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Labor Laws in Iceland

  • Annual Leave: 24 days
  • Maternity Leave: 6 months
  • Public Holidays: 16
  • Workweek: 8 hours per day.

Income Tax in Iceland

Income Tax in Iceland is progressive ranging from 31.48% to 46.28%

Value Added Tax (VAT) in Iceland

Iceland has a standard VAT rate of 15%.

Social Security in Iceland

The social security contributions for employers and employees are as follows:

Employer Contributions

  • Employers pay a general social security contribution (national insurance) of 6.35% on employee earnings.
  • An additional 0.65% is payable for sailors.
  • If an employee has a foreign A1 certificate, the social security contribution is 0.425%.
  • Employers must contribute a minimum of 11.5% to mandatory pension funds.
  • Employers are also obligated to make a 0.1% contribution to the Icelandic Rehabilitation Fund (VIRK).

Employee Contributions

  • Employees must contribute a minimum of 4% of their monthly earnings to mandatory pension funds.
  • Employees can choose to make additional voluntary pension contributions of up to 4%, in which case the employer is obligated to contribute an additional 2%.

Work Visas Iceland

The work visas available to legally work in Iceland include:

Temporary Work Permit for Experts

To work in Iceland as a foreign expert from outside the EEA, EFTA, or Faroe Islands, you must apply for a temporary work permit under these conditions:

  • Expert Knowledge: You possess specialized skills and knowledge.
  • Local Unavailability: The employer couldn't find a suitable candidate locally or within the EEA, EFTA, or Faroe Islands with equivalent qualifications.
  • Critical Role: Your expertise is crucial for the employer's operations.
  • Employment Contract: You have a signed contract with your prospective employer.

Long-term Remote Work Visa

  • This visa allows individuals who work for foreign companies to live and work in Iceland for up to six months.
  • This is aimed at digital nomads and requires proof of remote work and a minimum monthly income of ISK 1,000,000.

Residence Permit for Work

  • This permit applies to employees who have a job offer in Iceland and fulfill specific conditions such as work requiring expert knowledge, labor shortages, or work based on service contracts or collaborations.

General Work Permits

  • These are necessary for non-EEA/EFTA nationals who intend to work in Iceland. Employers must apply for these permits on behalf of the employees, and they need to be compliant with Icelandic labor laws.

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