VAT in Iceland (VSK)
Value Added Tax (virðisaukaskattur / VSK) applies to most goods and services at 24%, with a reduced rate of 11%. Register when turnover exceeds 2,000,000 ISK in 12 months. Fustle handles registration, invoicing, and bi-monthly VAT returns.
VAT rates: 24% and 11%
Iceland has three VAT rates:
- 24% standard rate on most goods and services
- 11% reduced rate on accommodation, some food, books, and newspapers
- 0% on exports and certain exempt services
As a contractor you charge VAT on invoices once registered. Fustle selects the correct rate for your service type.
Registration threshold: 2,000,000 ISK
You must register for VAT when taxable turnover exceeds 2,000,000 ISK in any rolling 12-month period. You can also register voluntarily before reaching the threshold.
Register via RSK 5.02 at skatturinn.is. Fustle can guide you through registration and starts charging VAT on invoices from your registration date.
Bi-monthly filing and payment
VAT returns are filed every two months via skatturinn.is. Report output VAT (collected from clients) minus input VAT (paid on business purchases). Pay the net amount by the deadline.
Submit a zero report if you had no taxable activity in the period. Fustle files bi-monthly returns automatically and pays VAT from your balance.
Penalties for late or missing VAT reports
Skatturinn imposes penalties for non-compliance:
- Late filing: 5,000 ISK fine
- Late payment: 1% per day (max 10 days) plus interest (dráttarvextir)
- No filing: estimated VAT plus interest
Fustle ensures timely filing to avoid penalties. If you pause your business, file RSK 5.04 to close your VAT registration.
Related guides
Official resources
Frequently asked questions
When must I register for VAT?
When your turnover exceeds 2,000,000 ISK in any 12-month period. You can also register voluntarily before reaching the threshold.
What VAT rate do I charge?
Most services are 24%. Accommodation and some food services are 11%. Fustle applies the correct rate based on your service category.
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