Iceland income tax rates

What this value means

HOW THE NATIONAL AND MUNICIPAL PARTS COMBINE — this is the whole point of the Icelandic schedule and the thing most summaries get wrong. Iceland does NOT levy a separate municipal income tax that a taxpayer computes on top of the state rate. Instead the published headline rates ARE the sum, bracket by bracket: 2026 state tekjuskattur 16.55% / 23.05% / 31.35%, PLUS a single flat útsvar of 14.94% applied in every bracket, giving 31.49% / 37.99% / 46.29%. The progressivity is entirely on the state side; the municipal side is flat. The 14.94% figure is the MEÐALÚTSVAR — the nationwide average municipal rate declared by the Ministry of Finance and used for WITHHOLDING everywhere in the country. Individual municipalities set their own útsvar within a statutory band, so a taxpayer's FINAL assessed liability uses their own municipality's rate: if it is above 14.94% they owe more at assessment, if below they get a refund. Withholding is therefore an approximation by design, trued up in the annual álagning. STEP 2 — THE PERSONAL TAX CREDIT: after applying the bracket rates to gross salary, a flat persónuafsláttur of ISK 72,492 per month (ISK 869,898 per year) is SUBTRACTED FROM THE TAX, not from income. Unused credit may be carried between months within the year, and 100% of a spouse's unused credit may be transferred in 2026. The credit is what produces a zero-tax threshold: at 31.49%, tax equals the credit at a monthly salary of about ISK 230,200, below which no income tax is payable. Non-residents staying part of a year receive the credit pro rata. ANNUAL EQUIVALENTS of the served monthly bands: 0-5,977,464 / 5,977,464-16,781,400 / above 16,781,400 ISK per year. UNIT WARNING: the served figures are MONTHLY, matching how Skatturinn publishes them — multiply by 12 before comparing with Denmark, Finland or Norway, whose files carry annual bands. NOT INCLUDED IN THESE RATES: (a) the mandatory pension contribution, 4% employee minimum plus 11.5% employer (deducted before withholding, so it lowers the tax base); (b) tryggingagjald (employer payroll/social security tax), 6.35% for 2026, an employer cost outside these brackets; (c) capital income (interest, dividends, rents, capital gains) which is taxed SEPARATELY at a flat 22% with a ISK 300,000 per person annual exemption for interest and listed-share dividends — it does not enter the three-bracket schedule. Children born in 2011 or later pay 6% (4% state + 2% municipal) on income above ISK 300,000 a year, with no personal tax credit. Iceland has no local surcharges beyond útsvar and no church tax inside the income tax (sóknargjald is a separate per-capita levy paid from the state budget).

Earlier values

Get it programmatically

curl https://euroref.dev/v1/is/income-tax
# $0.001 per call — x402 on Base (USDC). No key, no signup.
# History:    curl https://euroref.dev/v1/is/income-tax/history?from=2020-01-01
# Provenance: curl https://euroref.dev/provenance/is/income-tax

Other Iceland series: policy interest rate · VAT rate · minimum wage · public holidays · inflation rate (CPI) · corporate tax rate · official exchange rates