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 for the deduction 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 working in Iceland 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 with supporting documents shall be submitted to a special committee, no later than three months from the date when the expert began working 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 through the Rannís application system.  The following documents shall be submitted with applications:

  • Confirmation of domicile from Registers Iceland - certificate C-122 .
  • Employment agreement.
  • Curriculum vitae.
  • Employer's 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 resides and has a legal domicile in this country; 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.

New employment

The right for deduction is not automatically transferred between places of employment.

The following takes effect as from 1 August 2022:

If an expert, who has been granted the right for deduction by the committee, changes jobs within the three year period of the deduction right, he/she may renew his/her application within a month from taking up a new position. A follow-up application for renewed deduction shall be submitted to the committee no later than one month from starting working in the new workplace. Failure to comply will lead to rejection of the application. The renewed right for deduction shall be valid until the end of the initial three year period. 

More information

This website is built with Eplica CMS