If you’re selling digital services and products to customers in Iceland, then you might be liable for Iceland’s Value-added Tax (VAT). This guide covers two very important parts of the system:
- Registering for the tax, and then
- Filing tax returns on time.
We’ve scoured the website of Iceland Revenue and Customs, known as Skatturrin (or RSK), to provide you with all the necessary information about VAT for international businesses in one place.
How to register for VAT in Iceland
Foreign businesses selling digital products should do a simplified registration online called VAT on Electronic Services (VOES). This portal is also where you’ll file and pay the tax returns. More on that later!
You will need to upload a document from your local tax agency that proves your business is registered there. So, before you get started, make sure you have an electronic version of a document that:
- Is from the “company registration authorities” in your home country
- Confirms your business’ tax registration
- Is in English or translated into English by a professional
- Is no older than 3 months. This is what the RSK website states!
Once you have that ready, it’s time to register. Start by supplying your email address at this website. Then you’ll receive an email with a link to the application form.
The form itself is simple and straightforward. You’ll need to provide standard information about your business, plus the Tax Identification Number from your home country and an estimate of your sales in Iceland.
Once you’ve uploaded the documents in the space you see below, you can hit Submit!
After your application is reviewed and approved, you will receive a registration certificate that includes a VAT number for your business. This is a unique identifier they’ll use to identify you in the system, and which you’ll need to put on invoices, etc.
In a separate letter, you’ll receive a special password that allows you to access your online VOES portal. The login information will be your VAT number and this password.
The website doesn’t state how long you should expect to wait, but if you have any questions, you can email them at firstname.lastname@example.org.
How to file VAT returns in Iceland
First thing’s first: You must report in Icelandic Krónur (ISK). That means if you’re charging Icelandic customers in your home currency, then these transactions must be converted to ISK for filing. The website advises you to use their VAT foreign currency exchange rates of the filing date.
When to file and pay
You must file a VAT return every two months. The deadline for declarations and payments is one month and five days after the end of the two-month period.
So, that means the reporting periods and deadlines are as follows:
- January-February, due April 5
- March-April, due June 5
- May-June, due August 5
- July-August, due October 5
- September-October, due December 5
- November-December, due February 5
One good thing is that RSK will send you an email reminder of the upcoming due date!
Note: You must still file even if you made no sales in Iceland! This is typically called a “Nil declaration” and it follows the exact same process as a normal return. (Just a little less data entry 😉)
How to file
Before you get started, you should collect all the information about your taxable sales in Iceland during the previous quarter. The tax website suggests having these pieces ready:
- total sales and income
- total purchases and expenses
You can file online in VOES, under ‘Submit a Declaration.’ You can log in here.
How to pay
As you probably guessed, you must pay in Icelandic Krónur, too! You can pay via online banking after you file your return.
If you don’t have access to online banking in Iceland, you can transfer from your bank account using the information below.
Important: Make sure you provide your VAT registration number, the year and reporting period in the comments/reference field of the transfer!
Transfer the amount of ISK you owe to Iceland’s Financial Management Authority:
Central Bank of Iceland (Seðlabanki Íslands)
IBAN: IS48 0001 2602 5203 5402 6964 59
Financial Management Authority (Fjársýsla ríkisins)
What to do in between registering and filing?
Well, you must comply with all the rules for Icelandic VAT! That means charging 24% VAT on all B2C sales in the country, among other things.
For further reading that will help you stay compliant and successful as a remote seller, check out our Iceland VAT Guide for Businesses
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the Tax Agency.