Key rates and amounts 2021

Individuals: Withholding tax 2021

Income from 0 – 349.018 ISK per. month
Income from 349.019 - 979.847 ISK per. month 37,95%
Income exceeding 979.847 ISK per month
(only on the amount that exceeds the income threshold)

Children (born 2006 or later) on income exceeding 180.000 ISK per year
Personal tax credit per monthISK50.792
Personal tax credit per yearISK609.509

A list of municipal tax rates is available on the website of Icelandic Association of Local Authorities (only available in Icelandic).

More information regarding tax liability

More information on personal tax credit

Value added tax (VAT)

Standard rateReduced rate
VAT rates24%11%
VAT calculated from total price
(price includes VAT)

Payroll tax

Employers pay the payroll tax based on the employee's wages.

General payroll tax
2020 6,35%

Capital gains tax

Capital gains tax for individuals is 22%

This applies to all capital gains such as sales profits, dividends and interests. However, there is a ISK 300.000 tax-free limit per person, on interests and income from shareholdings in the form of dividends and capital gains in companies listed on a regulated securities market or a market for financial instruments .

Rental income of residential properties are considered to be capital gains, that is if you rent out no more than two properties which fall under the Icelandic residential rental law. If those conditions are met 50% of the rental, income is tax free and without any deductions.

Icelandic National Broadcasting Service fee (útvarpsgjald)

AmountAnnual income threshold
Tax assessment 2021ISK18.3001.870.828 
Tax assessment 2020ISK17.900 1.833.671
Tax assessment 2019ISK17.5001.750.783
Tax assessment 2018ISK17.1001.718.678
Tax assessment 2017ISK16.8001.678.001
Tax assessment 2016ISK16.4001.637.600

More information about the Icelandic National Broadcast Service fee

The Senior Citizen's Construction Fund fee

AmountAnnual income threshold
Tax assessment 2021ISK12.0341.870.828 
Tax assessment 2020ISK 11.7401.833.671
Tax assessment 2019ISK11.4541.750.783
Tax assessment 2018ISK11.1751.718.678
Tax assessment 2017ISK10.9561.678.001
Tax assessment 2016ISK10.4641.637.600

More information about the Senior Citizen‘s Construction Fund fee

Per diem payments for domestic travel

January - MayJune - Sept.October - 
Accommodation and transportation (24 hours)ISK25.700 35.000 30.700
Accommodation (24 hours)ISK13.100 22.100 17.700
Transportation - whole day trip (minimum10 hours)ISK12.600 12.900 13.000
Transportation - half a day trip (minimum 6 hours)ISK6.300 6.450 6.500

Per diem payments for international travel

General per diem payments
Category 1SDR208125Moscow, Singapore, New York City, Tokyo, Washington DC.
Category 2SDR177106Dublin, Istanbul, Japan (except Tokyo), London, Luxemburg, Mexico City, Seoul
Category 3SDR15694Amsterdam, Athens, United States (except New York City and Washington DC), Helsinki, Barcelona, Geneva, Hong Kong, Canada, Copenhagen, Madrid, Oslo, Paris, Rome, Stockholm, Vienna
Category 4SDR13983Other destinations

Car allowance

For driving one's personal vehicle for the employer

0-1.000 km.ISK 114   
1.001-2.000 km.ISK 112
2.001-3.000 km.ISK 110
3.001-4.000 km.ISK 97
4.001-5.000 km.ISK 94

Lodging tax

Due to the corona virus pandemic lodging tax will be temporarily abolished from 1. April 2020 to 31. December 2021 for the lodging services provided within that period.