Tax laws Iceland
Iceland's tax system is characterized by its simplicity and competitive rates, contributing to its status as a developed economy.
Key Taxes:
Personal Income Tax: Iceland employs a flat tax system for personal income, with the main rate set at 22.75%. When combined with municipal taxes, the total tax rate reaches up to 35.7%, excluding various available deductions.
Corporate Income Tax: The corporate income tax rate in Iceland stands at 20%, applicable to limited liability companies and limited partnership companies. This rate has been in place since 2011 and is considered one of the lowest globally. Other legal entities, such as partnerships, are subject to a higher rate of 37.6%.
Value Added Tax (VAT): Iceland imposes a standard VAT rate of 24%. A reduced rate of 12% applies to certain goods and services, including foodstuffs, hotel accommodations, and passenger transport.
Recent Developments:
- Infrastructure Fee for Cruise Ships: Effective January 1, 2025, Iceland introduced a new infrastructure fee requiring cruise ships to pay 2,500 Icelandic krónur (approximately $18) per passenger for each day docked at Icelandic ports. This fee is five times higher than the previous charge and has led to the cancellation of over 80 cruise ship visits within the first few weeks of implementation. The government anticipated generating $10 million from the fee, but it has instead deterred cruise ships from stopping in Iceland.
Compliance and Administration:
The Icelandic tax system is administered by the Directorate of Internal Revenue (Skatturinn). Taxpayers are required to file annual tax returns, and the Directorate conducts audits to ensure compliance with tax laws.
Note: Tax laws and regulations are subject to change. It's advisable to consult the Directorate of Internal Revenue or a tax professional for the most current information.
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