Personal tax credit when moving to Iceland

Individuals resident abroad are generally not entitled to personal tax credit in Iceland. Individuals who move to Iceland or stay here temporarily for work are generally entitled to personal tax credit from the date of arrival until the date of departure.

There are, however, exceptions to this rule (see the section on citizens outside the EEA/EFTA).

Moving to Iceland

Entitlement to personal tax credit is limited to the period during which a person resides in Iceland. To use the personal tax credit, you must inform your employer of your date of arrival in Iceland and emphasize that the credit may only be used from that date.

On Skatturinn's service portal, you can obtain an document with your personal tax credit status, which many employers request. However, this document does not give an accurate picture of entitlement to accumulated personal tax credit for individuals who have lived abroad for part of the year.

The document assumes entitlement to personal tax credit from the beginning of the year, which does not apply to individuals who have lived abroad.

Citizens of countries outside the EEA/EFTA

Individuals who come to Iceland from countries outside the EEA/EFTA must have legal domicile in Iceland in order to use the personal tax credit. Proof of stay in the country alone is not sufficient.

To be entitled to the personal tax credit, the individual must have unlimited tax liability in Iceland. This means that all income and assets, regardless of where they originate or are located worldwide, are taxable in Iceland, unless a double taxation agreement states otherwise.

The right to use the personal tax credit therefore applies from the date on which legal domicile is registered in the National Registry.

An exception applies if an individual receives wage income before legal domicile is registered. In such cases, the individual is entitled to a personal tax credit for those payments based on limited tax liability. In these situations, any unused personal tax credit may not be transferred to a spouse who has legal domicile in Iceland.

Use of a spouse’s personal tax credit

To be entitled to a transferred personal tax credit from a spouse, both parties must have legal domicile in Iceland and meet the conditions for joint taxation. See further information on personal tax credit between spouses.

If the registration of legal domicile in the National Registry has been made retroactively, it is possible to request the spouse’s personal tax credit be used from the date the registration took effect. This is done on the tax return in March the following year.