Tax
Worldwide income, combined state and municipal tax, and 24% VAT
Residents are taxed on worldwide income through a state and municipal system administered by Iceland Revenue and Customs. Standard VAT is 24%, with a reduced 11% rate for some goods and services.
Key rules
- Income tax combines progressive state brackets with a municipal rate.
- Standard VAT is 24% (11% reduced).
- Capital income is taxed at a flat rate.
Governing law
- Income Tax Act
- Value Added Tax Act
Penalties and consequences
- Surcharges and interest for late payment; penalties for evasion
In practice
Iceland levies a separate financial-activity tax on the banking sector, a legacy of reforms after the 2008 financial collapse.