Iceland Sole Proprietor — Skattframtal RSK 1.01 & Rekstrarframtal RSK 4.11

Confirm the client is a tax-resident individual (einstaklingsur) operating as a sole proprietor (sjálfstætt starfandi) — not an ehf or hf. Establish the income year, municipality of residence (for the correct útsvar rate 12.44%–14.94%), and whether an A1 certificate applies (EEA workers). Without confirmed residency the worldwide-income rules cannot be applied and the engagement must stop.

Collect all bank statements (Landsbankinn, Íslandsbanki, Arion banki, Kvika, Revolut/Wise business) and sales invoices for the full calendar year. Classify each credit as business income (verktakagreiðsla / þóknun), employment income (laun — treated separately), rental income (leiga), or capital income (vextir, arður). For VSK-registered clients, extract net revenue excluding 24%/11% VAT from each business-income transaction.

Work through every debit on the bank statements against the Icelandic deductibility rules under Act No. 90/2003. Fully deductible items (office rent, accountancy fees, marketing, SaaS subscriptions, business insurance) are coded directly. Mixed-use items — home office (proportional floor area), vehicle (mileage log required, approx. ISK 83–142/km), phone/internet — are flagged for client confirmation before any deduction is applied. Capital items (laptops, furniture, vehicles) are separated for depreciation (fyrningar) rather than immediate expensing; depreciation rates are flagged as a research gap for accountant confirmation. Entertainment (veitingastaðir) and personal drawings (úttekt) are blocked.

Determine the client's occupation category and look up the Skatturinn reiknað endurgjald (calculated remuneration) table to set the minimum declared labour income. Compute income tax on that amount using the 2025 progressive brackets (31.49% / 37.99% / 46.29% combined), subtract the persónuafsláttur (ISK 68,691/month = ISK 824,288/year), and add mandatory pension contributions (4% employee + 11.5% employer self-paid = 15.5% total on calculated remuneration) plus tryggingagjald (6.35% general rate). The 4% employee pension contribution is deducted from the income tax base before computing tax.

If the client's 12-month turnover exceeds ISK 2,000,000 they must be registered for VSK; if not yet registered, flag and advise immediate registration via Form RSK 5.02. For registered clients, reconcile output VAT collected (standard 24%, reduced 11%) against input VAT recoverable from business purchases. VAT payments remitted to Skatturinn during the year are excluded from the income tax expense calculation. Confirm the bi-monthly (or other approved) VSK return periods are all filed.

Prepare the skattframtal RSK 1.01 (pre-filled by Skatturinn — review and amend as needed) together with the rekstrarframtal RSK 4.11 (business income statement). Enter net business profit, reiknað endurgjald, pension deductions, capital income (with ISK 300,000 tax-free threshold applied), and any spousal personal-credit transfer. Submit via skattur.is by the mid-March deadline (13 March 2026 for income year 2025). Note that final assessment (álagning) is issued by 31 May; any shortfall carries a 2.5% surcharge and is collected in five instalments July–December.