Non-resident

If you are a non-resident staying in Iceland for temporary work you have to:

  • be registered at Þjóðskrá (National Registry) and get Icelandic personal identity number
  • And if you are not a resident of one of the Scandinavian countries, or a country that is a member of the European economic area, you must have a work- and residence permit. You can get information on that at Útlendingastofnun Íslands (The Directorate of Immigration), http://www.utl.is/ or at Vinnumálastofnun (Directorate of Labour), http://www.vinnumalastofnun.is/

Income tax

Non-resident individuals staying temporarily in Iceland (for 182 days or less in any given 12-month period) who derive income from employment during their stay are subject to state income tax on such income. They are allowed the same deductions for expenses as residents. The annual personal tax credit may be applied in proportion to the duration of their stay in the country. Non resident individuals staying temporarily in Iceland are also subject to municipal income tax in the same manner as residents

Other non-resident individuals are subject to state income tax on their income derived from sources within Iceland. Icelandic-source income in the form of salaries and wages, remuneration to directors and committee members, grants, or remuneration for independent personal services and art performances is taxed by assessment at a rate of 34,45%. Further information on tax liability of non-residents can be obtained in the instructions of limited tax liability.

Pensions and old-age benefits received by non-residents from Icelandic sources are subject to state income tax. These non-residents may deduct the personal tax credit from tax computed on such income.

Non-resident individuals are also subject to municipal income tax on their Icelandic source income, including income tax at the flat rates of national income tax. The rate is the same as the average rate for residents, at 14,45% for the income year 2016 (assessment year 2017).

Icelandic-source business income is taxable in the same manner and at the same rates as for residents but the personal tax credit is not granted. Gains from the sale of and leasing income from, immovable property situated in Iceland are taxed by assessment at a flat rate of 20% in the year 2016.

Dividends paid by resident companies to non-residents individual shareholders are subject to a final withholding tax at a rate of 20%.

Net wealth tax has been abolished.

Withholding tax

Interest

Interest paid to non-residents is subject to withholding tax 10%. The total amount of interests is declared in the tax return but only interests exceeding the amount of 125.000 ISK is subject to taxation in the final assessment.

Royalties

Royalties paid by resident companies to non-residents are subject to withholding tax. The rate is 20% for individuals in the income year 2015. In addition municipal income tax is levied on royalties paid to non-resident individuals at the average rate 14,45% for the income year 2016.

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