How corporate tax works in Iceland
Iceland taxes resident companies on worldwide income at 20% from 2026. The 21% rate applied only in 2024 and 2025, so older guides overstate the current burden.
Groups with 90% or more ownership consolidate resident profits and losses. Dividends between resident companies are deductible with no withholding, while other holdings get participation relief.
Losses carry forward ten years with no carry-back. Banks and insurers face an extra financial-activity tax on top of the standard rate.
Tax rates at a glance
- Corporate rate
- 20%From 2026
- Other entities
- 37.60%
- Loss carry
- 10 years
- Group threshold
- 90%+
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
FoundersHolding companiesRegional operatorsInvestorsCross-border groups
Watch out for
- Entity choice changes the rate completely. LLCs pay 20% while general partnerships face 37.6%, so form follows tax here.
- Consolidation needs 90% and resident members only. Foreign subsidiaries stay outside regardless of ownership share.
- Outbound dividends face 20% or 22% withholding before treaties. EEA companies can reclaim to zero by filing locally.
- Salary-heavy founders face the personal side too. A 20% company rate beside 46.29% top salary tax makes distribution planning central.
Frequently asked questions
Does Iceland have corporate tax?
Yes, 20% for LLCs and similar companies from 2026, with 37.6% for partnerships and similar entities.
Are domestic dividends exempt in Iceland?
Yes. Dividends between resident LLCs are deductible with no withholding, and 90%-plus groups consolidate.
What happened to the 21% rate?
It was a temporary 2024-2025 rate. The standard rate returned to 20% from 2026.