--- title: "Iceland tax for new residents 2026: rates and regimes" url: https://settleanywhere.com/countries/iceland/tax/ lang: en updated: 2026-10-12 --- # Iceland tax Special regime for new residents: 25% of employment income deducted from taxable income. Checked against official sources on 12 Oct 2026 [Change log](https://settleanywhere.com/changes/) ## Special regimes for new residents Special regime ### Foreign experts: 25% of employment income deducted from taxable income for three years Tax relief **Details** - On: 75% of employment income after a 25% deduction Approved foreign experts are taxed on 75% of their employment income for the first three years of work in Iceland. (source 3) #### Taxed on 75% of employment income after a 25% deduction; social security tax, pension contributions and child benefits are based on total income. #### Who it applies to - The employee did not live or hold a legal domicile in Iceland for the 60 continuous months before starting work, not counting the first three months of stay. - The expertise is limited or non-existent in Iceland. - The employer is an Icelandic legal entity or a foreign company with a permanent establishment in Iceland. - The job involves research, development and innovation, teaching or specialised tasks, or management or core project work for the employer. #### Exclusions - The application must reach the committee within three months of starting work in Iceland. #### Tax residence Applies from the start of employment for three years; the 60-month non-residence test applies before the start. #### Visas Suits holders of an expert-work residence permit, but approval comes from a Ministry of Finance committee, not the Directorate of Immigration. #### Other taxes Applications go to the Icelandic Centre for Research (Rannís); tax withheld before approval can be corrected with form RSK 5.17. Checked against official sources on 10 Oct 2026 [Change log](https://settleanywhere.com/changes/) ## Which visas the regimes apply to - **25% of employment income deducted from taxable income**: [Expert work permit](https://settleanywhere.com/countries/iceland/work-expert-knowledge/). Suits holders of an expert-work residence permit, but approval comes from a Ministry of Finance committee, not the Directorate of Immigration. ## Standard rules and foreign-source income Standard rules ### Personal income tax 2026: three withholding brackets of 31.49%, 37.99% and 46.29% Worldwide income **Details** - On: Employment income less the mandatory pension fund contribution - Limit: ISK 498k/mo ≈ $4,080 Employment income is taxed in three monthly brackets: 31.49% up to ISK 498,122, (≈ $4,080) 37.99% up to ISK 1,398,450 (≈ $11,500) and 46.29% above, including municipal tax. (sources 1, 2) #### Taxed on Employment income less the mandatory pension fund contribution; residents are taxed on worldwide income, non-residents on income from Icelandic sources. #### Who it applies to - Residents (stay of six months or more in a twelve-month period) have unlimited tax liability from the day of arrival. - Capital income, including sales profits, dividends and interest, is taxed at 22%; ISK 300,000 (≈ $2,460) per person a year is tax-free on interest and on dividends and gains from shares in listed companies. #### Exclusions - Stays of less than six months in twelve give limited tax liability on Icelandic-source income only. - Residents are taxed on foreign-source income like other income; former residents stay liable for 3 years unless they show they are taxed elsewhere. #### Limits - ISK 498,122 a month (≈ $4,080) · Upper limit of the 31.49% bracket (2026 withholding) - ISK 1,398,450 a month (≈ $11,500) · Upper limit of the 37.99% bracket; income above is taxed at 46.29% - ISK 72,492 a month (≈ $590) · Personal tax credit deducted from calculated tax (ISK 869,898 (≈ $7,130) a year) #### Tax residence A person staying in Iceland for six months or more in a twelve-month period is a resident with unlimited tax liability from the day of arrival; municipal tax is 14.94% on average and included in the brackets. #### Visas Immigration status does not set tax residence; the stay in Iceland does. #### Other taxes VAT is 24% (reduced rate 11%); employers pay 6.35% payroll tax; workers pay a mandatory 4% pension fund contribution. Checked against official sources on 12 Oct 2026 [Change log](https://settleanywhere.com/changes/) ## VAT, social security and other taxes - VAT is 24% (reduced rate 11%); employers pay 6.35% payroll tax; workers pay a mandatory 4% pension fund contribution. - Applications go to the Icelandic Centre for Research (Rannís); tax withheld before approval can be corrected with form RSK 5.17. ## Questions people ask ### Who qualifies for 25% of employment income deducted from taxable income? The employee did not live or hold a legal domicile in Iceland for the 60 continuous months before starting work, not counting the first three months of stay. Suits holders of an expert-work residence permit, but approval comes from a Ministry of Finance committee, not the Directorate of Immigration. ≈ USD figures are approximate: daily reference rates from ExchangeRate-API, dated 12 Oct 2026, refreshed when the site is updated. **Sources (3)** ## Official sources 1. [Key rates and amounts 2026](https://www.skatturinn.is/english/individuals/key-rates-and-amounts/2026/) · Iceland Revenue and Customs (Skatturinn) · checked 2026-10-11 2. [Tax liability](https://www.skatturinn.is/english/individuals/tax-liability/) · Iceland Revenue and Customs (Skatturinn) · checked 2026-10-11 3. [Foreign experts](https://www.skatturinn.is/english/individuals/foreign-experts/) · Iceland Revenue and Customs (Skatturinn) · checked 2026-10-11