Taxes

• Everyone with tax liability in Iceland must pay tax on taxable income arising from sources such as wages, fees, cash payments, sickness allowance etc.
• Taxes on the wages of individuals are divided into state income tax, on the one hand, and, on the other, municipal tax that is paid to the local authorities.
• Income tax and municipal tax are withheld by the employer who pays the tax deducted from the salary to the collector for the Treasury. Those who are self employed (such as contractors) are liable to pay the taxation themselves.
• Anyone who registers legal domicile with Þjóðskrá (National Registry) in Iceland will be posted a tax card which entitles its holder to a personal tax credit, kr. 42.205 pr. month. Individuals who turn sixteen in the becoming year and have a legal domicile in Iceland are entitled to tax credit.
• It is important to hand over the tax card to the employer as soon as possible. If the employer doesn't have the tax card a full tax reduction will be made as the employer has to deduct full tax from the salary, with out any tax credit, if he doesn't have the tax card.
• Tax credit is not given without a tax card.