Starting a business in
🇮🇸Iceland
Checked November 9, 2026 · How we score
Corporate tax
20%
Top income tax
46.29%
Setup from
$1,500
all-in, first year
Time to form
10 days
visit usually needed
What is the corporate tax rate in Iceland?
The headline corporate tax rate in Iceland is 20% in 2026, and individuals pay up to 46.29%. Flat 20% corporate income tax. Dividends received are generally exempt for companies; losses can be carried forward 10 years.
| Corporate income tax | 20% Flat 20% corporate income tax. Dividends received are generally exempt for companies; losses can be carried forward 10 years. |
|---|---|
| Personal income tax (top) | 46.29% Progressive state tax up to 31.35% plus municipal tax of about 12.4–14.9%, giving a top marginal rate of 46.29% on monthly income above ISK 1.4 million. Capital income (interest, dividends, gains) is taxed at 22%. |
| Tax system | Worldwide income |
| Capital gains tax | 22%Capital gains of individuals are taxed at 22% on the gain after an annual allowance, with a lower effective rate for homes owned at least two years. |
| Dividend withholding (non-residents) | 22% |
| VAT / GST | 24% |
| Social security | Employers pay about 6.35% social security tax plus 8–11.5% pension contributions; the 24% VAT has a reduced rate of 11%. |
Forming a company in Iceland
| Usual entity | ehf (private limited company) |
|---|---|
| Minimum capital | $3,700 |
| Setup cost (all-in) | $1,500–$3,500 |
| Annual running cost | $4,000–$9,000 |
| Time to incorporate | 10 days |
| Form remotely as a foreigner | No |
| Local director required | Yes |
| Local address required | Yes |
| Owners on public register | Yes |
| Statutory audit for small companies | Yes |
| Business banking for non-residents | Hard |
Residency and visas
The remote-worker visa lets non-EEA nationals stay up to 180 days with monthly income of ISK 1,000,000 (ISK 1,300,000 for couples). Founders from outside the EEA need a residence permit, and directors must usually be EEA residents.
| Digital nomad visa | Long-term visa for remote workers, $7,300/month income |
|---|---|
| Golden visa | No |
| Ease of residency for founders | 4/5 (1 = easiest) |
Taxes for individuals living in Iceland
Residents are taxed on worldwide income with credit for foreign tax. There is no remittance or territorial regime.
| Foreign income of residents | Taxed |
|---|---|
| Income tax structure | Progressive rates |
| Inheritance / estate tax | 10%10% inheritance tax on estate value above ISK 5 million (2025 threshold); spouses are exempt. |
| Wealth tax | No |
| Annual property tax on your home | Yes |
| Exit tax when you leave | No |
| When you become tax resident | Resident if you have a legal domicile in Iceland, or stay more than 183 days in a 12-month period. |
Special tax regimes
Remote-worker long-term visa
Non-EEA remote workers can live in Iceland up to 180 days while working for a foreign employer; tax residency can start after 183 days.
Low corporate rate vs. high personal rate
A flat 20% corporate rate applies, but combining it with 22% on dividends gives an effective rate of about 37.6% on distributed profit.
Pros and cons
Why founders pick Iceland
- 20% corporate tax
- Strong rule of law, high reputation
- No wealth tax
- Remote-worker visa for non-EEA nationals
Watch out for
- Top personal rate of about 46%
- Very high living costs
- Non-resident setup is hard (Icelandic ID number and local director)
- 24% VAT
- Small domestic market
Best for: Residents of Iceland running local companies · Energy and tourism businesses · Remote workers wanting a stable high-trust base
Iceland: common questions
Is Iceland a tax haven?
No. Iceland is a normal-tax country: companies pay 20% corporate tax and the top personal income tax rate is 46.29%.
What is the corporate tax rate in Iceland?
The corporate tax rate in Iceland is a flat 20% of profit. Dividends paid out to individuals are then taxed at 22%, so distributed profit bears about 37.6% in combined tax.
How do I set up a company in Iceland as a foreigner?
Register an ehf with the Icelandic Business Registry (Skatturinn). You need ISK 500,000 of share capital, an Icelandic ID number (kennitala), a registered address and directors that live in the EEA unless an exemption is granted. Expect about 1–2 weeks and USD 1,500–3,500.
What is the income tax rate in Iceland?
The top marginal rate is 46.29% (state plus municipal) on income above ISK 1.4 million a month. Capital income, including dividends and gains, is taxed at 22%.
Does Iceland have a wealth tax or exit tax?
No. Iceland abolished its net wealth tax in 2006 and has no general exit tax, though it charges a 10% inheritance tax.
Sources
- Skatturinn (Iceland Revenue and Customs)
- Directorate of Immigration Iceland
- PwC Worldwide Tax Summaries – Iceland
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Not tax or legal advice. Rates and rules change; we check official sources and update every page, but verify with a licensed adviser in the country before acting. Spotted something out of date? Use the correction form below.