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If you stay in Iceland for less than 6 months per year your tax liability is limited. Then you only have to pay tax on the income made in Iceland but you still pay taxes in your country of origin. If you however stay longer than 6 months a year in Iceland you wil pay all of your taxes in Iceland.
Steps of income taxation (2011):
For the first 1400 Euro pr. month - 37,34%
From the next 2860 Euro pr. month - 40,24%
Income exceeding 4260 Euro pr. Month - 46,24%
Everyone recieves Personal tax deduction wich at the time of writing is approx. 275 Euros, which counters taxation each month. Quick Explanation how the taxation works
Further information about tax liability of foreigners in Iceland can be found on the website of the Icelandic Revenue Service
Application for a taxcard for temporary stay or payment
You must supply your employer with a tax card, once you have done so you will be automatically taxed each month, your employer will take care of deducting tax from your paycheck.
Like in most European countries there is tax on all sold products in stores and is always included in the price.
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