Capital Gains Tax in Iceland
Reviewed by the Commoner Law Editorial Team. 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?
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.
- Financial instruments (shares, funds, bonds): Capital gains from the sale of privately owned financial instruments are taxed at the standard 22% capital income rate (Category C) — they are not exempt.
- 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 to Do If You Are Selling Property or Investments and Need to Understand Capital Gains Tax in Iceland
- 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.
Common Questions
What is the capital gains tax rate in Iceland?
The general rate is 22% on capital income. This covers gains from the sale of property, dividends, interest, and rental income. A tax-free threshold of ISK 300,000 per person applies to certain capital income such as interest and dividends. Capital gains from the sale of privately owned financial instruments are taxed at the standard 22% capital income rate (Category C) — not exempt.
Is selling my home in Iceland tax-free?
Gains from the sale of your private residence are fully tax-exempt if you owned the property for more than 2 years. If you sell before hitting the 2-year threshold, rollover relief lets you defer gains by reducing the acquisition cost of a replacement home. Track both your purchase price and sale price to calculate any gain.
Do I need to report exempt capital gains on my Icelandic tax return?
Yes. Even exempt gains — such as a primary residence sale after 2 years — should be disclosed on your annual tax return. Report all capital gains and rental or investment income when filing. The Income Tax Act (Lög nr. 90/2003) treats capital gains differently from employment income, but disclosure is still required.
When does it apply — capital gains tax?
You sell property, investments, or other assets at a profit.You receive dividends, interest, or rental income.
What should I do if I am selling my home or investments and need to know whether capital gains tax applies in Iceland?
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 — capital gains tax?
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.