Iceland’s Ministry of Finance and Economic Affairs published an overview of the budget proposals for 2018 on 14th December 2017.
The main tax changes in 2018 included in the fiscal budget proposal are as follows:
- The capital gain tax rate will rise from 20% to 22%, whereupon the tax base will be reviewed. The aim is to make the tax system more equitable, irrespective of the origins of income.
- The exemption from value-added tax on environment-friendly motor vehicles (such as electric and plug-in hybrid vehicles) will be extended. A comprehensive assessment of taxation of motor vehicles and fuel is underway.
- The carbon tax will be increased by 50% instead of the 100% provided for in the 2018-2022 fiscal plan but will rise in coming years, in line with the action plan on climate issues. Previous plans for revenue generation concurrent with equalization of the oil tax and the petrol tax are abandoned, and the withdrawal of excise tax concessions on rental vehicles will be slowed down.
- Various other tax changes will be considered during the new Government’s first year in office; e.g., a reduction in value-added tax on Icelandic written language, music, and books; the tax environment of the media; and taxation of royalties.
