News - 12.02.2025

Tax Exemption Brought to the Minister of Finance

The Minister of Finance and Economic Affairs has responded positively to VR’s request that union grants for psychological services for members be exempt from income tax and will review the matter in relation to the next tax year.

Halla Gunnarsdóttir, Chair of VR, and Stefán Sveinbjörnsson, the union’s Managing Director, met this morning, February 12, 2025, with Daði Már Kristófersson, Minister of Finance and Economic Affairs, to discuss the taxation of grants for psychological services. Such grants are currently subject to income tax, whereas grants for activities such as sports participation are tax-exempt. The VR Board decided at a meeting last October to push for a change in this policy and for the Chair to bring the issue to the Minister of Finance. VR submitted a formal request to the Minister last month and requested a meeting to discuss this demand.

The VR Board insists that the tax treatment of grants for psychological services should be the same as that of rehabilitation or preventive care, such as physical therapy and exercise programs. In the union’s view, psychological services can be considered rehabilitation and preventive care just as much as physical therapy. Here is VR’s request to the Minister, which was sent on January 21, Icelandic only.

Halla stated that the Minister responded positively to the union’s request during the meeting. "There is a certain distinction in government regulations between physical and mental health that does not entirely reflect modern thinking. The Minister fully understood our arguments and position and was willing to consider the issue for the next tax year, although, of course, many factors need to be considered when making changes to the income tax system. We will follow up on the matter this spring and push to ensure the changes take effect next year."