Self employed
Self-employed (own-account workers/contractors) are self-employed, and are not employed by anyone else. A sole proprietorship is a business owned by an individual and is typically operated under its own State Registration number
Own-account workers/contractors
Own-account workers are entitled neither to receive wages from the buyer (for instance, in the event of illness or accident), nor to an employer's matching contribution to pension funds, to accident insurance or to holiday leave entitlement.
Own-account workers/contractors must themselves account for various wage- and operation-related taxes and charges under law. Furthermore, all those operating a business, as well as all employees, are required to contribute to a pension fund between the ages of 16 and 70.
There is a significant difference between the relationship a contractor has with a buyer and the relationship an employee has with an employer. Upon the bankruptcy of the buyer, contractors are, for instance, not entitled to receive payments from the Wage Guarantee Fund at The Directorate of labour.
Own-account workers/contractors receive unemployment benefits, provided certain conditions are met.
A self-employed person's pay is referred to as 'calculated remuneration', and it should be assessed according to the guidelines for calculated remuneration. The withholding tax for calculated remuneration must be paid every month. If the spouse or children of a self-employed person are employed in the business, their remuneration must also be calculated.
Sole proprietorship
The liability of an individual for the obligations of a sole proprietorship is direct and unlimited and in all respects comparable to other personal obligations.
The legal framework for sole proprietorship is simple, the proprietor has a high degree of independence, and the start-up cost is frequently low.
A company belonging to an individual shall bear the individual's full name, but first names may be abbreviated. A sole proprietorship must be registered in the Register of Enterprises.
If a sole proprietorship uses a name other than that of its owner, the enterprise must be registered in the register of firms with the district magistrate in the relevant district.
A sole proprietorship that accounts for a payroll must be registered on the relevant regional tax director's list of employers who pay withholding tax.
A self-employed person's pay is referred to as 'calculated remuneration', and it should be assessed according to the guidelines for calculated remuneration. The withholding tax for calculated remuneration must be paid every month. If the spouse or children of a self-employed person are employed in the business, their remuneration must also be calculated.
Value added tax (VAT) is a withholding tax and a general consumer tax. Business operators must collect and return value added tax from all sales of goods and services, unless specially exempted by law. There are currently two tax brackets in effect for value added tax.
Links of interest
Laws and regulations
Service provider
Iceland Revenue and Customs