Iceland

Individual - Other taxes

Last reviewed - 05 February 2020

Pension fund contributions

Every employee from 16 to 70 years of age and every employer must contribute to a pension fund. The minimum contribution is 15.5% (4% for employees and 11.5% for employers) of all employees’ and self-employed persons’ remunerations. The employee’s contribution (4%) is deducted from their taxable income.

In addition to the minimum contribution, an employee can contribute and deduct up to an additional 4% from one's taxable income, as long as the contribution is used to increase one's pension rights. This additional contribution can be paid into a private pension fund.

Should the employer’s contribution to the pension fund exceed 12.5% of the employee’s remuneration, and also exceed ISK 2 million per year, the excess shall be calculated as taxable income.

By supplying a completed A1 (former E-101) certificate, individuals from European Economic Area (EEA) member countries are not bound to contribute to an Icelandic pension fund. An employer of an individual supplying an A1 certificate is subject to a lower rate of social security contribution. Those exemptions are dependent on equivalent payments being made in the individual’s country of residence.

Contribution to the elderly fund

Iceland maintains a special fund for the elderly, aside from pension contributions. Everyone between the ages of 16 to 69 with income exceeding ISK 1,833,671 in 2019 must make a contribution to the elderly fund.The payment for the assessment year 2020 is ISK 11,740.

Consumption taxes

Valued-added tax (VAT)

VAT is a consumption tax levied on all stages of domestic business transactions. VAT is levied on all goods and services, as well as on the imports of goods and services, unless specific exemptions apply.

The general VAT rate is 24%.

See the Other taxes section in the Corporate summary for more information.

Net wealth/worth taxes

There are currently no net wealth/worth taxes in Iceland.

Inheritance tax

Inheritance tax is 10%.

No inheritance tax is levied on the first ISK 1.5 million of an inheritance. If the inheritance is paid out before death, a flat rate of 10% is levied on the total amount without any minimum allowance.

The tax base is the net value of all financial assets and properties owned by the deceased at the time of death (after debts and expenses have been deducted). The value is decided by the market value of the asset in question. Property value is based on the official Property Register price.

If assets are left to a surviving spouse or cohabitant, no inheritance tax is levied. The same applies to any pension that the inheritors receive.

Property taxes

A municipal property tax is applied on real estate in Iceland.

Customs duties

Iceland, Liechtenstein, Norway, and Switzerland are members of the European Free Trade Association (EFTA). The EFTA Convention established a free trade area among its member states. In addition, the EFTA states have jointly concluded free trade agreements with a number of countries in Central and Eastern Europe as well as in the Mediterranean region, Mexico, and Singapore. Also, the EFTA states entered into the Agreement on the European Economic Area in 1992. The current contracting parties are, in addition to the three EFTA states, the European Union (EU) and the 28 EU member states. Iceland also has a bilateral agreement with its two neighbouring countries, Greenland and Faeroe Islands.

When individuals move to Iceland, household inventory, as defined in regulation 630/2008, is duty free.

Travellers can bring clothing and other travel gear for personal use and up to 3 kg of food not exceeding the value of ISK 25,000. Those who intend to dwell in this country for a year or a shorter period for employment, study, or travel may import a vehicle registered abroad without having to pay duty or import charges. At the end of this period, the importer of a vehicle must either have completed its customs clearance or exported the vehicle.

Among goods that are subject to import restrictions are the following types of products:

  • Telephones and other communications equipment.
  • Angling gear and riding clothing.
  • Used riding gear.
  • Firearms and ammunition.
  • Live animals.
  • Medicines.
  • Flowers and other plants.

Stamp taxes

Stamp duty is levied on documents regarding change of ownership of real estate and land and ships registered in Iceland.

The stamp duty rate is 0.8% if the rightful owner is an individual.

When issuing deeds and purchase agreements of real estate and land, a 0.8% stamp duty is levied on the officially registered value of the real estate. The same applies to the deeds and purchase agreements of ships. The stamp duty rate for individuals buying their first real estate is 0.4%.

All other documents bear no stamp duty.

Contribution to the National Broadcasting Service

Every person between the ages of 16 to 69 with income exceeding ISK 1,833,671 in 2019 must pay a contribution to the National Broadcasting Service. The payment for the assessment year 2020 will be ISK 17,900.