Ég stend á öndinni

Literally: "I'm standing on the breath", but can also mean "I'm standing on the duck"
Means: I don't get it
German equivalent: Ich stehe auf dem Schlauch
Why I think it is funny: I always picture someone standing on the head of a duck looking confused.

Það er of seint í rassin grípið

Literally: "This is grabbing your ass too late."
Means: Someone trying to prevent a mistake after it happened
German equivalent: none - we Germans do everything on time, of course!
Why I think it is funny: It refers to someone grabbing their ass after they shat their pants trying to prevent it.

Hann er eins og snytur út úr nefiniu á honum

Literally: "He is like a snot out of his nose"
Means: He looks exactly alike him.
German equivalent: Er ist ihm wie aus dem Gesicht geschnitzt
Why I think it is funny: Actually I think it is rather disgusting. The German one translates to: "He is like he was carved out of his face." which is much nicer.