International VAT Guides – Iceland
VAT rates in Iceland
How much is VAT in Iceland?
The VAT Iceland system is mainly based on the norms and provisions that are part of the Value-Added Tax Act and the specific regulations that cover sections of the VAT Act in more detail, such as the registration of taxable persons, or special rules for registration of foreign taxable persons, real-estate economic operators.
The national indirect tax framework stipulates that all taxable persons that provide supplies of goods or provision of services(excluding the exclusive supply of the tax-exempt ones)are obligated to register for VAT, and follow all mandatory provisions for their type of business activity.
| Iceland VAT Rate | Rate Type | Coverage and imposition |
| 24% | Standard Rate | The general VAT rate applies to all supplies of goods and services that are taxable and on which the reduced rate cannot be imposed. |
| 11% | Reduced Rate | Accommodation services; Catering and restaurant services; E-books and e-publications; passenger transportation services. |
| 0% | Special Rate | exports of goods and services; international transport; VAT refund services to foreign persons residing abroad. |
| Tax-exempt | Tax-exempt | health-care services; insurance activities; rental of parking spots. |
VAT threshold in Iceland
The VAT Iceland Act and complementary regulations are principal sources upon which the indirect tax regulatory mechanism is established. In most instances, VAT threshold in Iceland rules are very similar and don’t distinguish between foreign and domestic persons.
The mandate for VAT registration is based upon the sales income the economic operator makes in any 12 months.
VAT registration threshold for resident businesses: ISK 2 million.
VAT registration threshold for non-resident businesses: ISK 2 million.
VAT registration threshold for foreign providers of digital services: ISK 2 million.
VAT Taxable Activities in Iceland
Types of taxable activities that mandate the VAT registration:
- Supply of goods and services for consideration;
- Exports;
- Imports of goods and services.
Tax Representative in Iceland
Non-resident providers of listed digital services and products could register without needing local tax agents’ services.
Tax registration
Standard Registration
Domestic or foreign taxable persons with a place of business or permanent establishment in the country should follow the steps specified for standard registration.
Simplified tax registration
Foreign providers of listed electronically supplied services or products without a permanent establishment in the country, could choose a simplified VAT registration. Simplified registration, permits foreign taxable persons to register online using a simplified form.
VAT on Electronically Supplied Services in Iceland
Digital Services
Non-resident providers of listed electronically supplied services or digital products must register for VAT, when they surpass a VAT threshold. The VAT threshold for foreign persons is ISK 2 million.
They are obligated to issue sales invoices for their B2C transactions. Only the supplies made to non-VAT persons are calculated for the threshold liability.
After registration, non-resident suppliers of digital services should charge VAT for B2C supplies.
How much is VAT in Iceland for Electronically Supplied Services?
VAT rate Iceland for most digital goods and services is 24%.
Taxable Digital Services in Iceland
The following types of digital services trigger mandatory VAT registration of non-resident providers:
- Audio and video streaming services;
- SaaS services;
- E-books and publications;
- Intermediation between third parties offering goods or services and those seeking them;
- Travel arranging services.
Marketplace and Digital Platform Operators Rules
The non-resident operator of a digital marketplace or platform (foreign intermediary) that intermediates in the distant supply of electronically supplied services or digital goods has the same obligations for VAT registration as a non-resident digital service provider.
The foreign digital platform operator will receive a VAT Iceland certificate upon completion of the registration procedure. The platform operator could also register using the benefits of the simplified registration procedure.
Invoicing Rules
The required content for sales invoices, being that in printed, pdf or electronic format are defined according to the Iceland VAT Act and Regulation No. 50/1993. Issuance of sales invoices according to the substantive principles is of critical importance for accounting reasons.
Deficient invoice, could result in impossibility of the buyer to account input tax credits, and could lead the supplier to wrongful return calculation.
The minimum requirements of the invoice are the following:
General information:
- Date of invoice issuance;
- Date and time of supply.
Seller information:
- Company name;
- Full address (head office);
- Billing address if different from company address;
- VAT number.
Customer information:
- Name;
- Full address;
- VAT number (if applicable).
Fiscal Information:
- Tax amount for each type of goods or services supplied;
- Net value per tax rate;
- Distinct line of gross value per tax rate or tax-exempt supply;
- Type of the transaction by reference to the categories indicated in the VAT Act;
- Total tax amount;
- Invoice Total tax exclusive;
- Rate of any discount;
- Total invoice amount.
Foreign Currency Invoice in Iceland
In most cases, issuing an invoice in foreign currency is permitted. However, submission of declaration should be processed exclusively in local currency.
VAT Return in Iceland
Standard Return
Local businesses and foreign businesses with permanent establishment in the country are obligated to follow the procedure for issuance of the standard return in electronic format.
Simplified return
Non-resident providers of electronically supplied services and other listed types of services or products are permitted to register and submit returns in a simplified pay-only format.
VAT Simplified Return
| VAT Return Name | VOEC return |
| Filling frequency | Bi-monthly |
| Online Filling | Mandatory |
| Annual Return | No |
| Filing deadline | Until the 5th day of the second month following the reporting period |
| Payment deadline | Until the 5th day of the second month following the reporting period |
| Payment currency | ISK |
| Language | Icelandic/English |
| Local VAT acronym | VAT |
Penalties for late reporting and omitted declarations
As previously mentioned, the bilateral tax treaties have established a common framework for the applicability of most tax provisions between Switzerland and Iceland. The scope and the content of tax penalties for non-compliance are also highly similar.
Fines and penalties according to VAT Iceland:
Late payments of VAT are subject to 1% penalty charge for each day past due date up to a total of 10% (no minimum penalty is stipulated).
In the case when the tax payable hasn’t been remitted for more than a month from the due rate, the additional penalty in the form of late payment interest will be accounted by Central Bank of Iceland.
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