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Iceland Investment Income Guide 2026

Investment income in Iceland is generally taxed at a flat 22% rate, with important exemptions for bank interest received by resident individuals.

Dividend Taxation

Dividends received by individuals are taxed at 22%. A withholding tax (WHT) of 22% is deducted at source by the paying company. Resident individuals can credit the WHT against their final tax liability.

Interest Income

• Bank interest: 0% for resident individuals on interest from Icelandic bank accounts
• Other interest: 22% on bond interest, corporate loans, and foreign-source interest
• Interest expense related to investment activities may be deductible

Capital Gains

See the Capital Gains Guide for full details. The standard CGT rate is 22%, with a 0% rate for shares held over 3 years if reinvested.

Withholding Taxes on Investment Income

• Dividends: 22% WHT (may be reduced under DTTs)
• Interest: 22% WHT (0% for resident individuals on bank interest)
• Royalties: 20% WHT (reduced under most DTTs)

Foreign Investment Income

Residents are taxed on worldwide investment income. Foreign tax credits are available under Iceland's over 45 double tax treaties. You must declare all foreign investment income on your annual tax return.

Investment Losses

Capital losses on financial assets can be offset against capital gains in the same year. Excess losses can be carried forward for 3 years.

Tax-Free Accounts

Iceland does not have tax-advantaged investment accounts comparable to ISAs or Roth IRAs. However, occupational pension funds receive favorable tax treatment on investment returns within the fund.