Individual - Taxes on personal income

Last reviewed - 09 July 2020

Resident individuals are fully liable for tax payments in Iceland on their worldwide income.

Non-resident individuals staying temporarily in Iceland, who derive income from employment during their stay, are subject to national income tax on such income. They are also subject to municipal income tax in the same manner as residents. Other non-resident individuals are subject to national income tax and municipal income tax on their income from Iceland. Non-residents are allowed the same deductions for expenses as residents.

Personal income tax rates

Personal income is a net income tax base with a progressive state income tax rate and municipal tax.

Step Monthly income (ISK*) Income tax



tax** (%)

Total tax


1 On the first ISK 336.916 (ISK 4,042,995 per year) 20.6 14.44 35.04
2 On income between ISK 336,916 (ISK 4,042,995 per year) and ISK 945,873 (ISK 11,350,472 per year) 22.75 14.44 37.19
3 On any income over ISK 945,873 (ISK 11,350,472 per year) 31.80 14.44 46.24

* Icelandic króna

** The municipal income tax withheld at source is 14.44% but varies from 12.44% to 14.52% in the final assessment, based on the decision of each municipality.

Icelandic-source income in the form of remuneration to non-resident directors and committee members, grants, or remuneration for independent personal services and art performances is taxed by assessment at a rate of 20% plus the average municipal income tax rate, which is 14.44% in 2019.

Capital income tax

The tax rate on an individual’s capital income is 22%.

As of 1 January 2020 payments to authors from rightholder's associations are considered capital income and taxed 22% after they have been made available to the public.

As of 1 July 2020 individuals with limited tax liability are not required to withhold tax of capital gains from the sale of shares.