Iceland

{"ftc_utility":"high","fbar_trigger_notes":"US expats in Iceland will typically hold local ISK-denominated bank accounts. If aggregate balances across all foreign accounts exceed $10,000 USD at any point during the calendar year, FBAR filing (FinCEN 114) is required. Iceland's banking system is well-integrated; most expats will exceed this threshold quickly.","ftc_utility_reason":"Iceland's personal income tax rates (31.48% to 46.28%) substantially exceed US federal rates, so Foreign Tax Credits are highly effective at eliminating US tax liability on Iceland-source income. Most US expats resident in Iceland will owe little or no US federal income tax after applying FTCs, making the FTC approach often preferable to FEIE for higher earners.","presence_day_count_notes":"Iceland allows EEA/Schengen-area freedom of movement. US citizens do not require a visa for stays up to 90 days but must obtain a residence permit for longer stays. Once a residence permit is obtained, satisfying 330 days outside the US in any 12-month period is straightforward for full-time Iceland residents. Days spent in Iceland count toward the 330-day physical presence test as long as they are spent outside the US.","typical_qualifying_method":"either","housing_exclusion_available":true,"physical_presence_test_applies":true,"estimated_housing_exclusion_usd":35000,"local_tax_rate_on_earned_income":0.3798,"bona_fide_residence_test_applies":true}

{"pension_income":{"notes":"Foreign pension income received by Iceland residents is generally taxable at progressive income tax rates. Icelandic pension income is also taxed at standard progressive rates. The applicable rate depends on total income; rates range from 31.48% to 46.28% for 2024.","tax_rate":null,"locally_taxed":true},"social_security":{"notes":"Under the US-Iceland tax treaty, US Social Security benefits paid to an Iceland resident are generally taxable only in the United States. Iceland typically does not tax US Social Security benefits received by residents. A totalization agreement between the US and Iceland also exists, coordinating social insurance contributions.","locally_taxed":false,"treaty_protection":true},"roth_distributions":{"notes":"Iceland does not recognize the Roth IRA's tax-exempt status under US law. Distributions from a Roth IRA may be treated as taxable income in Iceland unless the treaty provides relief. The 1975 treaty predates the Roth IRA and does not explicitly address it; tax treatment is uncertain and individuals should seek local tax advice.","locally_taxed":true},"us_401k_ira_distributions":{"notes":"The US-Iceland tax treaty (1975, as amended) generally allocates taxing rights on pension and retirement distributions to the country of residence. A US resident receiving Icelandic pension would pay tax in the US; an Iceland resident receiving US 401k/IRA distributions would generally be taxed in Iceland at progressive rates starting at 31.48%. Treaty Article 18 covers pensions. US expats should analyze treaty provisions carefully and may need to file a claim to avoid double taxation.","tax_rate":0.3148,"locally_taxed":true,"treaty_protection":true}}

{"rate":0.22,"notes":"Capital gains for individuals in Iceland are taxed at a flat 22% rate. This applies to gains from sale of shares, bonds, and most other capital assets.","details":{"tax_type":"Capital Gains Tax","country_name":"Iceland","country_iso_code":"ISL","source_references":["PwC Worldwide Tax Summaries - Iceland","Skatturinn (Icelandic Tax Authority)"],"last_verified_date":"2026-06-03","general_description":"Iceland taxes individual capital gains at a flat 22% rate, separate from the progressive income tax schedule. Corporate capital gains are generally included in ordinary taxable income and taxed at the standard corporate rate of 20%. Gains on sale of primary residence may be exempt under certain conditions.","corporate_capital_gains":{"rate":0.2,"tax_treatment":"Included in ordinary corporate taxable income and taxed at the standard corporate income tax rate of 20%."},"individual_capital_gains":{"rate":0.22,"tax_treatment":"Flat 22% rate on gains from shares, bonds, and other capital assets. Gains on the sale of a primary residence are exempt if the seller has lived in the property for at least two years prior to sale."}}}

{"notes":"Dividends received by individuals are taxed at a flat 22% rate in Iceland. Dividends paid to non-residents are subject to a 20% withholding tax, which may be reduced under applicable tax treaties.","rates":[{"rate":0.22,"type":"flat","notes":"Flat rate applicable to resident individuals on dividend income."},{"rate":0.2,"type":"withholding","notes":"Standard withholding rate on dividends paid to non-residents; may be reduced by treaty."}]}