Income Tax Rates
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?
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 should you do?
- 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.
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