VSK Business Registration & Self-Assessment 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's value-added tax, VSK, is administered by Skatturinn under Lög nr. 50/1988. This right covers what matters to a business: when you must register, how to file, what you can and cannot deduct, and what happens if you file late or cross a threshold without registering:
- Rates: standard 24% and reduced 11% under § 14. Zero-rated turnover (§ 12) includes exports, international transport, and defined services supplied to non-residents used abroad. Exempt activities (§ 2(3)) — health, social, education, culture, rental of real property, insurance, banking — cannot claim input VAT.
- Registration threshold: ISK 2,000,000 in any rolling 12-month period (§ 4(3)), unchanged since 1 January 2017. Registration becomes mandatory as soon as sales are foreseen to reach that level. Voluntary registration is allowed below the threshold when taxable sales exceed VAT-bearing costs or when pre-operation investment is tied to taxable future sales.
- How to register: file RSK 5.02 on Skatturinn's service portal. You need a kennitala (foreign individuals via Þjóðskrá; foreign companies via Fyrirtækjaskrá) and log in with electronic ID. File at least 8 days before operations start.
- Bi-monthly returns (§ 24): Jan-Feb, Mar-Apr, May-Jun, Jul-Aug, Sep-Oct, Nov-Dec. Due on the 5th of the second month after the period ends (so Jan-Feb is due 5 April). Electronic filing through Þjónustuvefur is mandatory.
- Annual filing is available to businesses with turnover under ISK 4,000,000 in a calendar year, on application by 15 February. The annual return is due 5 February the following year.
- Input VAT (§ 16): deductible on goods and services used in taxable activity only if the seller is on the VSK register at time of sale. Non-deductible categories include private use, housing, canteen/meals, passenger cars (unless resold), entertainment, and gifts.
- Record-keeping: 7 years from end of fiscal year under Lög nr. 145/1994 § 20. Annual accounts 25 years; cash-register strips 3 years.
- Reverse charge: an Icelandic buyer not on the VSK register who buys electronic services from a non-resident seller must self-assess and remit VSK (§ 35). Foreign B2C sellers of e-services into Iceland register under VOES if annual sales exceed ISK 1,000,000.
When does it apply?
- You run a business, freelance, or sole trader in Iceland and taxable sales are about to or have crossed ISK 2,000,000 in 12 months.
- You are a foreign business selling goods or services into Iceland — either B2B through an Icelandic representative or B2C e-services through VOES.
- You want to register voluntarily to recover pre-operation input VAT on a planned taxable business.
- You missed a bi-monthly deadline, received a warning-list notice, or had VSK retroactively assessed.
- You want to claim a foreign-business refund under reglugerð nr. 1243/2019.
What to Do If You Are Running a Business in Iceland and Need to Register for VSK or File a Return
- Check the threshold monthly — if taxable sales will cross ISK 2,000,000 in any rolling 12-month window, register before the next sale.
- File RSK 5.02 on Skatturinn's Þjónustuvefur at least 8 days before activity. Registration is usually issued within 8 days. Skatturinn can refuse if you had áætluð taxes (estimated taxes) in any of the last 3 years.
- Mark the calendar: bi-monthly return + payment due on the 5th of the month two months after period end. For annual filers (under ISK 4m), apply by 15 February and file by 5 February the next year.
- Keep invoices with the seller's VSK number. Input VAT is only deductible if the seller was on the register at the time of sale.
- Forgotten input VAT up to ISK 100,000 can be picked up on a later return in the same fiscal year. Larger amounts require an amending return (RSK 10.26).
- Apportion mixed-use inputs by the ratio of taxable turnover to total turnover — document the calculation.
- Foreign businesses claim refunds via form RSK 10.29 under reglugerð nr. 1243/2019, with a minimum of ISK 75,000 per 2-month period or ISK 15,000 for a full/part year.
- If your VSK number is on the warning list (vánúmer) for missing returns or payments, file and pay in full, then email [email protected] to request removal.
What should you NOT do?
- Don't charge VSK on invoices if you are not on the register — businesses not registered cannot add VSK to their invoices.
- Don't cross the ISK 2,000,000 threshold without registering. Skatturinn can retroactively reassess up to 6 years (10 years for income or assets in low-tax jurisdictions), with álag of 1% per day (capped at 10%) plus default interest.
