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Living and working in Iceland

Last reviewed 5 Nov

Average rent per square metre: Iceland: 3,521 ISK/m² a month; Reykjavík: 3,915 ISK/m² a month (Húsgreind, rents from the HMS rental register)

How income tax works: Tax is withheld in three brackets that combine state and municipal tax: 31.49% on monthly pay up to ISK 498,122, 37.99% up to ISK 1,398,450 and 46.29% above. A personal tax credit of ISK 72,492 a month comes off the tax. Your 4% pension contribution is taken before tax. (Skatturinn, Tax brackets 2026)
Monthly pay where the higher rate starts: 37.99%, about ISK 5.98 million a year. The top 46.29% rate starts above ISK 1,398,450 a month. (Skatturinn, Tax brackets 2026)
Tax relief for foreign experts: Qualifying foreign experts are taxed on only 75% of their income for their first 3 years of work in Iceland. Apply through Rannís. (Skatturinn, Foreign experts)

Statutory annual leave: Paid through a 10.17% holiday allowance. Most agreements raise it to 25 to 30 days with time in the job. (Work in Iceland, Workers' rights)
Public holidays on weekdays in 2026: Plus half days on Christmas Eve and New Year's Eve. (Central Bank of Iceland, Public holidays)
Standard working week: With 37.5 hours of active work under the shorter-week agreements of 2020 and 2021, and 36 in some sectors. (Work in Iceland, Workers' rights)
Notice periods: There's no legal probation period. Under the general agreements, notice is 12 days after 2 weeks in the job, 1 month after 3 months, 2 months after 2 years and 3 months after 3 years, running from the end of a month. (SGS, Notice period for termination)
Parental leave: 12 months in all: 6 months per parent, of which up to 6 weeks can be transferred. It pays 80% of average pay, up to ISK 900,000 a month for children born in 2026. (Work in Iceland, Maternity and paternity leave)
Sick pay: Paid by the employer: 2 days for each month worked in the first year, then 2 months on full pay after a year, 4 months after 5 years and 6 months after 10. (island.is, Sick leave rights)
Pension: A compulsory occupational pension fund: 4% from the employee and 11.5% from the employer. (KPMG, Icelandic Tax Facts 2026 (PDF))

Work permit routes: EU and EEA citizens need no permit; they register a legal domicile with Registers Iceland. Others need a work permit for expert knowledge: a degree or equal expertise, with the job advertised in the EEA first. Permits last a year and can be renewed; permanent residence is possible after 4 years. (island.is, Work permit for expert knowledge)

EU Pay Transparency Directive: Iceland isn't in the EU. Since 1 September 2026, employers with 50 or more staff must publish a gender pay-gap report every three years, replacing the equal-pay certification. (island.is, New legislation on gender pay gap reporting)

General information, not tax, legal or immigration advice.