Jurisdiction overviewTax in Iceland
Last reviewed: · by TaxProsRated editorial
Key points
Iceland's Skatturinn administers a three-tier progressive income-tax system with combined state and municipal rates of ~31.45%, ~37.95%, and ~46.25%. Corporate income tax is 20% (21% from 2025). VAT (VSK) runs at 24% standard and 11% reduced. Iceland is an EFTA/EEA member — not an EU member — with ~45 active bilateral tax treaties plus the Nordic Tax Convention. The ISK has floated freely since 2001; post-2008 capital controls were fully lifted in 2017.
Who is the tax authority?
Skatturinn (the Icelandic Tax Authority) runs Iceland's tax system. It operates under the Ministry of Finance and Economic Affairs. Customs is administered by Tollurinn, a separate agency.
Filing flows through skattur.is, one of the most digitised tax portals in the Nordic region. Virtual all filings, payments, and correspondence run through this unified e-services portal.
The credentialed accounting profession is CA Iceland, regulated by the Institute of State Authorised Public Accountants (Félag löggiltra endurskoðenda, FLE). Practitioners holding the FLE designation work across audit, tax, and business-advisory services.
Substantive law rests on four main statutes: Income Tax Act (Tekjuskattslog 90/2003), VAT Act (Virdisaukaskattslog 50/1988), Tax Procedure Act, and the Top-up Tax Act (Pillar Two transposition).
What is the tax year and when are returns due?
Iceland's individual tax year is the calendar year (1 January to 31 December). Personal income tax returns are due 14 March of the following year via the skattur.is pre-filled framework. Corporate returns are due 31 May for calendar-year filers.
Who counts as an Icelandic tax resident?
Under the Tekjuskattslog, a person is an Icelandic tax resident if either rule applies:
- Permanent residence is maintained in Iceland (centre of life)
- Physical presence in Iceland of at least 183 days in any 12-month period
Residents pay tax on worldwide income. Non-residents pay tax only on Icelandic-source income. Treaty tie-breakers under the OECD Model and the Nordic Tax Convention apply for Nordic-region workers and cross-border commuters.
Deep-dive: see expat and cross-border tax in Iceland for mid-year arrival and departure rules.
What are the personal income tax rates?
Iceland's personal income tax combines a state component and a municipal component. The two parts stack to produce three effective bands:
| Income bracket (ISK/month) | State rate | Municipal avg | Combined effective |
|---|---|---|---|
| Up to ~446,136 | 16.78% | ~14.67% | ~31.45% |
| ~446,136 to ~1,252,501 | 23.05% | ~14.67% | ~37.72% |
| Above ~1,252,501 | 31.85% | ~14.67% | ~46.52% |
Municipal rates vary by municipality from 12.44% to 14.97%. The personal allowance operates as a monthly tax credit (~ISK 64,926/month for 2024), reducing effective tax in lower brackets. Capital income — dividends, interest, rental income, and capital gains — is taxed at a flat 22% rate, separate from the employment-income brackets.
Employees and employers both pay mandatory pension and social-security charges on top of income tax:
| Charge | Employee | Employer |
|---|---|---|
| Pension (basic pillar) | 4% | 11.5% |
| Social security (lídinn) | — | ~6.35% |
Deep-dive: see self-employed tax in Iceland for how all charges stack for sole traders.
How does corporate tax work?
Iceland's corporate income tax (CIT) applies a single flat rate — one of the lower CIT rates among Nordic peers. The rate for 2024 is 20%; it was raised to 21% for fiscal years starting from 1 January 2025.
Flat rate for resident companies. Sole proprietors use progressive personal income-tax rates instead of the CIT rate.
Raised by successive Finance Act amendments. Withholding on non-resident dividends is 22% (0% for qualifying EEA participants).
Tax losses carry forward for 10 years. Carryback is unavailable. An R&D super-deduction of 35% applies (subject to an annual cap). Iceland transposed Pillar Two GloBE rules via the Top-up Tax Act — IIR and QDMTT are effective for fiscal years starting from 31 December 2023.
Deep-dive: see small business tax in Iceland for sole-trader vs incorporated comparison.
What about VAT and other indirect taxes?
Iceland's VAT is called Virdisaukaskattur (VSK). The standard rate is 24% under the VAT Act. The reduced rate is 11%, covering basic foodstuffs, books and magazines, accommodation, public transport, and certain cultural goods.
| Rate | Applies to |
|---|---|
| 24% | Standard rate — most goods and services |
| 11% | Foodstuffs, books, accommodation, transport, cultural goods |
| 0% | Exports (zero-rated, not exempt) |
The VSK registration threshold is ISK 2,000,000 in annual turnover. Below that threshold, registration is voluntary. VAT returns are bi-monthly — six periods per year — filed by the 5th of the second month following each period. Reverse-charge rules apply on certain domestic supplies.
Deep-dive: see VAT in Iceland for the full VSK mechanics including the EEA-aligned digital services framework.
