VAT (Value Added Tax) in Iceland
Reviewed by the Commoner Law Editorial Team. Sourced from Icelandic Acts of the Althingi, statutory instruments, and official guidance. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
Iceland applies VAT on most goods and services:
- Standard rate: 24% — applies to most goods and services.
- Reduced rate: 11% — applies to: hotel/guesthouse rentals (under 1 month), campgrounds, food and catering, passenger transport, travel agency services, spa/sauna admissions, books, newspapers, magazines, radio/TV subscriptions, condoms, and reusable nappies. Note: alcohol is taxed at the standard 24% rate, not the reduced rate.
- Zero rate (0%): Exports of goods and services, international transport, services to non-residents.
- Exempt (no VAT): Healthcare, social services, education, libraries/museums, public transport, insurance, banking/financial services, rental of real property, funeral services.
Registration threshold: ISK 2,000,000 in taxable turnover within any 12-month period.
When does it apply?
- You are a consumer purchasing goods or services in Iceland.
- You are a business with taxable turnover exceeding ISK 2,000,000.
What to Do If You Believe You Were Incorrectly Charged VAT in Iceland
- Check receipts — VAT should be itemised. If you are a business, ensure input VAT is correctly recorded for deductions.
- If you are a business, file VAT returns bimonthly — due 1 month and 5 days after each period ends. Electronic filing is mandatory.
What should you NOT do?
- Don't charge VAT if you are below the registration threshold — this is not permitted.
- Don't file late — late VAT returns attract penalties and interest.
Common Questions
What are Iceland's VAT rates?
The standard rate is 24% on most goods and services. The reduced rate of 11% covers food, catering, alcohol, hotel/guesthouse rentals under 1 month, campgrounds, passenger transport, travel agency services, spa admissions, books, newspapers, magazines, and radio/TV subscriptions. A zero rate applies to exports and international transport. Exempt categories (no VAT) include healthcare, social services, education, public transport, and financial services.
When does an Icelandic business have to register for VAT?
When taxable turnover exceeds ISK 2,000,000 within any 12-month period. Businesses below the threshold cannot charge VAT on their invoices. Once registered, VAT returns must be filed bi-monthly and are due 1 month and 5 days after each period ends. Electronic filing is mandatory.
What should I check on a VAT receipt in Iceland?
VAT should be itemised on the receipt. If you are a business, input VAT must be correctly recorded for deductions. Check that the rate applied matches the category of goods or services — a restaurant meal should be at 11%, while a car repair should be at 24%. Late VAT filings by businesses attract penalties and interest.
When does it apply — vat (value added tax)?
You are a consumer purchasing goods or services in Iceland.You are a business with taxable turnover exceeding ISK 2,000,000.
What should I do if I think a business charged me the wrong VAT rate in Iceland?
Check receipts — VAT should be itemised. If you are a business, ensure input VAT is correctly recorded for deductions.If you are a business, file VAT returns bimonthly — due 1 month and 5 days after each period ends. Electronic filing is mandatory.
What should you NOT do — vat (value added tax)?
Don't charge VAT if you are below the registration threshold — this is not permitted.Don't file late — late VAT returns attract penalties and interest.