Wages and Taxes
A community-curated guide by Iranian-Icelandic Community
Wages and Payslips
Salaries in Iceland are paid monthly at the beginning of the month, with net income deposited directly to your bank account after tax deductions. Payslips are usually issued electronically via your bank's online services. Deductions include retirement fund contributions (minimum 4% employee, 11.5% employer), union fees, and workplace association costs.
Tax System
All residents earning income must pay income tax. On average about 37.4% of income goes toward taxes and wage-related expenses. All residents must submit a tax declaration in March each year. File online at www.skattur.is. Tax authorities calculate owed taxes and eligibility for family housing benefits and child allowances.
Illegal Work
Working without a formal contract (unregistered or 'under-the-counter') is illegal: it means no healthcare coverage, no vacation pay, no retirement contributions, no unemployment benefits, no work accident insurance, and difficulty obtaining loans or housing. Unreported wages are considered tax evasion and carry legal penalties.