Deduction from the income of foreign experts

Target group:

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

Objectives:

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.

Deadline:

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 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.