Personal tax credit

Personal tax credit is a tax deductions people can use to lower the tax withdrawn from their salaries by their employer.

People 16 years and older who are domiciled in Iceland are entitled to personal tax credit. Those turning 16 get full personal tax credit for the entire year, no matter when their birthday is within the year.

How do I use my personal tax credit?

Before wages are paid, the employer must be informed of the following about the personal tax credit and tax bracket:

• Whether to use personal tax credit

• As of which month

• Cumulative personal tax credit information (if applicable)

• Which tax bracket.

Information about your personal tax credit can be found on www.skattur.is, by logging on with your electronic ID og Skatturinn password.

Responsibility for correct information

It is the responsibility of each individual to inform their employer of the correct tax bracket and how the personal tax credit is to used so that the correct tax is deducted from wages at the time of payment.

Employers do not have access to information on the use of the personal tax credit of other employers.

In the event of over-utilisation of a personal tax credit or payment at the wrong tax level, this can lead to too little tax being paid. This can cause the tax assessment at the end of the year to be negative. In the end, it is the individual who has to pay that debt.

Cumulative personal tax credit

Personal tax credits that are not used for one month accumulate and can be used later in the year. If the accumulated personal tax credit or the personal tax credit of a spouse is to be used, the employer must be informed of this.

A statement on personal tax credit usage can be found on www.skattur.is, by logging on with an electronic ID or Skatturinn password. This statement can be presented to an employer if needed.

Accumulated personal tax credit does not transfer from one year to another.

Special rules apply to the accumulation of a personal tax credit for non-residents.

Temporary stay or moving to or from Iceland

Those who move to or from Iceland during the income year or work temporarily in Iceland are only entitled to personal tax credit for the days they are domiciled in Iceland.

In these cases, the statement of used personal tax credit can give false hope of accumulated tax credit for the whole year and not just the limited stay in Iceland.