Tax liability of students abroad
Students who stay abroad for studies can apply to retain their tax rights in Iceland. This means that, for tax purposes, they may be entitled to the personal tax credit and benefits they would have received if they had been domiciled in Iceland for the entire year.
These extended rights in Iceland do not affect the student’s tax status in the country where they are studying.
Please note that income and assets abroad affect taxation in Iceland (see more on double taxation agreements). If you receive child benefits or similar payments abroad, this will reduce your child benefits in Iceland.
Conditions for application
The individual must have been resident in Iceland for the five years prior to studying abroad
Studies must begin within three months of leaving Iceland
The student must be enrolled in full-time studies
The studies must be at a recognized upper secondary school or university abroad
Application process and required documents
You must apply annually through your tax return by selecting the relevant option on the front page and submitting the required documents. If the documents are not provided, the application will be rejected.
The documents must include the student’s postal address abroad or the address of a representative in Iceland, as well as the student’s last registered domicile in Iceland.
Required documents
The following documents must be submitted with the application:
Confirmation from the educational institution stating:
the program of study during the income year and its duration
the start date of the studies
the expected completion date
Confirmation from foreign tax authorities regarding the income or lack of income of the student and spouse, for example:
a certified copy of foreign tax returns, if income is reported there, or
a written income statement from foreign tax authorities, or
foreign tax assessment notices or confirmation of tax settlement
Confirmation of child benefits or similar payments received abroad during the income year (if applicable)
Studies that qualify for maintaining tax rights in Iceland
Students abroad can retain their tax rights in Iceland if:
The studies are carried out at a recognized foreign upper secondary school or university
The student is enrolled in full-time studies
The duration of the studies is at least 6 months (624 hours per year), except in the case of exchange studies
For the purpose of these rules, studies also include practical training, specialization or professional certification, provided other conditions are met.
If preparatory studies or language courses are required before starting university studies, it is possible to apply for recognition of such studies as qualifying for maintaining tax rights in Iceland.
Students participating in exchange programs at foreign universities may retain their tax rights in Iceland even if their stay abroad is shorter than 6 months, provided they are enrolled at an Icelandic university and other conditions are met.
Studies that do not qualify
Studies at primary or secondary school level abroad that do not lead to formal professional qualifications or certification
Distance learning from an Icelandic university
Decision on tax residency
Iceland Revenue and Customs determines whether a student qualifies to retain tax rights in Iceland. General rules on appeals to tax authorities apply in these cases.
If the Iceland Revenue and Customs does not approve the application, the student will be subject to limited tax liability, meaning they are only taxed on income earned in Iceland after their domicile has been moved abroad.
Family members of the student
If the student’s spouse or children over the age of 16 also stay abroad as a direct result of the studies, they may also apply to retain their tax rights in Iceland.
Cohabiting partners are treated the same as married couples, provided the conditions for joint taxation are met.
Service provider
Skatturinn - Iceland Revenue and Customs