Children under the age of 16 are taxed as separate individuals on income received for work and services only. Other income is, if the child's parents are taxed as a couple, taxed with the income of the parent which has the higher net income from employment. If the parents are taxed separately, it is included in the income of the person receiving child benefits because of the child. Personal Income Tax Rates. In income year 1999, the first ISK 81.886 of children's employment income is not taxable.
Special rules apply to income from assets.
As regards both municipal and national income tax, the tax rate payable by non-resident individuals is often the same as for residents. The same applies to individuals receiving payments for services carried out in the country. However, individuals who receive pension from Iceland are taxed like residents. The taxable income of individuals is computed as the total annual income, as adjusted for tax-free income, less allowable deductions. Normally the same tax base applies to both national and municipal income tax.