Property Related Taxes in Iceland
Effective Tax Rate on Rental Income |
|||
| Monthly Income | €1,500 | €6,000 | €12,000 |
| Tax Rate | 11.00% | 11.00% | 11.00% |
Nonresident individuals are taxed on their Icelandic-sourced income.
Rental Income Tax
Rental income is taxed under the Capital Gains Tax with a nominal rate of 22%. However, if a person rents out no more than 2 properties that fall under the Icelandic residential law, 50% of the rental income is tax free, essentially reducing the tax rate to 11%.
Capital Gains Tax
Capital gains are taxed at 22% on the proceeds exceeding purchase costs. In case of a sale of a residential property which the seller has owned for more than 2 years, there is no capital gains tax.
Property Tax
Real estate taxes are levied at the municipal level. The tax is imposed on the officially assessed value of the property, at rates that vary depending on which municipality the property is located. The tax rate varies from 0.18%-1.60% of the value of the property.
Corporate Tax
Income earned by companies is taxed at rates varying from 21% (for LLCs and limited partnerships) to 37.60% (other types of legal entities). When calculating taxable income, expenses incurred in acquiring and maintaining income are all deductible.
Property Buying Costs and Taxes in Iceland
| Transaction Costs | ||
| Who Pays? | ||
| Transfer tax (Real Estate Appraisal Fee) | 0.80% - 1.60% | buyer |
| Notary fees | 0.10% | buyer |
| Legal fees | 0.00% - 1.00% | buyer |
| Real Estate Agent Fee |
1.50% - 2.50% |
seller |
| Total costs paid by the buyer: | 0.90% - 2.70% | |
| Total costs paid by the seller: | 1.50% - 2.50% | |
| ROUNDTRIP TRANSACTION COSTS | 2.40% - 5.20% | |
| Source: Global Property Guide | ||