Tax Rights
Income tax, personal tax credit, VAT, capital gains, appeals, audits, payment plans, and social insurance contributions under Icelandic national law.
Covered in this guide:
Iceland income tax is progressive across three brackets under the Income Tax Act (Tekjuskattslög, Lög nr. 90/2003), combining national and municipal tax (~14.94%). Every resident aged 16 and over gets a personal tax credit (persónuafsláttur), transferable between spouses. Capital gains are taxed at 22%. VAT (Lög nr. 50/1988) is 24% standard, 11% reduced — businesses register over ISK 2 million in turnover. The Directorate of Internal Revenue (RSK) runs assessments. You can appeal to the Internal Revenue Board (Yfirskattanefnd) and onward to the district courts. Employers pay a social insurance levy under Lög nr. 113/1990.
Key Laws
Income Tax Act (Tekjuskattslög)
Lög nr. 90/2003
Progressive income tax brackets, personal tax credit, capital gains tax, worldwide taxation
Value Added Tax Act
Lög nr. 50/1988
24% standard VAT rate, 11% reduced rate, registration thresholds
Act on Social Insurance Contributions
Lög nr. 113/1990
Employer social insurance levy funding pensions, health, and unemployment benefits
Income Tax Rates
Iceland uses a progressive income tax system with three brackets. The combined rate includes state income tax and municipal tax (average municipal tax is approximately 14.94%).BracketMonthly Income (I...
Right to Appeal Tax Assessment
Iceland has a two-tier administrative appeal process for tax disputes:Step 1 — Internal Review by RSK:File a written complaint to the Directorate of Internal Revenue (RSK) within 60 days of the assess...
Tax Audit Rights
As a taxpayer, you have rights during a tax audit:Written notice: Audits are conducted through formal written communication with strict procedural rules.Right to representation: A representative (acco...
Tax Payment Plans
If you owe taxes and cannot pay in full, you may be able to arrange an instalment payment plan:Eligibility: All tax returns and required documents must have been filed. Debt must be below ISK 2,000,00...
VAT (Value Added Tax)
Iceland applies VAT on most goods and services:Standard rate: 24% — applies to most goods and services.Reduced rate: 11% — applies to: hotel/guesthouse rentals (under 1 month), campgrounds, food and c...
Capital Gains Tax
Capital gains in Iceland are taxed as capital income:General rate: 22% on capital income (gains from sale of property, dividends, interest, rental income).Primary residence exemption: Gains from the s...
Social Security Contributions
Iceland has mandatory social insurance and pension contributions:Employer social insurance contribution (tryggingagjald):General rate: approximately 6.35–6.90% of gross wages — paid entirely by the em...
Tax Return Filing
All taxpayers in Iceland must file an annual tax return:Filing deadline: 13 March 2026 for income year 2025 (individuals filing electronically; Skatturinn does not grant extensions to individuals). Ac...
VSK Business Registration & Self-Assessment
Iceland's value-added tax, VSK, is administered by Skatturinn under Lög nr. 50/1988. This right covers what matters to a business: when you must register, how to file, what you can and cannot deduct,...