How vat / sales tax works in Iceland
Icelandic VAT defaults to 24%, with 11% on food, restaurants, hotels, passenger transport, books, and cultural services.
Traders register past ISK 2 million of twelve-month turnover, file bi-monthly returns due a month and five days after period end, and invoice with RSK-registered numbers.
Exports zero-rate, financial, health, education, and property supplies are largely exempt, and non-resident sellers register for Icelandic supplies.
Tax rates at a glance
- Standard VAT
- 24%
- Reduced VAT
- 11%
- Food and stays
- 11%
- Exports
- 0%
- Registration line
- ISK 2m
- Filing rhythm
- Bi-monthly
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
E-commerce sellersHospitality operatorsFreelancersExpatsCross-border traders
Watch out for
- Tourism-season volumes multiply classification errors across stays, dining, excursions, and transport that each carry distinct treatment.
- Non-EEA status changes border mechanics with customs and import VAT on arrival despite EEA market access.
- Exempt finance and property supplies block input recovery, repricing mixed contracting against taxable competitors.
- Currency volatility reprices krona thresholds and tourist spending power within single seasons.
Frequently asked questions
What is the VAT rate in Iceland?
Iceland applies 24% standard VAT in 2026, with 11% for food, stays, transport, books, and culture.
When must an Icelandic business register for VAT?
Past ISK 2 million of twelve-month turnover, with bi-monthly returns due a month and five days after each period.
How does Iceland handle non-resident sellers?
Non-resident suppliers of Icelandic taxable supplies register locally, with imports facing customs and VAT assessment at the border.