Everyone who works in Iceland must pay taxes. Taxes of wages of individuals are divided into income tax to the state and local tax for municipalities.
Income tax is divided into steps and the tax percentage is dependent on the wages of the worker. On the website of the National Director of Taxation (www.rsk.is) you can find information on the withholding tax based on the amount of wages.
An employer takes the withholding tax from the employee's wages but the employee is entitled to a fixed tax rebate (personal rebate) each month. An employer cannot use the personal rebate granted by the tax card unless he has the tax card (www.rsk.is).
CHANGES 2016: TAX CARDS HAVE BECOME ELECTRONIC.
The tax authorities issue tax cards (electronic). A citizen of an EEA state who moves his legal residence to Iceland gets sent a tax card when his legal residence has been registered with the Icelandic National Registry.
Paid taxes are stated on the pay slip. It is essential to preserve the payslips to prove that taxes have been paid.
Individuals who are married, confirmed same-sex union or registered cohabitation can jointly use their personal rebate. Further information can be found in the website of the National Director of Taxation (www.rsk.is).
If you are not sent a tax card after you have registered a legal residence you should apply for a tax card at the National Director of Taxation or tax agencies.
Everybody who is taxable in Iceland must submit a tax return every year, usually in March. On the tax return you are to file the total wages of the previous year, along with debts and assets.
If you have paid too much or too little tax it is rectified in August the same year as the tax return is filed. One who has paid less than is his due must pay the difference and he who has paid more than he should gets the balance repaid.
The tax return is submitted online (www.skattur.is) and a web key (user name and password) sent to the legal residence of all taxpayers, 16 years and older. If a tax return is not filed the Director of Taxation estimates the income and the dues are calculated accordingly.
On the website of the National Director of Taxation (www.rsk.is) you can find a form for tax returns and a pamphlet on taxation in Iceland in English, Finnish, Norwegian, Swedish, French, Spanish, German, Polish and Russian.
 Local tax is one of the municipalities' sources of income, a certain percentage of which is collected from wages, regardless of the level of wages. The local tax percentage can be different between municipalities.
 General tax rebate is a fixed amount which all workers get for tax rebate and is withdrawn from the tax payments of the worker.
- Information about income tax and other taxes on Island.is
- Detailed information about tax liability and taxation in Iceland, in various languages (English, Danish, Finnish, French, Chinese, Norwegian, Swedish, Russian, Spanish, Polish, German and Icelandic) can be found on the website of the Directorate of Internal Revenue (Ríkisskattstjóri – RSK) - www.rsk.is
Links of interest