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Do you live in another Nordic country and own a real estate in Iceland?

The discussion below is about the taxation of those not domiciled in Iceland but owning real estate in the country.

Taxation in Iceland

Those residing in another Nordic country but owning real estate in Iceland, from which they derive income, rental or sales proceeds, have limited tax liability in Iceland because of these assets. A 22% capital income tax is assessed on this income. The tax is calculated on the gross income without any deduction. If real estate is rented, and the total rental is less than the tax assessment directed by the Minister of Finance, the income shall be counted as income for the assessment at a rate ranging from 3.5% to 5%, and the percentage is determined by where the asset is located. Rent paid for housing because of an apartment for one's own use in the state of residence, may be deducted from rental income in Iceland if the rental income is from residential housing for one's own use that is temporarily rented.

Sales proceeds

Under the provisions of Article 13 of a double-taxation treaty between the Nordic countries, sales proceeds from the sale of real estate may be taxed in the state where the real estate is. When real estate is sold that has been taxable in Iceland under the rules in force on limited tax liability, the general rules on calculation and taxation of sales proceeds apply. If taxable sales proceeds are involved, the taxation may be postponed for two years days from the date of sale, and the purchase price of replacement real estate written off, but these provisions apply only if the seller of the asset makes it plain that he will buy replacement real estate in Iceland. If no purchase is made or construction begun on real estate in Iceland within these time limits, the sales proceeds are taxed in the second year after they accured.

This income is not subject to a duty of withholding but is taxed according to a tax return. A tax return because of these assets and income from them shall be submitted to the tax director of the tax district where the asset is located.

If joint ownership is involved, each individual reports his ownership share and share of the proceeds on his tax return.

Net worth tax

Net worth tax is not levied in Iceland.

Real-estate tax

The municipalities levy real-estate tax on real estate, and the tax is a percentage of the real estate assessment of the building or plat, ranging from 0.180% to 0.625%. Along with real-estate tax, other real-estate fees are collected, such as the plat lease, garbage collection tax, water use tax, etc. Click here to obtain information about the real-estate tax rate in your municipality.

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