Currency framework: the floating Króna
Iceland uses the Icelandic Króna (ISK). The ISK has floated freely since 2001.
ISK floating since 2001 — capital controls lifted 2017 — NOT an EUR adopter
After the 2008 banking crisis, Iceland imposed capital controls to stabilise the ISK. Those controls were fully lifted in March 2017. Iceland remains outside the eurozone and has no active EUR-adoption timeline. Cross-border payments and transfers are free of controls today.
Meet an Iceland-resident taxpayer
What is the treaty network?
Iceland has approximately 45 active bilateral tax treaties. It is also a signatory to the Nordic Tax Convention (1996), a multilateral framework covering Iceland, Norway, Denmark, Finland, Sweden, Faroe Islands, and Greenland. Iceland ratified the OECD Multilateral Instrument (MLI) on 26 September 2019, with modifications entering force from 1 January 2020.
Major bilateral partners include the US, UK, Germany, France, Canada, India, China, Switzerland, South Korea, Singapore, Australia, Netherlands, Belgium, Malta, Spain, Italy, Greece, Brazil, Vietnam, Indonesia, and Mexico. The Nordic Tax Convention distinguishes Iceland's treaty network from most non-EU EFTA peers.
Deep-dive: see tax treaty relief in Iceland for bilateral withholding-rate schedules.
How are cryptoassets taxed?
Skatturinn treats individual cryptoasset disposals as capital gains, taxed at the flat 22% capital-income rate under the Tekjuskattslog. Mining and staking income, if conducted as a business, is classified as business income and taxed at corporate rates.
Geothermal power + cold climate = low-cost Bitcoin mining
Iceland's abundant geothermal and hydroelectric power — combined with the natural cooling from cold ambient air — made it a major Bitcoin-mining location from 2014 onward. Skatturinn has issued guidance on FIFO cost-basis valuation. EEA-equivalent MiCA provisions apply through the EEA Agreement framework.
Deep-dive: see crypto taxation in Iceland for valuation rules and the mining-as-business threshold.
Where does Iceland sit in the Nordic and EFTA cohorts?
Iceland is the smallest of the five Nordic countries by population (~390,000). It sits in two overlapping cohort grids — the Nordic income-tax group (with Norway, Denmark, Finland, and Sweden) and the EFTA-EEA non-EU group (with Norway, Switzerland, and Liechtenstein).
The 2008 banking crisis and its tax legacy
Iceland's banking sector collapsed in October 2008. Landsbanki, Glitnir, and Kaupthing — three banks with combined balance sheets roughly ten times Iceland's GDP — all failed within a week. The collapse was the largest banking failure relative to the size of any country's economy in history.
Common penalties and pitfalls
Foreign nationals and MNEs operating in Iceland trip on a consistent set of recurring issues:
The CIT rate rose from 20% to 21% for fiscal years starting 1 January 2025. Models built on 20% need updating for affected years.
IIR and QDMTT apply for fiscal years from 31 December 2023 via the Top-up Tax Act. In-scope MNE groups (global revenue above EUR 750M) should verify Iceland-entity impact.
Dividends, interest, rental income, and capital gains are taxed at a flat 22%, separate from the progressive employment-income bands. Cross-border investors need the right treaty rate applied.
Iceland applies EU acquis equivalents through the EEA Agreement, but specific provisions differ. Do not assume every EU directive applies verbatim — verify via the EEA Joint Committee decisions.
The Nordic Tax Convention (1996) covers IS, NO, DK, FI, SE, FO, GL as a single multilateral framework. It supersedes older bilateral treaties within the group — relevant for cross-border employment and residency.
Iceland files VSK six times per year — every two months — unlike monthly peers. Cash-flow and calendar mapping differ from UK/DE/FR quarterly or monthly models.
Bitcoin mining at scale is classified as business income; the 22% flat capital-gains rate does not apply to mining operations. Skatturinn guidance covers FIFO cost-basis and business vs personal-use classification.
Iceland ratified the MLI in 2019. The principal purpose test (PPT) applies to treaties from 1 January 2020. Arrangements whose main benefit is a treaty reduction face denial.
Standard audit period is 6 years. Skatturinn can extend beyond that for fraud cases. Retain records for at least 7 years to cover the standard period safely.
When should you talk to an Iceland tax pro?
Some situations are simple enough to handle through the skattur.is pre-filled return. Others need professional input:
- Your employment income lands in Tier 3 (above ~ISK 1.25M/month) — the 46% combined rate applies
- You receive cross-border dividends, interest, or capital gains — the 22% flat rate + treaty claims can interact in non-obvious ways
- You operate a business that may cross the corporate-resident threshold — especially with the 2025 CIT rate change
- Your business might be in scope for Pillar Two (global revenue above EUR 750M)
- You hold cryptoassets and have conducted significant disposals or operated a mining setup
- You are moving into or out of Iceland — residency tie-breaker under the Nordic Convention or OECD Model may apply
- You received a Skatturinn notice of assessment, audit letter, or back-tax query
- You are unsure whether VSK registration applies to your turnover
You can find vetted Iceland practitioners through the directory below.
