Share capital and dividends in 2026: three legal ways to take money out of an ehf.

Kassify · 6 November 2026

An owner takes money out of a private limited company (ehf.) in three ways: as salary, as a dividend (arður) from profit, or as repayment of a loan the owner made to the company. A dividend is paid only from profit in approved annual accounts, by a decision of the shareholders' meeting on the board's proposal, and the company withholds 22% capital income tax. A loan from the company to its owner is prohibited, and Skatturinn taxes it as salary or as a gift.

This article covers the rules on share capital (hlutafé), the three ways with their taxes, the steps to a lawful dividend, the withholding dates, a worked example in krónur of salary and dividend from the same amount, and the mistakes that cost the most.

Share capital belongs to the company

Share capital is what the owners put into the company in exchange for its shares. Under Article 1 of the Private Limited Companies Act no. 138/1994 it is at least 500.000 kr., and all of it is paid in at formation. If it is paid with something other than cash, a car or equipment for example, a lawyer or chartered accountant confirms that the asset exists. How a company is formed is covered in the article on starting an ehf.

After formation the share capital belongs to the company, not the owner. Under Article 73 of the Act, the company's funds may not be distributed to shareholders except under the rules on dividends, capital reduction or winding up. So share capital is not taken back with a bank transfer. It is changed at a shareholders' meeting, with new articles of association and a notice to Skatturinn's company register.

A reduction paid out to shareholders counts as a dividend to the extent it exceeds the purchase price of the shares, under Article 11 of the Income Tax Act no. 90/2003. The fee is from the company register's forms dated 11 September 2026. A company pays one fee however many changes it reports on forms RSK 17.40 to 17.49.

Three ways to take money out of an ehf.

Each way is taxed differently and has its own timing. The rates are from Skatturinn's site for 2026.

Salary

An owner who works for the company and controls it must calculate remuneration for himself, and the minimum depends on the job and the number of employees. The 2026 categories and amounts are in the article on calculated remuneration. Salary comes first, because a dividend never replaces it.

Dividend

A dividend is the owner's share of profit the company has already paid tax on. The company pays 20% income tax on the profit, and from the dividend it withholds 22% and pays it to the treasury. A dividend earns no pension rights and carries no social security tax.

Repayment of a loan from the owner

An owner who puts money into the company beyond the share capital, to bridge the first months for example, can do so as a loan. With a written loan agreement and the loan booked as a debt to the owner, the company can repay it whenever cash allows. Repayment of the principal is not income for you, because you only get back what you lent.

A loan from the company to you is prohibited

This applies in one direction only. Under Article 79 of the Private Limited Companies Act, the company may not lend to its shareholders, board members or managing directors, or provide security for them. The ban also covers spouses, cohabiting partners and certain relatives. The exception is an ordinary trade credit, such as payment terms on goods the company sells to everyone.

Skatturinn's 2026 guide to the business tax return, RSK 1.04, says how such a loan is taxed: as salary under paragraph 3 of item 1 of section A of Article 7 of the Income Tax Act no. 90/2003, or as a gift under paragraph 2 of item 4 of the same section, with reference to paragraph 2 of Article 11. The loan then carries ordinary income tax and municipal tax, not 22%. The same goes for a dividend paid in breach of the Act. It does not count as a dividend but as salary or a gift, and under Article 77 the shareholder repays it with interest.

Note: The most common loan is not a loan agreement. It is a withdrawal from the company's bank account that sits at year end as the owner's debt to the company.

When a dividend may be paid

A dividend follows six steps in the right order. The articles are from the Private Limited Companies Act.

1. 1
   The annual accounts are approved

   Under Article 74, a dividend may only be paid from profit in the approved annual accounts for the last financial year, from profit carried forward and from free reserves. Losses not yet covered are deducted first. The current year's profit cannot be distributed until that year's accounts are approved. When and how the accounts are filed is in the article on annual accounts.

2. 2
   The reserve gets its share

   Under Article 75, at least 10% of the profit goes to the statutory reserve until it equals 10% of share capital, and then at least 5% until it equals a quarter of share capital. With 500.000 kr. of share capital that is 125.000 kr.

3. 3
   The board proposes the dividend

   Under Article 76, the shareholders' meeting may not decide a larger dividend than the board proposes or approves. In a one-person company the board member is usually the owner, but the proposal must still exist.

4. 4
   The shareholders' meeting decides

   The dividend is decided at a shareholders' meeting, usually the annual general meeting, and the decision is recorded in the minutes. A dividend counts as income in the year the decision is made, not necessarily when it is paid.

5. 5
   The company pays out and withholds 22%

   The dividend must be paid no later than six months after the decision. The company pays the shareholder 78% and withholds 22%.

6. 6
   The withholding is filed

   The company files a return and pays the withholding on Skatturinn's service site, skattur.is, after the quarter in which the dividend was paid. Once the return is filed, a payment claim appears in the company's online bank.

Withholding dates for dividends

Each period is three months, and the final due date is 15 days after the due date. If the final due date falls on a weekend or holiday, it moves to the next working day.

If the dividend is not paid out in the year it is decided, the company files the withholding no later than with the October to December return of the decision year. If no payment subject to withholding was made in a period, the company files a zero return.

Example: 3.000.000 kr. as salary or as a dividend

Assume Sigga owns all the shares in an ehf. that runs a shop, and works there herself. Assume she already pays herself a salary of 1.500.000 kr. a month, above the minimum calculated remuneration for her category, so every extra króna of salary falls in the top withholding bracket. Finally, assume the company has 3.000.000 kr. to spare from its 2026 profit, that the reserve is already full, and that the 2026 rates still apply in 2027, when the dividend is paid.

As a dividend Sigga gets 567.526 kr. more in hand. Counting the pension contributions, the difference is 175.387 kr. The dividend arrives a year later, though: the 2026 profit only becomes a dividend once the 2026 annual accounts are approved in 2027, and only if there is enough free equity after the reserve and older losses.

The example works because Sigga already pays herself above the minimum. If she paid herself less than the calculated remuneration for her category and took the rest as a dividend, the tax director raises the remuneration to the benchmark, and she pays withholding and social security tax on it.

The mistakes people make

• A dividend instead of salary. An owner who works for the company calculates remuneration first. The dividend comes on top, never instead.
• A withdrawal booked as the owner's debt. That is a loan under Article 79, and it is taxed as salary or a gift.
• A dividend from this year's profit. A dividend rests on the approved accounts of the last financial year. A dividend paid in December from the same year's profit is an unlawful distribution.
• A larger dividend than the board proposed. The shareholders' meeting cannot go above the board's proposal.
• The reserve is forgotten. At least 10% of the profit goes to the reserve until it equals 10% of share capital.
• No withholding kept back. The company pays out 78% and pays the 22% before the final due date. If no return arrives, the tax director estimates the amount.
• Decided in December, paid in January. The dividend is income in the decision year, and the withholding goes with that year's October to December return.
• Share capital taken back with a transfer. Share capital is reduced only by a shareholders' meeting decision and a notice on RSK 17.48 within a month.
• A capital increase not reported. If the notice does not arrive within a year of the decision, the increase lapses.

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• The owner's calculated remuneration is part of payroll, with payslips, withholding and pension returns every month.
• Annual accounts and tax return included in the monthly price, reviewed by a chartered accountant, so the free equity the dividend rests on is right.
• Dividend or salary: you learn which suits you, and what the company may pay out. A bookkeeper replies within 24 hours.
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More on Kassify's advice and annual accounts.

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