I found out that there is NO property tax in Iceland, which is awesome and that is the reason why the interest expense on mortgage is not tax deductible. In addition, Iceland has a flat tax rate for companies, and it is 18%, which is really low compared to a number of European countries.
However, the pension system is pretty crazy… or atleast I think it is. Every working individual in Iceland needs to contribute 10% to a Defined Benefit (You cannot opt out, dodge it or yell or scream… )
1. You will not get anything out of this fund until you retire or you turn 67 which ever comes LAST.
2. You have no control how this pension fund is controlled or what investment vehicle is used, except that you are guranteed to be paid a certain amount (which I have no clue how it is calculated) when you retire until you are dead.
3. Usually you pay a certain % and the balance is matched by the company you work for.
4. The pension fund pays if you get disabled.
They do have another way of saving for retirement, which is called the Defined Contribution, you can sock upto 4% of your salary tax deferred to this account and your employer usually matches a certain %. You have control on where you put this fund, the only problem is you cannot take anything out until you retire or turn 60 which ever comes LAST again.
You pay 40% income tax so any tax incentive is welcome… but I am little frustrated that you cannot take anything out of your retirement account. I would much prefer if there was a penality for withdrawal just like it is in the US. I think it is 36% on capital gains + 10% penality for early withdrawal…