Unlimited tax liability
Those domiciled in Iceland have full and unlimited tax liability. The same applies to those residing in Iceland for 183 days or longer during a 12-month period, as well as those working for more than 183 days during a 12-month period aboard an aircraft or ship registered in Iceland. This entails a duty to pay income tax on all income, regardless of where it was earned. "Income" means wages, job-related payments, perquisites, etc. There is an authorised deduction for obligatory contributions to a pension fund of 4% of total income and an additional contribution to a personal pension fund of up to 4% of total income.
Tax assessment takes into account the personal exemption. A family allowance is paid for children under 18 who are supported by the person submitting the form, and an interest allowance is calculated for those making interest payments because of housing for their own use. Individuals pay 22,5% national income tax and 14.,44 municipal income tax. Click here to obtain more information in English regarding taxation rules. Those shifting their domicile from Iceland to another country have unlimited tax liability for three years from the New Year's after moving away, unless they prove that they are liable for taxes in another state in the same manner as people domiciled there.