Key Tax Rates at a Glance
| Tax Type | Rate | Tier | Notes | Source |
|---|---|---|---|---|
| Income Tax — top rate | 46.25% | Very High | Top marginal rate | OECD 2026 |
| Income Tax — lowest rate | 36.94% | Entry rate | OECD 2026 | |
| Corporate Tax | 20.0% | Moderate | Standard rate | OECD 2026 |
| VAT | 24.0% | Moderate | Standard rate | OECD 2026 |
| Capital Gains Tax | 22.0% | Moderate | Standard rate | OECD 2026 |
| Social Security (employee) | 4.0% | Employee contribution | OECD 2026 | |
| Territorial Taxation | No | Worldwide taxation | OECD 2026 | |
| Digital Nomad Visa | Yes | Check official government sources | Official |
Iceland Special Tax Regime
| Criterion | Detail |
|---|---|
| Who qualifies | Qualifying expats, investors and skilled workers. |
| Tax rate under regime | Reduced rate under Iceland Special Tax Regime. |
| Duration | Varies — consult official government sources. |
| Application process | Apply through Iceland Tax Authority. |
| Key restriction | Must not have been tax resident in prior years. |
Income Tax Brackets
Income Tax Brackets (2024 rates in ISK)
Iceland uses a progressive tax system with both state and municipal income taxes. Residents pay state income tax on worldwide income. The brackets below show state tax only; municipal tax (~14.45% average) applies on top. Non-residents only pay tax on Iceland-source income.
| Annual Income (ISK) | Annual Income (USD approx) | State Tax Rate |
|---|---|---|
| 0–3,900,000 ISK | $0–$30,000 | 22.5% |
| 3,900,000–9,000,000 ISK | $30,000–$69,000 | 31.8% |
| Above 9,000,000 ISK | Above $69,000 | 37.7% + municipal (up to 46.28% combined) |
Corporate Tax
Corporate Tax
Iceland's corporate tax rate is 20%, applied to net taxable profits. Small enterprises may benefit from reduced rates or allowances on reinvested earnings. Dividend withholding tax is withheld at source before distribution to shareholders. Holding company rules apply for certain investment structures.
VAT & Consumption Taxes
VAT & Consumption Taxes
Standard VAT rate is 24%, among Europe's highest. Food products, books, magazines, heating fuels, and certain pharmaceuticals qualify for the 11% reduced rate. Export services are zero-rated. VAT registration is mandatory for most businesses operating in Iceland.
Capital Gains & Investment Income
Capital Gains & Investment Income
Capital gains are taxed as ordinary income (22.5%–46.28% depending on bracket). Dividend income is included in taxable income and subject to the same progressive rates. Foreign-source capital gains are taxed for Iceland residents. Crypto gains follow standard capital gains treatment.
Digital Nomad & Expat Visas
Iceland offers a dedicated digital nomad or remote-work visa. Check official government sources Holders typically benefit from the Iceland Special Tax Regime.
Tax Scenarios — Effective Rates
Estimated all-in tax burden after income tax and employee social security. Assumes standard deductions; does not account for special regimes or itemised relief.
Tax Burden Calculator
Estimated take-home pay in —
Key Insight
A digital nomad visa is available, attracting remote workers seeking a lower-tax base.
Free resource
Moving to Iceland?
Get our Expat Tax Checklist — key steps to optimise your tax position before you relocate.
Frequently Asked Questions
Comparisons
Social Security & Benefits
Social Security
Employees contribute 8.65%–9.33% for mandatory pension and unemployment insurance, depending on income level. Employers contribute approximately 11.8%. International workers subject to Icelandic social security must comply with EU/bilateral agreements if applicable. Periods worked abroad may be credited toward pension eligibility.