Foreign experts

Special rules apply to the taxation on remuneration to foreign experts that come to Iceland for work. The legislation, which came into effect January 1st 2017, stipulates that only 75% of the income is taxed for the first three years from the start of employment provided certain conditions are met. A special committee appointed by the Ministry of Finance and Economic Affairs evaluates whether the conditions are met.

Once an application has been approved, tax is withheld from 75 percent of the income. Tax on income withheld for periods before the approval of application is corrected once the application has been approved. Calculations for Social security tax, contributions to pension funds, child benefits and private housing interest subsidy are based on total income.

An employee is a foreign expert if the following conditions are met:

  • He/she has not been resident or stayed continually in Iceland at any time during the five calendar years prior to the calendar year in which employment starts.
  • His/her area of expertise is limited or non-existent in Iceland.

The rule is only applicable if the foreign expert:

  • is employed by a legal entity that is domiciled in Iceland or is a foreign company with a permanent establishment in Iceland; and
  • is hired for work that requires special expertise or level of skill which is very limited or non-existent in Iceland; and
  • is hired for work that relates to professional research, development and/or innovation, teaching or it relates to specialized tasks; or
  • works in management or project management or his work relates to projects that are core components of his employers business.

Applications should be sent to the Icelandic Centre for Research, Rannís, Borgartúni 30, 105 Reykjavík.

Additional information

Rules and regulations

Foreign experts – Art. 1 of Regulation No. 1202/2016

25 percent reduction of taxable income – Art. 30, Para 1, Section A, Point 6 of Income Tax Act No. 90/2003

Committee – Art. 4. of Regulation No. 1202/2016

Condition for the reduction – Art. 1. of Regulation No. 1202/2016

Application – Art. 2. and 3. of Regulation No. 1202/2016

Other

Ministry of Finanace and Economic Affairs

The Icelandic Centre for Research

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