Value-added tax (VAT)
The standard value-added tax rate in Iceland is 24%. The lower rate is 11% and applies to foodstuffs, restaurants and hotels.
CD’s and other recordings are VAT free.
If a business sells and delivers goods or services from another state to customers in Iceland to a value of ISK 1,000,000 or more in any twelve-month period, then they are required to register and account for VAT in Iceland.
If a business supplies electronically supplied services to consumers in Iceland, to a value of ISK 1,000,000 or more in any twelve-month period, then they are required to register and account for VAT in Iceland. Registration is not required when the buyer is a company and can account for the VAT as part of the input tax.
For the purpose of registration, an Icelandic VAT representative is needed.
You can access the registration form on the Icelandic tax authorities’ (RSK) web site. (PDF 142 KB)
Importation of goods to Iceland
The customs authorities will calculate and determine the customs duties and import VAT at the time of importation. The declared consignee of the goods is responsible for the payment of customs duties and import VAT.
Importation of services to Iceland
If a foreign company performs physical services in Iceland, they will have to register and charge VAT.
The Icelandic buyer of a service from abroad shall pay VAT on the service price (reverse charge).
The same applies to the service of a foreign party in Iceland, provided the foreign party does not operate a venue for business or have an agent in Iceland. This is intended to reduce any VAT advantage of buying those services from outside Iceland.
The reverse charge applies on a wide range of services. For example:
• the purchase and lease of copyright, patent rights, registered trademarks and copyrighted designs and the sale or lease of other comparable rights
• advertising services
• services of consultants, engineers, lawyers, accountants and other similar specialised services
• computer services, other data processing and the transfer of information
Income and source-tax
If you are working or performing in Iceland as an artist and stay in the country for less than 183 days during any twelve month period, you have limited tax liability. This means your income is eligible for tax in Iceland.
If you are performing in Iceland as an artist and invoicing your employer (ie. You’re acting as a company), then you are obliged to pay 20% income tax. The tax rate for individuals who are not represented by a company or agency is 18%. Indivisuals also pay municipal tax.
Royalties and other copyright related transactions
For foreigners with limited tax liability, the gains from royalties and other copyrighted material are also taxed. Individuals pay 20% income tax and 14.44% municipal tax; whereas companies pay 20% income tax and no municipality tax.
It is recommended that you check best practices with your accountant.
Useful and practical tax information about taxation of Nordic citizens in all Nordic languages can be found on Nordisk eTax.
Sources and additional information (in English and Swedish):