This article provides a clear overview of the corporate tax regime for companies in Iceland for 2025, focusing on relevant rates, applicable entity types, and key structural features. All figures and regulations referenced are current, offering insight for those considering commercial operations or investments in Iceland.
Overview of Corporate Taxation in Iceland
Iceland’s corporate tax system in 2025 is characterised by a flat tax rate for most companies, with a substantially higher rate for specific legal entities. The system uses a straightforward approach without progressive brackets, making base calculations more predictable for businesses.
Corporate Tax Rates and Structure (2025)
| Entity Type | Tax Type | Rate (%) | Currency (ISK) |
|---|---|---|---|
| Limited Liability Companies (LLCs) & Limited Partnerships | Flat | 20% | ISK |
| Other Legal Entities (e.g., partnerships) |
Surtax (Flat) | 38.4% | ISK |
The standard corporate tax rate for Icelandic limited liability companies (LLCs) and limited partnership companies is 20%. This flat rate applies to the taxable income of these entities, regardless of profits level, as there are no brackets in the Icelandic system.
Other legal entities—most notably partnerships that do not qualify as LLCs or limited partnerships—face a considerably higher surtax of 38.4%. This differentiation can have a substantial impact on the optimal structure choice for your business in Iceland.
Tax Currency and Assessment Basis
All corporate tax liabilities in Iceland are calculated and paid in Icelandic Króna (ISK). The assessment is based on corporate income, with no specific information provided for minimum or maximum holding periods that would affect tax treatment.
Key Features of the Icelandic Corporate Tax Regime
- Simple Flat Rate: Most companies benefit from a non-progressive, flat 20% corporate tax rate.
- Surtax for Other Entities: Non-LLC legal entities, such as general partnerships, are taxed at a substantially higher flat rate (38.4%).
- No Progressive Brackets: There are no graduated brackets or stepped rates for higher profits—rate remains fixed for each entity type.
- Tax Basis: Only corporate income is assessed; no alternative minimum tax or public information on further adjustments was available for 2025.
Current Data Gaps
Data on minimum or maximum holding periods that may impact the tax rate or eligibility for reduced rates is not disclosed by Icelandic authorities. Any potential updates typically follow Icelandic tax law cycles and may be shared in yearly revisions.
Pro Tips: Navigating Icelandic Corporate Tax in 2025
- Review your entity type before registration: Choosing an LLC or limited partnership can result in a much lower tax rate than organizing as another kind of legal entity.
- Budget tax payments in ISK: Since all assessments and payments are strictly in Icelandic Króna, closely monitor exchange rates if your company operates cross-border. As a reference, 1 ISK ≈ $0.0072 USD as of early 2025.
- Confirm latest classifications: Icelandic definitions for legal entities can be precise. Ensure your entity is correctly classified to avoid unexpected 38.4% surtax exposure.
- Integrate tax planning early: Iceland’s lack of progressive brackets makes annual forecasting more straightforward. Leverage this for clear financial planning and cash flow management.
- Monitor annual updates: While rates are historically stable, confirm details with the official Directorate of Internal Revenue (rsk.is) before finalising your tax plans for the new year.
Official Resources
In summary, Iceland employs a straightforward, flat corporate tax rate of 20% for LLCs and limited partnerships, while other entities—especially standard partnerships—face a much higher rate of 38.4%. Tax planning in Iceland is mostly about correctly choosing and maintaining your legal structure, given the stark differences in rates by entity type. Since there are no brackets, the system promotes predictability, but close attention to entity classification and ongoing compliance is essential for any company considering operations in Iceland.