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 that are welfare states, but the spending is less than in most European countries. Despite low tax rates in relation to European welfare states, overall taxation and consumption is still much higher than in countries such as Ireland. Employment regulations are relatively flexible. The tax is collected by Skatturinn, the Iceland Revenue and Customs Agency and is due in March each year.

Income tax

Income tax is deducted at the source, which is called

Individuals in Iceland pay 22% capital gains tax (2018)

Corporate tax

The corporate income tax rate in Iceland stands at 20% since 2011,^[1] one of the lowest in the world. These 20% stand for limited liability companies and limited partnership companies. Corporate income tax for other types of legal entities (e.g. partnerships) is assessed at a rate of 37.6%. Non-resident corporations doing business in Iceland are subject to the same rate as applies to resident corporations.^[5][6]

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Value-added tax

The standard rate of value-added tax is 24%. A number of specific consumer goods and services are subject to a reduced VAT rate of 11% (e.g. food, hotels, newspapers, books, and energy like electricity, heating and fuel).

Residence in Iceland

For taxation purposes a resident of Iceland is anyone who is present in Iceland for 183 days during any 12-month period. An individual that stays in Iceland for longer than 183 days is considered to be a resident from the day of arrival. After leaving Iceland tax liability of an individual ends.

Non-residents staying in Iceland for a period shorter than 183 days are subject to national income tax on any income. They are also subject to municipal income tax as well as residents.

References