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​Wages and taxes​

  • In Iceland, wages are usually paid on a monthly basis, around the beginning of a new month. ​
  • Income after taxes is transferred into employees' bank accounts. ​
  • The wage slip is in a vast majority of cases on electronic form, visible under "My documents" in people's home banking service (online). ​
  • The wage slip indicates the amount of wages paid, total wages, taxes paid and other wage-related expenses. ​
  • Total wages is the amount of wages before the deduction of taxes and wage-related expenses.​
  • Wages paid is the amount transferred into the bank account. ​
  • All wage earners shall receive wage slips on which income and deductions are indicated. ​

Wage related expenses

  • Wage-related expenses include:​
    • Pension fund payments​
    • Union membership dues​
    • Contribution to the employees' association in the workplace​
    • Food expenses, if the employee pays for food provided in the workplace. ​
  • Employers are also obliged to deduct from wages any child support payments or unpaid official duties and send to the authorities. ​
  • All payments and all deductions shall be indicated on the wage slip each month. ​

Taxes - an important source of support in welfare states

  • The Icelandic welfare state relies on people paying taxes and other official duties. The state's tax revenue is used to pay for public services and social benefits.
  • All parties who create revenue (wage earners and contractors) are required to pay income tax and municipal tax. ​
  • Income tax is paid to the state. ​
  • Municipal tax is tax paid to the municipality in which you live. ​
  • Wage payers are required to deduct taxes from the wages of wage earners and pay these taxes to the state. ​
  • Wage earners pay different amounts of taxes, depending on their income. ​
  • The taxation system has tax brackets that are applied to people's wages. ​
  • On average, people pay about 37.4% of their income in the form of taxes and wage-related expenses. ​
  • Personal tax allowance is deducted from the amount of the taxes. The personal tax allowance is ISK 59,665 per month for the year 2023.
  • Everyone who is aged 16 years or older during the income year and resides in Iceland is entitled to a personal tax allowance. ​

Tax return

  • Everybody is required to file a tax return with the tax authorities in March of each year. This also applies to people who receive social benefits or disability benefits. ​
  • If an individual does not file a tax return, the Commissioner of the Inland Revenue will assess the amount of wages earned by the relevant person.​
  • The tax return is an electronic document which indicates all income, assets, liabilities and tax payments for the year for the relevant person. ​
  • Tax authorities examine the tax return and calculate the amount of official duties which everybody must pay, and compensation if relevant. ​
  • Interest subsidies for housing loans and child benefits to support families with children are calculated based on the tax return. Such benefits are income and asset based.
  • The tax return is on electronic form. ​
  • Usually, all information has been pre-entered on it, for example wages and tax deducted from salaried work. ​
  • The tax return must be verified and filed electronically. This is done using a web key or an electronic certificate. ​
  • The tax return is filed in March of each year under "My pages" at (Support Network). ​
  • The results of the tax authorities' examination of each person's tax return are detailed on a tax assessment slip. Thereon are indicated official duties, compensation and whether the relevant person is owed money or owes money. The tax assessment slip can be found in electronic form under "My pages" at
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