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Getting started

Starting out: seven steps to your first invoice

You do not need to know everything in advance. You need to do a few things in the right order, and there are fewer than most people think. Here they are, with what to decide at each stage.

Updated
Sources reviewed
Tax year
2026

To start as a contractor in Iceland you choose a legal form (usually a sole proprietorship on your own ID number), notify Skatturinn with RSK 5.02 no later than 8 days before starting, choose a category and calculated remuneration, name a pension fund, register for VAT if turnover will exceed 2,000,000 ISK, set up an invoicing system with an unbroken number sequence, and file the first withholding return by the 15th of the following month.

Key figures

Notification
RSK 5.02, 8 days before starting
First withholding return
final due 15th of next month
VAT registration
mandatory above 2,000,000 ISK turnover
Pension fund
chosen at registration
4% + 11.5%
Vouchers
kept for 7 years

Step 1: Confirm it is contract work

Self-employment means you decide how and when the work is done, use your own equipment, carry financial risk and preferably work for more than one client. If a single buyer sets your hours, provides equipment and directs the work like a manager, Skatturinn can treat the relationship as employment. Read contractor or employee before you sign.

Step 2: Choose a legal form

Sole proprietorshipPrivate limited company (ehf.)
Set-upregistration with Skatturinnincorporation at the company registry, share capital
Liabilitypersonal and unlimitedlimited to the company
Taxcalculated remuneration + profit on your returnowner salary + corporate tax + capital gains tax on dividends
Filingswithholding return, VAT, tax return with RSK 4.11withholding return, VAT, annual accounts and company tax return
Suitsone owner, moderate riskscale, employees, several owners

Most people start as sole proprietors. You can switch to an ehf. later.

Step 3: Notify Skatturinn (RSK 5.02)

No later than 8 days before the business begins, register on the employer register at skattur.is and, where relevant, on the VAT register. In the notification you state:

  • Category (A–H) under the calculated remuneration rules. It depends on the kind of work you sell.
  • Calculated remuneration per month, at least the category's reference amount.
  • Pension fund. If your profession has no fund of its own you can choose a general fund. Lífeyrismál.is lists the funds.
  • VAT. Mandatory once turnover exceeds 2,000,000 ISK in 12 months; optional below that if the activity is taxable.

Details: RSK 5.02.

Step 4: Open a business account and an invoicing system

Separate business money from personal money with a dedicated bank account; it saves time in bookkeeping and at return time. Invoices must run in an unbroken sequence with ID numbers, a description and VAT shown separately. See invoicing.

Step 5: Send the first invoice

Issue the invoice when the work is done or delivered, with a due date and payment details. If VAT-registered, add 24% (or 11%). If not, say so. Keep the invoice for seven years.

Step 6: File the first withholding return

For every month from registration you file a withholding and social security return at skattur.is with a final due date on the 15th of the next month, and pay the pension contribution. The amounts are based on calculated remuneration, not on what was collected. On 400,000 ISK of calculated remuneration the 4% contribution is 16,000 ISK, taxable income 384,000 ISK, withholding 120,922 ISK less the 72,492 ISK credit = 48,430 ISK, employer pension 46,000 ISK and social security 28,321 ISK. See withholding tax and the tax calendar.

Step 7: Make bookkeeping a routine

Store receipts for business expenses as they arise and note what they relate to. If you use a car in the business, keep a mileage log from day one. Every two months you file a VAT return and in March a tax return with the business statement. See expenses and tax return.

What you do not need to do

  • You do not need an accountant for a sole proprietorship.
  • You do not need to set up a company to send an invoice.
  • You do not need to be VAT-registered below 2,000,000 ISK of turnover.
  • You do not need an office; working from home is fine, but document the costs.

Where Fustle comes in

Fustle is the tool for steps 4–7: invoices in sequence, receipts and expenses in one place and, in Payroll, calculation of withholding, social security and pension with the year's figures. Your first five sent invoices on Invoicing are free. Start invoicing.

Frequently asked questions

How long does it take to get going?

Electronic registration with Skatturinn takes a few days to process and the notification must arrive 8 days before you start. The invoicing system and bank account are set up in parallel. Being ready to send the first invoice within two weeks is realistic.

What does it cost to start?

Registration with Skatturinn is free. The cost is your time, an invoicing system and possibly advice. Taxes and contributions accrue in proportion to calculated remuneration from the first month.

Can I start working before the registration is approved?

Skatturinn expects the notification before the activity begins. If you start earlier you risk an estimated assessment and surcharges. Send the notification first.

How do I choose a category?

The category depends on the nature of the work and your education or experience, not on what you charge. Skatturinn publishes descriptions of the categories with each year's reference amounts. If the work spans more than one category, the one covering the larger share applies.

Sources

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.

Where does Fustle fit in?

Record the work and create the invoice. The service you choose determines the support included.

Explore Invoicing →Try the payroll calculator →