Banking & Taxes


The kennitala

The kennitala is an identification number issued by Registers Iceland and it is essential that you apply for it at your earliest convenience. As already mentioned, to get a permanent kennitala it‘s best if you find permanent accommodation quickly and register your legal residence in Iceland, but often you can use the temporary address. Applying for a temporary kennitala is possible if needed, but the permanent kennitala is important as its date of issue controls when you become fully eligible for Icelandic health care. EEA citizens can register as soon as the permanent kennitala has been issued, but non-EEA citizens have to wait 6 months from the date of issue.

Non-EEA citizens get their kennitala when their residence and work permits are approved.

Bank account

Most Icelandic employers deposit salaries directly into your bank account. As soon as you have your kennitala you should apply for a bank account.

When opening a bank account in Iceland you need to bring your passport (or other valid ID) and your phone. Electronic IDs in your mobile phone are widely used in Iceland, e.g. by banks, so getting one is a necessity. Usually, the bank can set one up for you.

Also, make sure the type of account you open and the access to your deposits suits your requirements.

Credit cards are very widely used in Iceland and are a common method to pay for items in installments, but please note that you may have to wait a full year before you can apply for an Icelandic credit card.

Online banking is widely used and available in English. Banks can issue electronic IDs which are needed to access your accounts online, so please bring your phone with an Icelandic SIM card. When applying for bank accounts you are issued a PIN which is necessary for your online banking. Your payslips are accessible online.

Most banks are open weekdays from 09:00-16:00 but some have branches with longer hours.

Below are links to the main Icelandic banks:

Taxes in Iceland

Tax liability

If you stay in Iceland for less than six months in a twelve-month period, your tax liability is limited. This means that you have to pay tax on income arising from sources in Iceland although your unlimited tax liability still is in another country. Taxable income includes, for example, cash payments, wages, fees, sickness allowance, and benefits in kind. You are allowed the same deductions for expenses as residents, i.e. the mandatory payments to pensions insurances funds 4% of total employment income and in addition voluntary pension insurance premiums of up to 4% of total employment income.

If you stay in Iceland for six months or longer in a twelve-month period, you are considered to be a resident of Iceland, which means your tax liability is unlimited from the day you arrive to the country. In that case, you will be taxed on your worldwide income. Further information about taxation in Iceland can be found in English at “Income and capital taxation in Iceland” on the website

Withholding tax

Income tax and municipal tax are withheld by the employer. The amount withheld is calculated on the basis of employment income, including pensions and certain benefits in kind, after deducting pension premiums. When your salary is paid you will receive a payslip showing the amounts withheld as tax, pension premiums etc. Do remember to keep your payslips, they are evidence that the tax has been deducted. The employer pays the tax deducted from your salary.

Personal tax credit

The 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 changes every year. The same applies if you have other income such as pension, benefits, etc.

To ensure that the right amount of tax is deducted, employees must inform their employers whether or not to use their personal tax credit. Without permission from the employee, the employer must deduct full tax, from the salary, without any tax credit.

Employees from the EU who have spouses from the EU (legally married or fulfilling legal requirements for joint taxation) can use their spouse’s personal tax credit from the date of the spouse’s arrival in Iceland as long as the spouse is not using it at their own place of work. It’s important to keep the flight ticket confirmation and attach it to the first tax return as proof of arrival date.

Employees from outside the EU cannot use their spouse’s tax credit but will get reimbursement from the tax authorities following the annual tax return submission.

Tax return

If you are subject to a limited tax liability you must file your tax return to the tax office in the region where you lived, while staying in the country, not later than one week before you leave the country. You can get a tax form RSK 1.13 at the local tax office or at the website, It is necessary that on the tax form you fill out your address in your home country, your taxpayer identification number (TIN) in your home country, and your agent’s address in Iceland.

If you didn’t file your tax return before you left the country it is necessary to do so as soon as possible, and not later than March the year following the tax year. Those submitting their tax return electronically can download notices of collection and taxes from the service web page by using their password. You can apply for a password at

Tax adjustment

Final adjustment takes place on the basis of the tax return at the end of July the year following the tax year. If your withholding tax was higher than your assessment you will get a refund, and if you did not pay enough you must pay the residue. If you have an agent in Iceland who can claim your tax refund or pay for you the residue, he must have written permission from you to receive the payment.


If you wish to file a complaint about the assessment you must contact the local tax commissioner and issue a complaint in writing. The tax commissioner must receive your complaint within thirty days after the date of your assessment. If you are not satisfied with the tax commissioner’s ruling you can appeal further to Yfirskattanefnd (The Board of Internal Revenue) within three months from the date of the ruling.