Taxation in Iceland

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Taxes in Iceland are levied by the state and the municipalities.1 Property rights are strong and Iceland is one of the few countries where they are applied to fishery management. Taxpayers pay various subsidies to each other, similar to European countries with welfare state, but the spending is less than in most European countries. Despite low tax rates, overall taxation and consumption is still much higher than countries such as Ireland. Employment regulations are relatively flexible.

Income tax

Income tax is deducted at source, known as pay-as-you-earn (PAYE). Each employee has a personal tax credit of 44,205 ISK per month; unused credit may be transferred to one's spouse. Up to 8% of gross income may be deducted for private pension insurance.23

Monthly consideration Rate
First 241,475 ISK 37.32%
Next 498,033 ISK 40.22%
Above 739.510 ISK 46.22%


The rate includes 14.44% collected by municipal authorities.

Tax on capital gains

Individuals pay 20% capital gains tax.

Corporate tax

The corporate tax rate is 20%,1 one of the lowest in the world.4

Value added tax

The standard rate of value added tax is 25.5%, with a reduced rate of 7% for certain products.

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