Iceland legal and accounting and tax considerations in 2023
Corporate taxes in Iceland
Tax rate in Iceland
- Resident and non-resident Iceland companies pay 20% income tax on annual profits;
- A non-resident company is taxed only on Iceland-derived income. A resident company is taxed on worldwide income;
- A branch of a foreign company pays 20% tax on income sourced in Iceland;
- An Iceland company may apply to be exempt from corporate income tax if Iceland has signed a Double Tax Agreement with the business owner’s country of residence;
- In Iceland, corporate income tax returns are due to be filed on or before 31 May each year, unless the company chooses an individual tax year.
Other taxes in Iceland
- Standard VAT on goods is 24% (although a reduced rate of 11% applies in some circumstances) and must be filed bi-monthly. This excludes export goods, which are 100% VAT-exempt;
- A company with net operating losses may carry them forward for up to 10 years;
- Withholding taxes are levied at a flat 20% on i) dividends ii) interests and iii) royalties. Foreign branches in Iceland suffer no remittance tax;
- Capital gains from non-business property and disposition of shares are taxed as an investment income, with a progressive rate of 22.9% to 31.8%;
- Social security contributions on all employee wages is levied at 7.6%.
- Personal taxation is progressive, ranging between 37% and 46%.
- Iceland does not impose thin capitalisation rules. However, there are controlled foreign company rules and transfer pricing rules with country reporting requirements;
- Iceland allows corporations to carry forward net operating losses for up to 10 years, but carry-back of losses is not allowed;
- Tax incentives are available for Research and Development companies.
Legal and Compliance
- An Iceland LLC or private limited company is not required to appoint a manager;
- The board of directors of an LLC shall consist of one or more members, each of whom shall be a natural person. The power to appoint and remove directors is governed by the provisions of a company’s constitution.
- Iceland has signed over 40 double taxation and tax information exchange treaties with countries including France, Canada and UK;
- Healy Consultants Group will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparing financial accounting records and iv) preparing forecasts, budgets, sensitivity analysis and other services;
- Companies conducting international business are advised not to register trademarks in Iceland, as they do not offer international protection.