return has not been filed.
- Apply online through island.is or contact Skatturinn directly.
- Pay all scheduled payments on time — one missed payment can cancel the plan.
What should you NOT do?
- Don't ignore a tax debt — Skatturinn can use enforcement, seizure of assets and forced sale.
- Don't neglect payments under the plan — automatic cancellation prompts Skatturinn to resume collection.
- Don't accrue new tax debt while the plan is in place — a new unpaid assessment also prompts cancellation.
About Tax Rights in Iceland
Income tax in Iceland is progressive in three brackets under lög um tekjuskatt (the Income Tax Act, Lög nr. 90/2003) and combines state tax and municipal tax (~14.94%). All residents aged 16 and over receive a personal tax credit (persónuafsláttur) that is transferable between spouses. Capital income is taxed at 22%. VAT (Lög nr. 50/1988) is 24% standard and 11% reduced — businesses register once turnover exceeds 2 million kr. Skatturinn (the tax authority) handles the assessment. You can appeal to yfirskattanefnd (the State Tax Board of Appeals) and from there to the district courts. Employers pay a social security contribution (tryggingagjald) under Lög nr. 113/1990.
Common Questions
Can I get a payment plan for tax debt in Iceland?
Yes, if the conditions are met. You must have filed all tax returns and the necessary documents, and the debt must be under 2,000,000 kr. for individuals (10,000,000 kr. for companies). Apply online through island.is. Default interest continues to accrue while the plan is in place, and no collection actions, such as seizure or enforcement, may have been started.
How do I apply for a tax instalment plan in Iceland?
File all outstanding tax returns first — you cannot get a payment plan if a return has not been filed. Apply online through island.is or contact Skatturinn directly. Signing a plan interrupts the limitation and a new 4-year period begins from the date of signature.
What happens if I miss an instalment on a tax payment plan in Iceland?
One missed payment can cancel the plan. Cancellation prompts Skatturinn to resume collection, which can include enforcement, seizure of assets and forced sale. Accruing new tax debt while the plan is in place — failing to pay a new assessment — also prompts cancellation, so stay current with all new taxes.
What is the tax payment plans right in Iceland?
If you owe taxes and cannot pay in full, you may be able to set up a payment plan:Conditions: All tax returns and the necessary documents must have been filed. The debt must be under 2,000,000 kr. for individuals (10,000,000 kr. for companies).Application: You can apply online through island.is.Interest: Default interest continues to accrue while the payment plan is in place.Limitation period: Signing a plan interrupts the limitation — a new 4-year period begins.No collection actions (seizure or enforcement) may have been started.
When does it apply — tax payment plans?
You have an unpaid tax debt and cannot pay the full amount immediately.Your tax debt is under 2,000,000 kr. (the individual limit).
What should I do if I owe Skatturinn but cannot pay the amount in full in Iceland?
File all outstanding tax returns first — you cannot get a payment plan if a return has not been filed.Apply online through island.is or contact Skatturinn directly.Pay all scheduled payments on time — one missed payment can cancel the plan.
What should you NOT do — tax payment plans?
Don't ignore a tax debt — Skatturinn can use enforcement, seizure of assets and forced sale.Don't neglect payments under the plan — automatic cancellation prompts Skatturinn to resume collection.Don't accrue new tax debt while the plan is in place — a new unpaid assessment also prompts cancellation.