Iceland's 2026 Tax Reform: Impact on Investors and Businesses

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In October 2025, Iceland’s Minister of Finance and Economic Affairs introduced a draft bill proposing amendments to a range of tax laws. The proposal reflects the government’s intention to modernise the tax framework in response to economic conditions, social policy priorities, and emerging financial activities. While still at the draft stage, the bill provides a clear indication of the direction of Iceland’s tax policy for 2026 and beyond.

The reform package combines measures aimed at supporting investment, improving tax administration, and addressing social and international considerations.

Investment support in Iceland

A central feature of the draft bill is the extension of temporary tax deductions for share purchases. This measure is designed to encourage private investment in companies and to support capital market activity. By prolonging the incentive, the government signals its commitment to maintaining an attractive environment for long-term investors.

The bill also proposes adjustments to deadlines related to infrastructure taxes. These changes are intended to ease compliance and provide greater flexibility for taxpayers involved in infrastructure development.

Social and international aspects of tax regulation in Iceland

The draft legislation includes measures to safeguard child benefit rights linked to Brexit-related arrangements. These provisions aim to ensure continuity of social entitlements for affected families despite changes in the legal framework following the United Kingdom’s withdrawal from the European Union.

Additional social measures include tax exemptions for lottery winnings and an increase in the tax-free income threshold for children. Together, these changes reflect an effort to enhance household support and reduce the tax burden on lower-income families.

Regulation of virtual asset services in Iceland

Another significant aspect of the bill is the introduction of new obligations for virtual asset service providers. This move aligns Iceland with broader international trends towards stricter regulation of digital assets and cryptocurrencies, with a focus on transparency, reporting, and tax compliance.

For market participants, the proposed rules imply higher compliance standards and closer regulatory oversight in the rapidly evolving digital asset sector.

Implications for taxpayers and investors in Iceland

Overall, the proposed tax reform represents a balanced approach that seeks to combine fiscal responsibility with investment incentives and social protections, while addressing the challenges posed by new forms of economic activity.

As reported by International Investment experts, Iceland’s draft tax reform bill points to a pragmatic policy direction. Investors can expect continued support for equity investment alongside increasing regulatory clarity, particularly in relation to virtual assets and cross-border social policy issues.