Iceland Tax Deductions 2025

Corporate Income Tax Deductions:

• Business expenses that are directly related to generating income are deductible.

Deductible expenses include:

• Salaries and wages.
• Rent and utilities.
• Cost of goods sold.
• Interest expenses (subject to limitations).  
• Depreciation of assets (according to established rates).  
• Research and development expenses (with specific conditions).  
• Losses can be carried forward for 10 years.  
• Losses can not be carried back.  

Individual Income Tax Deductions:

• Certain expenses are deductible from individual income tax.  

Deductible expenses include:

• Pension contributions.
• Certain interest expenses.
• Union dues.
• Certain charitable donations.  
• Specific professional expenses.
• Personal tax credits are available.  

Value Added Tax (VAT) Deductions:

• Businesses registered for VAT can deduct input VAT from output VAT.  
• Deductible input VAT includes VAT paid on goods and services used for business purposes.  
• Specific rules apply to the deductibility of VAT on certain expenses.

Interest Deductions:

• Interest expenses are deductible if they are related to business activities.  
• Limitations may apply to interest deductions, particularly concerning related-party transactions.  

Depreciation:

• Depreciation of tangible and intangible assets is deductible.
• Depreciation rates and methods are defined by Icelandic tax law.

Charitable Donations:

• Certain donations to approved charitable organizations are deductible, with limitations.

Business Losses:

• Business losses may be carried forward for 10 years.