Establishing and maintaining an Iceland payroll
Iceland has gone through a strong period of recovery in the years following the 2008 financial crisis, and is now a significant draw for foreign investment.
If your organization is looking to expand into Iceland, one of the first steps will be hiring employees locally, and this requires setting up a payroll in the country. While it is certainly possible to do this, Iceland’s unique employment laws, as well as language and cultural barriers, can cause delays and make it a lengthy process for foreign businesses.
At New Horizons, we specialize in providing Iceland payroll support services, offering organizations a way to outsource the time-consuming process of setting up a payroll. We offer flexible service packages, whether or not your organization already has an Icelandic entity.
If you have an entity in Iceland
For any organization that already has an official entity in Iceland, we can set up and run your in-country payroll, managing everything from HR to contracts and compliance work.
This is a great option for larger businesses and those aiming for a medium to long-term operation in Iceland.
If you don’t have an entity in Iceland
If you have not registered an official entity in Iceland, we can provide our more comprehensive payroll service, offering our Icelandic subsidiary to work as your employer of record in the country. Our Iceland payroll experts can also manage your HR, contracts, legal compliance, and more.
Build your business in Iceland with help from New Horizons
Iceland payroll guide
What withholdings and taxes are required in Iceland?
Employees in Iceland must pay an income tax, which is on a progressive scale ranging from 20.6% to 31.8%, and a municipal tax of 14.44%.
The corporate rate in Iceland is generally 20%. However, there are different rates for different types of businesses, such as partnerships.
Entitlements and terminations
Employees in Iceland are generally entitled to between one week and six months of service, depending on length of service. Employers must also hold a meeting with employers to explain the circumstances and reasoning for the termination.
Probation periods are generally limited to three months.
How to establish an Iceland payroll and hire employees
To hire employees in Iceland, you will generally need to set up a payroll, register an Icelandic entity, and open an Icelandic bank account. This process can potentially take weeks to complete.
You can avoid the unnecessary hassle by outsourcing to the experienced New Horizons Iceland payroll experts. Our team will handle everything for you, ensuring you are set up in days, not months. You can also choose to hire using our Iceland subsidiary as your employer of record, helping you can focus on expanding your operations whether or not you already have a registered entity in Iceland.