Deduction from the income of foreign experts

Target group

Foreign experts, who are hired to work in Iceland, as from 1 January 2017.


Experts qualifying are authorised to deduct 25% of income, i.e. only 75% of their income is taxed, by withholding and assessment, for the first three years of employment. In the case where the employer has withheld public levies on salary income from the time the employee began work in this country as a foreign expert until an application is approved, the Director of Internal Revenue shall correct previous with holdings. Salary-related levies, including child support and interest tax rebates shall take account of the total salary of the foreign expert.


An application for deduction as well as supporting documents shall be submitted to a special committee, no later than three months from the date when the employee began work in Iceland.


What are the objectives?

The objective is to attract foreign experts who possess the necessary knowledge and expertise to work in this country and to make it easier for companies to attract such parties to avoid having to take such activity out of the country. This is the case e.g. with Icelandic technology and research companies and the university community. Thus, tax incentives attrack to the country experts, such as in research and development, innovation, production, management, planning, marketing, engineering, finance, information technology, communication technology and teaching, to name a few.

Who can apply?

Applicant should apply for deduction in the application system of Rannís. It is necessary to submit the following documents with applications:

  • Confirmation of domicile story of Registers Iceland - certificate C-122 .
  • Hiring agreement.
  • Curriculum vitae.
  • Employers statement to the effect that such specialised expertise or experience is not available in this country or only to a small extent.
  • Other documents that the applicant considers relevant.

Form and conditions of application

An employee is a foreign expert, irrespective of citizenship, if the following conditions are met:

  • he/she has not resided or held a legal domicile in this country for the next 60 continuous months prior to when he/she began working in this country, although the first three months of his/her stay in this country are not included; and
  • he/she possesses knowledge or experience not available in this country or only to small extent.

The rule is only applicable if the foreign expert:

  • is hired by a legal entity with a legal domicile or a fixed place of business in this country and said party pays him/her as an expert; and
  • is hired to engage in tasks that demand expert knowledge and experience not available in this country or only to small extent; and
  • he/she works in research, development and/or innovation, teaches or works on the solution and/or development of specialised tasks; or
  • is engaged in the execution and management of projects or other tasks that are key elements in the operation of the company.

Processing of the application

In order for an application to be valid, it must be submitted to the committee no later than three months from the date when the employee began work in this country together with all necessary and requested information for each expert. If it does not it shall be rejected. The committee shall normally decide upon an application within three weeks from the date of receipt of the application. If the reasoning and/or supporting documents are insufficient in the opinion of the committee, the committee shall, as it deems necessary, give the applicant the opportunity to correct such shortcomings. In general, the time limit for such purpose shall normally not be more than two weeks. If the deficiencies are not corrected in the assessment of the committee the application shall be rejected. A majority of committee members suffices for the approval of an application. The committee shall maintain a register of the applications received as well as of those applications approved. Committee members  shall observe full confidentiality regarding any information and documents received by the committee. Such confidentiality shall continue in effect after having left the committee.

The committee

An application for deduction shall be submitted to a special committee that assesses whether the employee in question comes under the provisions of the Act and Regulation. The committee shall consist of three members and three alternate members. The Minister of Finance and Economic Affairs as well as the Minister of Education and Culture shall each nominate their committee member and the third shall be appointed without nomination and be the chairperson of the committee. The alternate members shall be appointed in the same manner as the principal members.

The committee reviews applications and evaluates, among others education level, expertise, experience and salary. If the Committee considers that the applicant meets the requirements of the Act and Regulation, it shall notify the applicant of the approval or reject him otherwise. A majority of committee members suffices for the approval of an application. If the application is approved, the committee shall send confirmation to such effect to the Director of Internal Revenue. The decision of the committee is final at the administrative stage.

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