On 29th December 2017, The Icelandic Parliament has approved a number of tax changes under the 2018 budget. The budget increase tax on investment income, environmental and sin taxes, and it also extended the value-added tax break on supplies of low-emission vehicles. Changes are:

  • The withholding tax rate has been increased from 36% to 37.6% for companies with limited tax liability and who have a fixed business place in Iceland;
  • The non-resident rate applicable to interest income has increased from 10% to 12%;
  • The standard rate of withholding tax on Icelandic interest, capital gains and dividend income has been increased from 20% to 22%. However 50% of the rental income of residential housing received by persons is exempt from income tax;
  • Tax on investment income has been increased from 20% to 22%.