When you start a new job, it is important to remember the following:

  • The employee must inform their employer as to whether or not their personal tax allowance should be used when calculating withholding tax and, if so, the proportion to be used.
  • The employee also needs to specify the tax bracket their tax should be calculated from, if not the lowest.
  • The employee must inform their employer if they have accrued personal tax allowance or wish to use the personal tax allowance of their spouse.
  •  Employees can find information on how much of their personal tax allowance they have used on the website of the Directorate of Internal Revenue, www.skattur.is.
  • If required, employees can retrieve an overview of their used personal tax allowance during the current tax year to submit to their employer.
  • Everybody working in Iceland must pay taxes.
  • Taxes on your wages consist of: 1) income tax to the state and 2) local tax to the municipality.
  • Income tax is divided into brackets, and the tax percentage is dependent on the wages of the worker. The website of the Directorate of Internal Revenue (www.rsk.is) contains information on the amount of tax deducted based on the amount of income.
  • The amount of tax paid is stated on your payslip. It is important to keep your payslips to prove that your taxes have been paid.
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