Tax system in Iceland
Iceland taxes residents on worldwide income through combined central and municipal brackets: 31.49% to about ISK 6 million yearly, 37.99% to about ISK 16.8 million, and 46.29% above. A personal credit near ISK 870,000 softens every bill.
Pensions take 4% from employees with 11.5% from employers, both deductible, and employers add 6.35% payroll tax. Capital income — gains, dividends, interest, rent — pays a flat 22% with ISK 300,000 yearly free.
Companies pay 20% again from 2026 after a two-year 21% interlude. There is no wealth tax, estates pay 10% above ISK 6.8 million, and VAT runs at 24% or 11%.
Tax rates at a glance
- Income tax
- 31.49% - 46.29%Combined
- Wealth tax
- 0%
- Inheritance tax
- 10%
- Capital gains tax
- 22%
- Corporate tax
- 20%
- Dividend tax
- 22%
- VAT
- 24% / 11%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesExpatsInvestorsFoundersCross-border groups
Watch out for
- Iceland is not low-tax for high salaries. The 46.29% top combined rate plus pension and payroll layers makes top pay firmly Nordic.
- Residence uses rolling twelve-month windows. Stays above 183 days in any year-long span bring worldwide taxation from arrival.
- Former domiciles carry a three-year shadow. Leaving without proving taxation elsewhere keeps full liability alive.
- The 20% company rate is a return, not a cut. Anyone pricing 21% from 2024 guides is a year out of date.
Frequently asked questions
Is Iceland a high-tax country?
For salaries, yes at Nordic levels: 31.49% to 46.29% combined with pension and payroll layers, plus 24% VAT. Capital pays a moderate flat 22%.
Does Iceland have a wealth tax?
No. The crisis-era net wealth tax lapsed after 2014, and only municipal property tax remains.
Which taxes matter most in Iceland?
The main ones are combined income tax with credits, 22% capital tax, 20% corporate tax, 10% estate tax above ISK 6.8 million and 24% VAT.