Iceland Employment Compliance Hub: Employment, Payroll & Tax Guide
Key Law Terms Overview in Iceland
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Regulation Updates in Iceland
Tax assessment results for individuals 2026
What it is: Tax assessment results for individuals 2026 have been published, and employers will receive information on outstanding balances to be withheld from wages.
What it changes: This creates a payroll withholding obligation for employers and EOR/payroll providers to operationalize the withheld amounts from employees’ wages based on the outstanding balances.
Who is affected:
- Employers
- EOR/payroll providers
What employers should do:
- Prepare to receive information on outstanding balances
- Implement payroll withholding processes to withhold the specified amounts from employees’ wages
Notes: Effective month: 2026-05. Manual verification recommended.
Increase of maintenance requirement for residence permits
What it is: The policy update increases the maintenance income requirement for residence permit applicants, effective May 2026.
What it changes: The higher maintenance requirement means applicants must meet a higher standard of income/maintenance to be eligible for residence and work permits; this affects eligibility for non-EEA hires sponsored by employers and EORs.
Who is affected:
- Employers and EORs sponsoring non-EEA hires
- Applicants seeking residence and work permits who must meet the maintenance requirement
What employers should do:
- Account for the higher maintenance requirement when assessing candidate eligibility for residence and work permits
- Adjust hiring or sponsorship discussions accordingly to ensure candidate qualifications meet the new requirement
Notes: Effective month: 2026-05. Manual verification recommended.
Discover the latest employment and compliance updates in Iceland — helping you stay ahead in a changing regulatory landscape.