Taxes in Iceland
Taxes in Iceland
Keywords:
Filer= the person who must file a tax return.
Tax card= is available at tax offices (Reykjavík, Tryggvagata 19) and the Director of Internal Revenue (Laugavegur 166). To get a tax card you must have an identification number (kennitala) and identification card with your picture on it. The employer must have your tax card in order to use your personal tax credit (persónuafslátt). If you work at more than one place the tax card can be divided, for example 60%-40%, or if you're not working, your spouse may use your tax card. Everyone residing in Iceland gets a tax card at the age of 16, whether they have a work permit or not, since they are regarded as tax payers from that age.
Employee/wage earner= a person working for a specific company, firm/institution.
Income= salary paid to the employee for his work.
Employer/wage payer= a specific company, firm/institution that the employee is working for.
Personal tax credit= a fixed sum deducted from your withholding tax every month, was kr. 29.029 in 2006, is kr. 32.150 in 2007.
Withholding tax/tax= payments to the state of all income, usually deducted from the employees' wages every month. The withholding tax is calculated from your total monthly income (36,72% in 2006 and 35,72% in 2007). Then the personal tax credit is deducted from the calculated sum (if the employee has a tax card) and the difference is paid to the state.
Income tax= a tax payable to the state of the employees' total income. The employer must calculate and pay the taxes for his employees.
Municipality tax= a tax payable to the municipalities of the employees' total income. The employer must calculate and pay the taxes for his employees.
Tax return= forms sent to employees/tax payers every year. Everyone gets a return form and also a web key for filing from the internet. Some only get a web key, but then they must have requested it.
Tax commissioner= the authority responsible for processing tax returns, tax levitation and reimbursements.
Reimbursements= you can file for (a special form) reimbursement of taxes due to, for example, temporary sickness, difficulties/shocks, disabled children, extensive loss of property which has not been reimbursed, or when the filer supports his parents financially. Parents supporting children aged 16-21 while they're studying, are also entitled to reimbursements (income dependent though). The parent must register information on the school the youngster attends as well as his income in a special field on the tax return.
These days everyone will be receiving, by mail, an overview (launamiði) of salaries earned in 2006. Soon tax returns and web keys will be sent to everyone aged 16 years and older. You can file the return manually or from the internet (www.rsk.is, vefskil) by using the web key.
Every year a return must be filed for the income from the previous year (this year salaries for 2006). The deadline for the 2007 tax return is March 21. On the website for the Director of Internal Revenue: www.rsk.is, international, you will find tax returns in 7 languages and pamphlets in 8 languages (working temporarily in Iceland). On the back of the return forms you will find instructions on how to file the return. On the tax return you must also file (register) bank account balance at the end of last year, property (real estate and cars f.ex.) and debt.
If you need assistance in filing the return you can turn to your local tax office, your union or to the Intercultural Centre (Alþjóðahús). Accountants also assist with filing tax returns but their services cost money. If you don't file a tax return, taxes will be levied on your estimated income for last year. It is important to file the return since the estimate is usually much higher than your income.
It is important to keep all pay slips because, if the employer does not pay withholding tax of the employees' salary to the state, the employee will have to prove that the tax was deducted from his salary, otherwise he will have to repay his taxes.
The Director of Internal Revenue
Laugavegur 166
105 Reykjavík
563 1100
www.rsk.is
The Tax Commissioner in Reykjavík
Tryggvagata 19
101 Reykjavík
560 3600
www.skr.is
