Iceland Inheritance & Gift Tax Guide 2026
Iceland imposes inheritance and gift tax at progressive rates based on the relationship between the deceased/donor and the recipient. Close family members benefit from a 0% rate.
Inheritance Tax Rates
- 0% — spouses and children (including adopted children and stepchildren)
- 5% — siblings, grandchildren, and grandparents
- 10% — all other beneficiaries (aunts, uncles, cousins, unrelated persons)
These rates apply to amounts exceeding the tax-free threshold of approximately ISK 5,000,000 per beneficiary.
Gift Tax
Gift tax follows the same rates and thresholds as inheritance tax. Gifts from spouses and parents to children are exempt. Gifts to siblings are taxed at 5%, and to others at 10%, on amounts above the ISK ~5M threshold per person per year.
Tax-Free Threshold
The first ISK ~5,000,000 received by each beneficiary from a single estate or donor is tax-free. This threshold is indexed periodically.
Valuation
Assets are valued at fair market value at the date of death (or gift). Property is valued using the fire insurance value (brunabótamat) as a reference, adjusted to market value. Shares and financial assets are valued at their market price.
Filing Requirements
Inheritance must be reported to RSK within 6 months of the date of death. Gift tax returns are due by the filing deadline of the tax year in which the gift was received.
Exemptions and Reliefs
- Spousal inheritance: 0% with no upper limit
- Direct descendants (children): 0% on amounts up to ISK ~5M per child
- Family business relief: reduced valuation for qualifying family businesses
- Life insurance proceeds: generally exempt
Planning Considerations
Annual gifting of amounts below the threshold can reduce the taxable estate. Couples can each make gifts up to the threshold to the same recipient.