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Icelandic Budget Proposes Income Tax Reform

by Ulrika Lomas, Tax-News.com, Brussels

13 September 2018


Iceland's 2019 Budget includes proposals to increase the personal deduction and index income tax thresholds to the consumer price index.

The Budget proposes increasing the personal deduction by one percentage point above the 12-month rise in CPI. It also intends for the increase in the entry threshold to the upper tax bracket to be linked to CPI.

Iceland has two tax brackets. Taxpayers are allowed to deduct a certain amount each year from their income tax, calculated in proportion to the length of time they have been resident in the country.

The Government expects that individuals' tax payments will fall by ISK1.7bn as a result of these changes.

The Budget also proposes that the payroll tax be reduced by 0.25 percentage points at the start of 2019, and by another 0.25 percentage points at the beginning of 2020. The Government said that this equates to a combined 9.3 percent reduction in the payroll tax.

TAGS: individuals | tax | Iceland | employees | tax thresholds | payroll | tax reform | individual income tax

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