Capital Gains Tax
Written in plain language for general understanding. This is educational content, not legal advice. Based on Icelandic Acts of the Althingi, statutory instruments, and official guidance.
Icelandic National Law
What is this right?
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 sale of your private residence are fully tax-exempt if you owned the property for more than 2 years.
- Rollover relief: If you sell your home before the 2-year threshold, gains can be deferred by reducing the acquisition cost of a replacement residence.
- Liquid assets: Capital gains from the sale of privately owned financial instruments are generally tax-exempt for individuals.
- Tax-free threshold: ISK 300,000 per person on certain capital income (interest, dividends).
When does it apply?
- You sell property, investments, or other assets at a profit.
- You receive dividends, interest, or rental income.
What should you do?
- Track your purchase price and sale price — you will need these to calculate your gain.
- If selling your home, check whether you meet the 2-year ownership threshold for the exemption.
- Report capital gains on your annual tax return.
What should you NOT do?
- Don't assume all property sales are taxed — the primary residence exemption can save you significant money.
- Don't fail to report — even exempt gains should be disclosed on your tax return.
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