In September, Efling in cooperation with the Directorate of Internal Revenue organised a short course in English and Polish about the Icelandic laws and regulations on individual taxation. The course was organised because Efling recognizes the need to ensure that our foreign members have access to correct information about the tax system.
The presenter, Helgi Guðnasson, who works for RSK led both courses. Helgi specialises in the field of individual taxation.
The main takeaways from the course are presented below. At the bottom of the page there is also a link to the full presentation in English and Icelandic.
Individuals are obliged to pay income tax, VAT (value added tax), vehicle tax and other smaller taxes.
All individuals receiving income from employment(salary), unemployment benefits, social benefits, or pension funds are obliged to pay income tax. The tax is usually withheld at source and the proof of its payment is the payslip(launaseðill). It is important to make sure the payslip is provided each month and states the tax was paid, as it serves as a proof in case the employer fails to pay the tax on behalf of the employee.
Depending on the income, the income tax equals 36,94%, or 46,24%.
All employed individuals aged 16 and over are entitled to receive a personal tax discount of ISK 56.447 a month (in 2019). The personal tax discount renews yearly at the beginning of each calendar year. Unused personal tax discount rolls over from month to month, however it expires at the end of the calendar year.
Each individual is obliged to fill out tax report, which usually takes place in March. If an individual is planning to leave Iceland, they should file tax report in person in the tax office.
If an individual is taking up work as a contractor, they are obliged to pay all taxes and other contributions by themselves. This requires specialised knowledge about taxes and accounting.
Black work is illegal and may incur serious legal consequences. By taking up black work an individual forfeits their rights to health insurance, unemployment benefits, social benefits, maternity leave payments and work accident insurance.
The above information is only a summary of the presentation, more details and the legal interpretation should always be obtained directly from RSK.