Income Tax Rates 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?
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%).
| Bracket | Monthly Income (ISK) | Combined Rate |
|---|---|---|
| 1st | 0 – 498,122 | 31.49% |
| 2nd | 498,123 – 1,398,450 | 37.99% |
| 3rd | Over 1,398,450 | 46.29% |
Personal Tax Credit (Persónuafsláttur):
- Monthly: ISK 72,492
- Annual: ISK 869,898
- Available to all individuals aged 16+ domiciled in Iceland.
- Unused credit from one month can be carried forward within the tax year.
When does it apply?
- You earn income in Iceland — employment income, self-employment income, or other taxable income.
- All persons domiciled in Iceland are subject to tax on worldwide income.
What to Do If You Think Your Income Tax or Personal Tax Credit Is Wrong in Iceland
- Check your tax card — ensure your personal tax credit is correctly allocated.
- You can split the personal tax credit across multiple employers via the Skatturinn (RSK) portal.
- If you are married or in a registered partnership, unused personal tax credit can be transferred between spouses.
What should you NOT do?
- Don't ignore your tax card — an incorrect allocation of personal tax credit can result in an unexpected tax bill at year-end.
- Don't confuse tax brackets — each bracket applies only to income within that range, not your total income.
Common Questions
What are Iceland's income tax brackets?
Iceland has three progressive brackets combining state and municipal tax. The 1st bracket (up to ISK 498,122 per month) is taxed at 31.49%. The 2nd bracket (ISK 498,123 to 1,398,450) is 37.99%. The 3rd bracket (over ISK 1,398,450) is 46.29%. Each bracket applies only to income within that range, not to your total income.
How does Iceland's personal tax credit work?
Every person aged 16 or older domiciled in Iceland receives a personal tax credit (persónuafsláttur) that offsets tax liability. It is ISK 72,492 monthly or ISK 869,898 annually. Unused credit from one month can be carried forward within the tax year. Married couples and registered partners can transfer unused credit between spouses.
Can I split my Icelandic personal tax credit between employers?
Yes. You can allocate the personal tax credit across multiple employers through the Skatturinn (RSK) portal. Check your tax card carefully — an incorrect allocation can result in an unexpected tax bill at year-end. All persons domiciled in Iceland are subject to tax on worldwide income under the Income Tax Act (Lög nr. 90/2003).
When does it apply — income tax rates?
You earn income in Iceland — employment income, self-employment income, or other taxable income.All persons domiciled in Iceland are subject to tax on worldwide income.
What should I do if I believe Skatturinn has calculated my income tax or personal tax credit incorrectly in Iceland?
Check your tax card — ensure your personal tax credit is correctly allocated.You can split the personal tax credit across multiple employers via the Skatturinn (RSK) portal.If you are married or in a registered partnership, unused personal tax credit can be transferred between spouses.
What should you NOT do — income tax rates?
Don't ignore your tax card — an incorrect allocation of personal tax credit can result in an unexpected tax bill at year-end.Don't confuse tax brackets — each bracket applies only to income within that range, not your total income.