Guide to Starting as a Freelancer in Iceland (2025)

Are you thinking about working for yourself in Iceland? Freelancing gives you the freedom to choose your clients, set your own schedule and decide how much you want to earn. Iceland — with its strong economy, tech-savvy population and relaxed Nordic lifestyle — is one of the easiest places in Europe to start freelancing.

But before you send your first invoice, you need to understand how freelancing actually works in Iceland: registration, taxes, VAT, pension and compliance. This guide walks you through everything — and shows how FreelancePay automates the process so you can focus on work instead of paperwork.

Who Can Become a Freelancer in Iceland

Anyone with a professional skill or trade can freelance in Iceland. Developers, designers, copywriters, consultants, photographers — and even trades like electricians or cleaning services — can operate as individual contractors. Most professions don’t require special licenses, but some (for example health care, construction, or legal) may have extra certification rules. Always check your field’s requirements before starting.

How Much Can Freelancers Earn in Iceland?

The average monthly salary in Iceland is around 731 000 ISK. Freelancers often charge by the hour or project, so income can vary widely. Digital professionals commonly charge 6 000 – 15 000 ISK/hour, while creative and technical specialists can earn more. To find your rate, research what similar professionals charge — and remember that as a freelancer you’ll cover your own taxes and pension contributions.

How to Register as a Freelancer in Iceland

1. File Form RSK 5.02 online at skatturinn.is. Select individual contractor / self-employed person.
2. Wait for approval (usually 1–14 business days).
3. Receive your kennitala (ID number) and Web Key for logging in.
4. Register for VAT (VSK) once your 12-month revenue exceeds 2 000 000 ISK.
5. If you pause or stop freelancing, submit Form RSK 5.04 to close your registration.

EU citizens staying more than 6 months must register in the National Registry. Non‑EU nationals usually need a residence and work permit before registration.

How to Pay Taxes as a Freelancer

• 31.49% on income up to 472 005 ISK/month
• 37.99% on 472 006–1 325 127 ISK/month
• 46.29% above 1 325 127 ISK/month

• Tryggingagjald (social security): 6.35%
• Lífeyrissjóður (pension): 15.5% (4% employee + 11.5% employer)

You report income monthly via skatturinn.is. Late payments incur 1% daily penalty for 10 days + interest.

Paying VAT in Iceland

Once your annual revenue passes 2 million ISK, VAT registration becomes mandatory. Standard rate: 24%. Reduced rate: 11% (accommodation and some services). Returns are filed every two months — even if you had zero income. Missing deadlines can lead to fines and estimated bills, so most freelancers automate this through a service like FreelancePay.

Managing Pension and Social Security

All workers in Iceland — including freelancers — must pay 15.5% into a pension fund. You act as both employer and employee, and payments are due monthly to your chosen fund. Tryggingagjald (6.35%) is paid together with your income tax each month.

Accounting & Invoicing Requirements

Freelancers must issue invoices for every sale. Each invoice should include buyer/seller info, service description, invoice ID/date, and VAT rate/amount. Keep digital copies of invoices and receipts.

Managing Expenses

You can deduct expenses directly related to your work — such as software, equipment, travel, phone and internet. Private or mixed‑use costs are not deductible. Vehicle deductions are based on verified business mileage using Form RSK 4.03.

Why FreelancePay Makes It Easy

• Register for you and get your VAT number
• Calculate tax, pension and social fees
• File monthly and bi‑monthly reports to Skatturinn
• Pay authorities directly from your balance
• Provide a complete year‑end summary

For a fixed 13 900 ISK per month, you stay 100% compliant without an accountant — and see exactly where every króna goes.

Step‑by‑Step Checklist to Start

1. Apply for work or residence permit (if needed)
2. Get your kennitala (ID number)
3. Register as a contractor → RSK 5.02
4. Choose a pension fund and report monthly payments
5. Register for VAT when revenue > 2 M ISK
6. Track invoices and deductible expenses
7. Use FreelancePay to automate tax and pension tasks

Start Working as a Freelancer in Iceland

Setting up as a freelancer in Iceland is straightforward — but it involves several registrations and recurring reports. With FreelancePay, you can skip the bureaucracy, invoice clients legally, and receive net payouts automatically.

Ready to begin? Start your free setup and get your first Icelandic invoice ready today.