Figures and dates
Glossary: the terms a contractor needs to know
Tax is largely vocabulary. When the terms are clear, the rules become clear too. Here are the ones that come up most often with Skatturinn, pension funds and customers, with the Icelandic word for each.
- Updated
- Sources reviewed
The glossary explains 34 terms the self-employed in Iceland need to understand, from calculated remuneration and withholding to input VAT and disguised employment, each with the Icelandic term and a link to a guide with the 2026 tax-year figures.
The terms
| Term | Icelandic | Explanation |
|---|---|---|
| Contractor | Verktaki | A person or company that takes on work against an invoice rather than as an employee. A self-employed individual is a contractor on their own ID number. |
| Self-employed | Sjálfstætt starfandi | The tax term for an individual running a business in their own name and paying themselves calculated remuneration from it. |
| Sole proprietorship | Einstaklingsrekstur | A legal form where an individual runs a business on their own ID number with unlimited liability. Profit is the owner's income. |
| Private limited company (ehf.) | Einkahlutafélag (ehf.) | A separate legal entity with limited liability for its owners, incorporated at the company registry with share capital. Files annual accounts and its own tax return. |
| Kennitala (ID number) | Kennitala | The ten-digit identification number of individuals and legal entities in Iceland. Mandatory on invoices for both seller and buyer. |
| Employer register | Launagreiðendaskrá | Skatturinn's register of those who pay salaries or calculated remuneration. Registration is required to file withholding and social security. |
| RSK 5.02 | RSK 5.02 | The notification to Skatturinn of the start or change of a business: registration on the employer register and the VAT register. File no later than 8 days before starting. |
| RSK 5.04 | RSK 5.04 | The notification of closure or pause of a business and deregistration from the employer and VAT registers. |
| Calculated remuneration | Reiknað endurgjald | The salary a self-employed person pays themselves for work in their own business, at least Skatturinn's reference amount for their category. The base for withholding, social security, pension and rights. |
| Reference category | Viðmiðunarflokkur (starfaflokkur) | Category A–H in Skatturinn's rules that sets the minimum calculated remuneration by type of work and education. |
| Withholding tax | Staðgreiðsla | Income and municipal tax an employer deducts from salary and files monthly. A prepayment settled at the annual assessment. |
| Withholding return | Skilagrein | The employer's monthly return to Skatturinn of salaries, withholding and social security. Final due date the 15th of the next month. |
| Tax bracket | Skattþrep | The progressive rates of income and municipal tax: 31.49%, 37.99% and 46.29% in 2026, each applied to income within its limits. |
| Personal tax credit | Persónuafsláttur | A fixed amount, 72,492 ISK per month in 2026, deducted from each individual's calculated income and municipal tax. |
| Municipal tax | Útsvar | The municipalities' income tax, collected through withholding at an average rate and settled at assessment by municipality. |
| Social security contribution | Tryggingagjald | The employer's payroll levy, 6.35% in 2026, on salary and the employer pension contribution. Funds unemployment insurance, parental leave and social insurance. |
| Pension fund | Lífeyrissjóður | A fund that receives mandatory contributions, 4% from the employee and 11.5% from the employer, and pays retirement and disability pensions. |
| Employer pension contribution | Mótframlag | The employer's share of the pension contribution, 11.5% of salary. The self-employed pay it themselves. |
| Additional pension savings | Viðbótarlífeyrissparnaður | An optional employee contribution of 2–4% of salary to a personal pension account with a 2% employer match. Reduces the taxable base. |
| Value added tax (VAT) | Virðisaukaskattur (VSK) | A consumption tax, 24% as standard and 11% on certain goods and services, collected and paid by the seller. Registration is mandatory at 2,000,000 ISK turnover in 12 months. |
| Output and input VAT | Útskattur og innskattur | Output VAT is the VAT you add to sales; input VAT is the VAT you pay on purchases. The difference is paid or refunded. |
