Inheritance tax

Inheritance tax is paid on the net assets of the estate which are assets less liabilities and expenses.

A spouse in a marriage pays no inheritance tax. The same applies to a cohabiting partner who has entered into a cohabiting partnership with a heir and is succeeded by a heir in accordance with a will. The status of cohabiting spouses must be specified in a will.

Inheritance tax shall be paid on the amount exceeding the tax-freedom threshold. Inheritance is granted tax freedom in proportion to its inheritance. Example: The untaxable fraction is ISK 6,203,409. If the heirs' inheritance ratio is 33.33%, the untaxable portion is ISK 2,067,596. If the heirs' inheritance ratio is 22.22%, the untaxable portion is ISK 1.378,397.

The tax freedom limits change on 1 January each year in accordance with the consumer price index and are the following of the estates that were established:

• 1 January 2025 to 31 December 2025 ISK 6,498,129.

Tax freedom does not apply to prepaid inheritance. In advance payment of inheritance, inheritance tax is paid on the entire value of the assets being delivered.