- Don't file late. Missed-return fee is ISK 5,000 per unfiled return once on estimation, waivable only for genuine external reasons.
- Don't claim input VAT on non-deductible categories — private use, housing, passenger cars (unless resold or licensed tourist transport), meals, gifts, and entertainment are specifically excluded.
- Don't assume there are deadline extensions. Icelandic law gives none — plan around the 5th-of-the-month rhythm.
- Don't continue collecting VSK after de-registration — all collected tax must be remitted without any input offset.
- Don't keep incomplete records — 7 years for invoices and accounts; 25 years for annual accounts.
Common Questions
When must an Icelandic business register for VSK?
When taxable sales cross ISK 2,000,000 in any rolling 12-month period under § 4(3), unchanged since 1 January 2017. Registration becomes mandatory as soon as sales are foreseen to reach that level. Voluntary registration below the threshold is allowed in defined cases — for example, when taxable sales will exceed VAT-bearing costs.
How often do Icelandic businesses file VSK returns?
Bi-monthly by default (Jan-Feb, Mar-Apr, and so on), due on the 5th of the second month after period end, so Jan-Feb is due 5 April. Businesses under ISK 4,000,000 annual turnover can file annually on application by 15 February; the annual return is due 5 February the following year. All filing is electronic via Skatturinn's Þjónustuvefur.
What are the Icelandic VSK rates in 2025/2026?
Standard 24% and reduced 11% under § 14 of Lög nr. 50/1988. Zero-rated turnover (§ 12) includes exports, international transport, and ship/aircraft supplies. Exempt activities (§ 2(3)) — healthcare, social services, education, culture, banking, insurance, real-estate letting — cannot claim input VAT, unlike zero-rated businesses.
What happens if I cross the VSK threshold without registering in Iceland?
Skatturinn can reassess retroactively up to 6 years (10 years for low-tax jurisdictions). You owe the unregistered VAT plus álag of 1% per commenced day late (capped at 10%) under § 27, plus default interest under § 28 once payment is more than one month past due.
Do foreign businesses have to register for VSK in Iceland?
It depends on what they sell. A foreign B2C seller of electronic services must register under VOES if annual sales into Iceland exceed ISK 1,000,000 — VOES filers are bi-monthly and cannot deduct input VAT. Foreign businesses with taxable activity but no Icelandic permanent establishment must register through an Icelandic representative who is jointly liable. Non-registered foreign businesses can claim refunds under reglugerð nr. 1243/2019.
When does it apply — vsk business registration & self-assessment?
You run a business, freelance, or sole trader in Iceland and taxable sales are about to or have crossed ISK 2,000,000 in 12 months.You are a foreign business selling goods or services into Iceland — either B2B through an Icelandic representative or B2C e-services through VOES.You want to register voluntarily to recover pre-operation input VAT on a planned taxable business.You missed a bi-monthly deadline, received a warning-list notice, or had VSK retroactively assessed.You want to claim a foreign-business refund under reglugerð nr. 1243/2019.
What should I do if I am starting a business in Iceland and want to register for VSK, or I crossed the turnover threshold without registering?
Check the threshold monthly — if taxable sales will cross ISK 2,000,000 in any rolling 12-month window, register before the next sale.File RSK 5.02 on Skatturinn's Þjónustuvefur at least 8 days before activity. Registration is usually issued within 8 days. Skatturinn can refuse if you had áætluð taxes (estimated taxes) in any of the last 3 years.Mark the calendar: bi-monthly return + payment due on the 5th of the month two months after period end. For annual filers (under ISK 4m), apply by 15 February and file by 5 February the next year.Keep invoices with the seller's VSK number. Input VAT is...
What should you NOT do — vsk business registration & self-assessment?
Don't charge VSK on invoices if you are not on the register — businesses not registered cannot add VSK to their invoices.Don't cross the ISK 2,000,000 threshold without registering. Skatturinn can retroactively reassess up to 6 years (10 years for income or assets in low-tax jurisdictions), with álag of 1% per day (capped at 10%) plus default interest.Don't file late. Missed-return fee is ISK 5,000 per unfiled return once on estimation, waivable only for genuine external reasons.Don't claim input VAT on non-deductible categories — private use, housing, passenger cars (unless resold or licensed...