| VAT period | Uppgjörstímabil | The two-month VAT reporting period. The due date is the 5th of the second month after the period ends. |
| Due date and final due date | Gjalddagi og eindagi | The due date is when a debt falls due; the final due date is the last day to pay without a surcharge. Withholding: due the 1st, final due date the 15th of the next month. |
| Surcharge | Álag | Skatturinn's penalty for late payment or filing, for example 1% per day up to 10% of unpaid withholding, plus penalty interest. |
| Tax return | Skattframtal | An individual's annual return to Skatturinn of income, assets and deductions. Business owners attach a business statement. |
| Business statement (RSK 4.11) | Rekstrarskýrsla (RSK 4.11) | The attachment to a self-employed individual's tax return: income, calculated remuneration, expenses and profit. |
| Vehicle operating statement (RSK 4.03) | Rekstraryfirlit fólksbifreiðar (RSK 4.03) | The form where vehicle costs are itemised and the business-use share is calculated from the mileage log. |
| Mileage log | Akstursdagbók | A record of every business trip: date, purpose, kilometres and odometer reading. Required for deducting vehicle costs. |
| Business expense | Rekstrarkostnaður | A cost incurred to earn, secure and maintain income, deductible under Article 31 of the Income Tax Act with vouchers. |
| Voucher | Fylgiskjal | An invoice or receipt supporting an entry in the books. Kept for seven years. |
| Credit note | Kreditreikningur | An invoice that reverses an earlier invoice in full or in part, referencing its number. Used instead of altering or deleting an invoice. |
| Disguised employment | Gerviverktaka | When an employment relationship in substance is set up as a contract for services. Skatturinn assesses the substance and can reassess both parties' taxes. |
| Tax assessment | Álagning | Skatturinn's final determination of the year's taxes after the tax return, issued in spring or summer. Withholding is credited and the difference settled. |
| Capital gains tax | Fjármagnstekjuskattur | Tax on interest, dividends and capital gains, 22%. Does not apply to salary or calculated remuneration. |
How to use the glossary
Click a term to open the guide that explains it in more detail with the year's figures and sources. If you come across a term in correspondence with Skatturinn or a pension fund that is missing here, send us a note and we will add it.
Sources
- Skatturinn — staðgreiðsla og reiknað endurgjald í rekstriskatturinn.is/atvinnurekstur/stadgreidsla-og-reiknad-endurgjald/
- Skatturinn — almennt um virðisaukaskattskatturinn.is/atvinnurekstur/virdisaukaskattur/almennt-um-vsk/
- Lög um tekjuskatt nr. 90/2003althingi.is/lagas/nuna/2003090.html
- Lög um staðgreiðslu opinberra gjalda nr. 45/1987althingi.is/lagas/nuna/1987045.html
- Lög um virðisaukaskatt nr. 50/1988althingi.is/lagas/nuna/1988050.html
- Lög um skyldutryggingu lífeyrisréttinda nr. 129/1997althingi.is/lagas/nuna/1997129.html
General information, not advice on your situation. Skatturinn and other authorities assess each case. Check the review date and sources before relying on a figure.
Related content
- Getting startedBeing a contractor in IcelandThe complete guide for contractors and the self-employed in Iceland in 2026: registering with Skatturinn, calculated remuneration, tax brackets, 6.35% social security, 15.5% pension, VAT, bookkeeping and rights. With sources.
- TaxesTaxes and contributions for the self-employedWhich taxes and contributions does a contractor in Iceland pay in 2026? Income tax in three brackets, personal tax credit of 72,492 ISK, social security 6.35%, pension 15.5% and VAT. How they add up and when to file.
- Figures and datesFigures for the self-employed in Iceland 2026Every key figure for contractors and the self-employed in Iceland for the 2026 tax year in one place: tax brackets, personal tax credit, social security, pension contributions, VAT rates and registration thresholds, with sources.
- Figures and datesTax calendar for the self-employed in IcelandEvery deadline the self-employed in Iceland need in 2026: withholding tax and social security by the 15th of each month, VAT every two months, pension contributions, wage statements and the annual tax return.
Where does Fustle fit in?
Record the work and create the invoice. The service you choose determines the support included.