frádráttarliðir

Frádráttarliðir are a concept in Icelandic tax law that refers to deductible expenses. These are costs that an individual or business can subtract from their taxable income, thereby reducing their overall tax liability. The specific types of expenses that qualify as frádráttarliðir are defined by law and are subject to various conditions and limitations.

For individuals, common frádráttarliðir may include certain travel expenses related to work, contributions to approved pension funds, and interest payments on housing loans. For businesses, deductible expenses can encompass a wide range of operational costs such as salaries, rent, utilities, raw materials, and depreciation of assets.

The purpose of allowing frádráttarliðir is to ensure that taxation is based on net income rather than gross income, recognizing that certain expenses are necessary to generate that income. It also serves as a tool for the government to encourage specific behaviors, such as saving for retirement or investing in businesses.

Taxpayers are required to maintain proper documentation for all claimed frádráttarliðir. The Icelandic tax authorities, Ríkisskattstjóri, may request this documentation to verify the validity of the deductions. Failure to provide adequate proof can result in the disallowance of the deduction and potential penalties. The rules surrounding frádráttarliðir can be complex, and it is often advisable to seek professional advice when preparing tax returns.