This page is general information. It is not personal guidance for your situation. Tax rules change. Verify current figures on the skattur.is portal or with a licensed Iceland practitioner before filing.
Frequently asked
Who is the Icelandic tax authority?
Skatturinn (the Tax Authority), under the Ministry of Finance and Economic Affairs. Customs is administered by Tollurinn. Filings flow through skattur.is. The credentialed accounting profession is CA Iceland, regulated by the Institute of State Authorised Public Accountants (FLE).
When is the Icelandic annual return due?
Personal income tax returns are due 14 March of the year following the calendar tax year via the skattur.is pre-filled framework. Corporate annual returns are due 31 May for calendar-year filers. VAT (VSK) is filed bi-monthly — six periods per year — due by the 5th of the second month after each period.
Who is an Icelandic tax resident?
A person is an Icelandic tax resident if they maintain permanent residence in Iceland OR are physically present at least 183 days in any 12-month period. Residents pay tax on worldwide income. Non-residents pay tax only on Icelandic-source income. The Nordic Tax Convention provides tie-breaker rules for Nordic-region cross-border situations.
What are the Icelandic personal income tax rates?
Iceland combines state and municipal income tax into three effective brackets: ~31.45% on the first tier (up to ~ISK 446,136/month), ~37.72% on the second tier (~446,136 to ~1,252,501/month), and ~46.52% above that. A monthly personal allowance (~ISK 64,926) operates as a tax credit. Capital income (dividends, interest, capital gains) is taxed at a flat 22%.
How does Iceland's corporate tax work?
The CIT rate is 20% for fiscal year 2024, raised to 21% for fiscal years starting 1 January 2025. Withholding on non-resident dividends is 22% (0% for qualifying EEA participants). Pillar Two IIR and QDMTT apply from 31 December 2023 via the Top-up Tax Act. Tax losses carry forward 10 years. R&D super-deduction of 35% available.
What is the Icelandic VAT rate?
Standard VSK (Virdisaukaskattur) is 24%. The reduced rate is 11%, covering basic foodstuffs, books, magazines, accommodation, and public transport. Exports are zero-rated. The registration threshold is ISK 2,000,000 annual turnover. VSK returns are bi-monthly — six per year — due by the 5th of the second month after the period.
How does Iceland tax cryptoassets?
Individual cryptoasset disposal gains are taxed at the flat 22% capital-income rate. Mining and staking conducted as a business are classified as business income at corporate rates. Iceland is a major Bitcoin-mining jurisdiction due to geothermal and hydroelectric power. Skatturinn has issued guidance on FIFO cost-basis valuation. EEA-equivalent MiCA provisions apply.
How many tax treaties does Iceland have?
Approximately 45 active bilateral tax treaties, plus the Nordic Tax Convention (1996) — a multilateral framework covering Iceland, Norway, Denmark, Finland, Sweden, Faroe Islands, and Greenland. Iceland ratified the OECD MLI on 26 September 2019 with modifications effective 1 January 2020. Iceland is an EFTA/EEA member but NOT an EU member. The ISK has floated since 2001; capital controls were fully lifted in 2017.
Major tax firms in Iceland
Verified directory of the largest accounting + tax practices operating in Iceland. Listings are entity-level reference cards — claim flow is open to firm representatives.
- Big 4
Deloitte Iceland
- Big 4
Deloitte Ísland
- Big 4
EY Ísland
- Big 4
KPMG Iceland
- Big 4
KPMG Ísland
- Big 4
PwC Iceland
- Big 4
PwC Ísland
- National
Grant Thornton Iceland
Find a tax pro in Iceland
Browse credentialed pros serving Iceland — filter by specialty, language, and credential type.
Browse the Iceland directorySources
The figures, dates, and rules on this page are sourced from the documents listed below. Where two sources disagree, both are listed.
- Skatturinn (Iceland) · accessed
- Government of Iceland · accessed
- Government of Iceland · accessed
- Government of Iceland · accessed
- Ministry of Finance (Iceland) · accessed
- PwC Worldwide Tax Summaries · accessed
- Government of Iceland · accessed
Important disclaimer
Informational only — not tax advice. This page summarises publicly available information about tax in Iceland as of July 2026. Tax laws change, individual circumstances vary, and the application of any rule depends on your specific facts.
TaxProsRated does not provide tax, legal, accounting, or financial advice. Before acting on anything you read here, consult a qualified tax professional licensed in your jurisdiction (in the US: CPA, Enrolled Agent, or attorney; in the UK: CIOT- or ATT-qualified adviser; in Australia: TPB-registered tax agent; elsewhere: a locally-licensed equivalent). TaxProsRated, its operators, and its contributors disclaim all liability for action taken in reliance on this page.