Iceland VAT: A Guide for Foreign Investors (2025)

Standard VAT Rate:

• The standard Value Added Tax (VAT) rate in Iceland is 24%.

Reduced VAT Rate:

• A reduced VAT rate of 11% applies to specific goods and services.

These reduced rates apply to items like:

• Books.
• Periodicals.
• Specific food items.
• Hotel accommodations.

VAT Registration:

• Businesses operating in Iceland must register for VAT if their taxable turnover exceeds specific thresholds.
• Foreign businesses conducting taxable transactions in Iceland may also be required to register.

VAT Returns:

• VAT returns are filed bi-monthly.
• Electronic filing is mandatory.

Intra-Community Transactions:

• Iceland is not a member of the EU.
• Therefore, there are no intra-community transactions.

Imports and Exports:

• Imports into Iceland are subject to VAT.
• Exports from Iceland are generally exempt from VAT.

VAT Refunds:

• Foreign businesses may be eligible for VAT refunds under specific conditions.
• Refund procedures are defined by Icelandic tax legislation.

E-commerce:

• E-commerce transactions are subject to Icelandic VAT rules.

Real Estate:

• The sales of real estate is generally exempt from VAT.
• Construction services are generally subject to VAT.