All residents (those who have been more than 6 months in Iceland in a rolling 12 month period) must pay taxes on worldwide income in Iceland. 

Tax returns must be completed every March for the previous year (tax year is Jan to December).  Employers can help with this but the self employed need to pay withholding taxes each month in advance of tax being due.  Accountancy advice is important, but expensive in Iceland.   

Personal tax credit is a tax deduction employees can use to lower the tax withdrawn from their salaries by the employer. The personal tax credit is 54.628 ISK per. month in the year 2020. The same applies if you have other income such as pension, benefits etc. 

An individual that stays in Iceland for less than six months in a twelve-month period, has limited tax liability in Iceland. This means he has to pay tax on income arising from sources in Iceland although he still has unlimited tax liability in another country. 

Persons moving to or from Iceland or those only temporarily employed in Iceland are entitled to personal tax credit for each day they are resident in Iceland.  Please note that persons from countries outside of the EEA and/or EFTA may need a work permit.