Iceland’s three largest banks paid 35.7bn krónur in tax

Iceland’s three largest commercial banks paid about 35.7 billion krónur in income and additional income tax for 2025, accounting for roughly 18% of the total paid by companies, according to mbl.is. The banks employ about 1.7% of workers in the private labour market.

The figures come from a summary by the Financial Services Association of Iceland, based on assessments by the Icelandic tax authority and the banks’ annual accounts. The three systemically important banks have accounted for 18% to 21% of companies’ combined income and additional income tax over the past four years.

The banks employ about 2,600 people. According to the summary, the tax paid per bank employee is around 12.6 times the average at other companies.

“Financial companies already pay the largest proportional share of income tax in Iceland,” Heiðrún Jónsdóttir, the association’s managing director, told Morgunblaðið, citing a summary by the Ministry of Finance and Economic Affairs.

Companies generally pay income tax of 20% on profits. Financial companies also pay an additional 6% tax on profits exceeding one billion krónur, as well as other specific taxes and charges.

The government’s 2027 budget bill proposes raising the special tax on financial companies’ liabilities from 0.145% to 0.254%. The tax is levied on liabilities rather than profits, so it applies whether a company makes a profit or a loss. It is also not deductible when calculating income tax.

Jónsdóttir criticised the proposed increase, saying banks play a key role in financing businesses. The government has also set a goal of increasing business investment to improve living standards.

She said the impact on the state’s overall finances should be assessed, particularly given its significant ownership in the banking sector. The state owns about 40% of the sector and 99.8% of Landsbankinn’s outstanding shares. As a result, almost all of the bank’s 34.9 billion krónur dividend in 2026 will go to the Treasury.

Jónsdóttir said it was unclear how much additional revenue the tax increase would actually generate once state ownership and possible knock-on effects were taken into account. Those effects should be analysed before the proposal moves forward, she said. If the reason for the increase is temporary, she argued, the measure should also be temporary and linked to companies’ performance.

“The banks already make a significant contribution to society,” she said, urging policymakers to consider their overall contribution and ensure that further charges do not undermine their ability to finance businesses and households.