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Iceland VAT Guide 2026

Iceland's Value Added Tax (VSK — virðisaukaskattur) is administered by Skatturinn (RSK). The standard rate of 24% is the highest in the Nordic countries.

VAT Rates

• 24% standard — most goods and services
• 11% reduced — foodstuffs, hotels and accommodation, domestic passenger transport, newspapers, books, and admission to cultural events
• 0% — exports of goods, international transport, and certain services supplied to non-residents

Registration Threshold

Businesses with taxable turnover exceeding ISK 2,000,000 in any 12-month period must register for VAT. Voluntary registration is possible below the threshold.

Filing Frequency

VAT returns must be filed every 2 months (six returns per year). The filing and payment deadline is the 15th of the second month following the end of the VAT period.

Input VAT Recovery

Registered businesses can deduct input VAT on most business purchases. Certain items like passenger vehicles (partial restriction), entertainment, and non-business expenses are non-deductible.

VAT on Tourism

The reduced 11% rate applies to hotel accommodation, restaurant meals, and domestic transport. Tour operators and travel agencies must account for VAT on their margins. The Tax-Free Shopping scheme allows tourists to reclaim VAT on goods exported from Iceland.

Penalties

Late filing incurs a penalty of 0.5% per day up to a maximum of 10% of the VAT due. Late payment interest is charged at the Central Bank's default interest rate plus 2%.