English video and information material
The minimum wage
Minimum wage refers to the minimum amount of wage that the employer is obligated to pay its employees for the work they have done during a certain period.
In Iceland, the minimum wage is based on the wage agreements made through collective bargains and vary between occupations and unions.
Minimum terms for professions are based on:
- The job
- Employee’s education
- Employee’s experience
- Other factors
Though different agreements are between unions and employers, most lower paying employment are covered by the minimum wage agreement between the biggest unions and Samtök atvinnulífsins – SA (Confederation of Icelandic Enterprise).
According to that agreement the minimum wage for full time (40 hours a week) for individuals 18 years old and over, who have been with the employer or company for more than 4 months is:
May 2021 kr. 351.000 a month (2.248,51 Euro)
May 2022 kr. 368.000 a month (2.357,31 Euro)
An agreement that is below these minimum terms in any given time is invalid, and these terms also apply to those who are not members of unions.
Migrant workers in Iceland are entitled to the same rights and terms as that of other workers in Iceland with regards to minimum wages and other wage related issues, overtime payments, the right to vacation pay, maximum working hours and minimum rest periods.
What taxes must be paid?
Taxes in Iceland
All working individuals in Iceland must pay tax on personal income. This tax is then divided to the state and municipalities, the percentage of the tax and more information on where your taxes go can be seen on the website of the Skatturinn (Icelandic tax, www.rsk.is) and on “your pages” area at www.skattur.is.
In general, the monthly deduction of payroll tax serves as a contribution for:
- Public spending like the education-, health- and welfare- system.
- Retirement pension.
- Unemployment benefits and paternity leave.
- Accidents derived from work.
All taxes are shown on the paycheck each month, and it is important to keep your paycheck for at least one year, for proof of taxation.
Personal Tax Credit
All individuals in Iceland have a personal tax credit that accumulated over the year, but starts at zero every January.
The personal tax credit in 2021 is
50.792 kr. per month
- All personal tax credits are digital.
- You must give your employer access to your tax credit to be used.
- You can share your tax-credit with your spouse (if married or living together).
Information on balance regarding your personal tax credit can be seen on RSK website.
- To be able to log on to the website all individuals need to have an electronic ID or RSK password key.
The website for all information on tax in Iceland
Video on tax credit:
What are the payroll expenses/taxes?
Rates and amount in Iceland: 2021
The Icelandic taxing system is divided into three part:
31,45 % of wages 0-349.018 kr.
37,95 % of wages 349.019 – 979.847 kr.
46,25% of wages over 979.847 kr.
Individuals who have two jobs must make sure that if the monthly salary exceeds ISL 336.916 from one employer to another, that latter must calculate income tax in a higher bracket for additional amounts.
Tax Returns
Individuals must file a tax return once a year, in March.
Few important things to have in mind:
- Tax return is done online through www.skattur.is
- You must have an electronic ID or web key.
- You can apply for a delay.
Taxable income:
- Cash payments
- Wages
- Fees
- Sickness allowance
- Benefits of any kind
Individuals that stay in Iceland for less than six months in a twelve-month period have limited tax liability in Iceland. They are also allowed the same deduction for expenses as residents and have personal tax credit.