Use this skill whenever asked to prepare, review, or classify transactions for an Iceland VAT (VSK) return for any client. Trigger on phrases like \"prepare VSK return\", \"Iceland VAT\", \"virðisaukaskattur\", \"Icelandic VAT filing\", or any request involving Icelandic VAT. Iceland is NOT an EU member but IS in the EEA. This skill covers Iceland only. MUST be loaded alongside vat-workflow-base v0.1 or later. Does NOT require eu-vat-directive (Iceland is not EU). ALWAYS read this skill befor...
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---
name: iceland-vat
description: "Use this skill whenever asked to prepare, review, or classify transactions for an Iceland VAT (VSK) return for any client. Trigger on phrases like \"prepare VSK return\", \"Iceland VAT\", \"virðisaukaskattur\", \"Icelandic VAT filing\", or any request involving Icelandic VAT. Iceland is NOT an EU member but IS in the EEA. This skill covers Iceland only. MUST be loaded alongside vat-workflow-base v0.1 or later. Does NOT require eu-vat-directive (Iceland is not EU). ALWAYS read this skill before touching any Iceland VSK work."
license: "AGPL-3.0-or-later (code) / OpenAccountants Guide License v1.0 (content)"
metadata:
source: openaccountants
openaccountants_url: "https://www.openaccountants.com/skills/iceland-vat"
jurisdiction: "IS"
tax_year: "2026"
last_updated: "2026-10-30"
---
# Iceland VAT (VSK): 2026 registration, return and payment method
**Status:** Checked against the law (tier 2). Built by the OpenAccountants team from the VAT Act No. 50/1988 (Alþingi consolidated text 158a, in force 1 October 2026), its regulations and Iceland Revenue and Customs (Skatturinn) guidance, all re-read on 30 October 2026. Not reviewed by a licensed accountant. Where Skatturinn's English page is older than the Act, this skill follows the Act and says so.
Figures are for tax year 2026. The only 2026 rate change in the Act is the temporary 11% fuel rate (Act 34/2026, 1 May to 31 August 2026). For a period after this skill was written, check the current consolidated Act.
> **General reference only.** Check the figures against the cited law, or with a licensed professional, before you file or pay.
## Who this applies to
Obtain the legal seller, Icelandic ID (`kennitala`), VAT registration number, registration certificate, settlement period, start date and any prior return. Keep separate facts for each supply: customer identity and location, what was supplied, supply date, amount excluding VAT, invoice, rate/exemption reason, and import or foreign-service evidence.
Skatturinn says domestic and foreign companies and self-employed people selling taxable goods or services in Iceland generally register using form RSK 5.02. A business selling only exempt labour/services, or taxable goods/services of **ISK 2,000,000 or less in each 12-month period from commencement**, is exempt from registration duty; employees are not within that duty. A foreign taxable person follows the same rules. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/)
Apply the ISK 2,000,000 test with these conditions:
- The amount is taxable sales **excluding VAT**, measured over any 12-month period, not the calendar year.
- The duty to notify and register arises **as soon as it should be clear that sales will reach ISK 2,000,000** in a 12-month period. Do not wait until the amount has actually been passed.
- The small-business exemption is optional. A business under the limit may register voluntarily, and once registered it must charge VAT on its sales.
- A business starting VAT-liable activity must notify the Director of Internal Revenue no later than eight days **before** the activity starts. [Skatturinn VAT-register guidance](https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/virdisaukaskattsskra/) and [VAT Act, Articles 4 and 5](https://www.althingi.is/lagas/nuna/1988050.html)
Registration is a factual test, not a rate election. A foreign company without an Icelandic permanent establishment that sells taxable services in Iceland must use an Iceland-domiciled representative; both are responsible for collection and payment. A foreign business that only supplies goods/services from abroad to Icelandic recipients, other than electronically supplied services, is not liable under the general statement on Skatturinn's page. Imported goods remain taxable at import. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/)
**VOES is separate.** It is an optional simplified, pay-only registration for qualifying foreign suppliers to non-taxable Icelandic customers. It covers listed electronic, telecom, paper/magazine-subscription, broadcasting and certain tourist services; it cannot be used where an Icelandic permanent establishment supplies the goods/services. A VOES seller cannot deduct input tax. A foreign B2C supplier of electronic services exceeding ISK 2,000,000 in a 12-month period must register/account for VAT, while a registered Icelandic B2B buyer that can count the VAT as input tax is not a trigger for the seller's registration. Establish the seller, customer status and supply before choosing ordinary registration, VOES or a different route. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/) and [VAT Act, Articles 4(3) and 35](https://www.althingi.is/lagas/nuna/1988050.html)
## Rates, bands and thresholds
| Item | Amount | Tax year | Source |
| --- | --- | --- | --- |
| Standard rate | 24% | 2026 | [VAT Act 50/1988, Article 14(1)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Reduced rate (listed supplies) | 11% | 2026 | [VAT Act, Article 14(2)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Temporary rate on listed fuels (tariff numbers 2710.1221, 2710.1229, 2710.1930, 2710.2021, 2710.2029, 2710.2065, 3826.0000) | 11% from 1 May 2026 to 31 August 2026; 24% outside that window | 2026 | [VAT Act, temporary provision XLIX (Act 34/2026)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Zero rate (not taxable turnover, input VAT still deductible) | 0% | 2026 | [VAT Act, Article 12](https://www.althingi.is/lagas/nuna/1988050.html) |
| VAT fraction of a VAT-inclusive price | 19.35% (24% rate); 9.91% (11% rate) | 2026 | [VAT Act, Article 20(1)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Registration exemption: taxable sales in each 12-month period from start | ISK 2,000,000 or less | 2026 | [VAT Act, Article 4(3)](https://www.althingi.is/lagas/nuna/1988050.html); [Skatturinn letter 1/2026](https://www.skatturinn.is/fagadilar/akvardandi-bref/obeinir-skattar/akvardandi-bref-1-2026) |
| Notify registration before activity starts / notify a change | at least 8 days before / within 8 days after | 2026 | [VAT Act, Article 5(1)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Ordinary settlement period and due date | two months; 5th day of the second month after the period (one month and five days), next working day if a weekend or holiday | 2026 | [VAT Act, Article 24(1) and (4)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Annual settlement: sales below | ISK 4,000,000 a year; due 5 February; apply before 15 February | 2026 | [VAT Act, Article 24(1)](https://www.althingi.is/lagas/nuna/1988050.html); [Skatturinn letter 1/2026](https://www.skatturinn.is/fagadilar/akvardandi-bref/obeinir-skattar/akvardandi-bref-1-2026); [Skatturinn: VAT register](https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/virdisaukaskattsskra/); [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/) |
| Agriculture (six-month periods) | due 1 September (Jan to Jun) and 1 March (Jul to Dec) | 2026 | [Skatturinn: VAT register](https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/virdisaukaskattsskra/) |
| Monthly periods after re-registration or recent bankruptcy | at least two years; due 15 days after each month | 2026 | [VAT Act, Article 24(2) and (3)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Refund of an on-time credit statement | within 21 days after the filing deadline | 2026 | [VAT Act, Article 25](https://www.althingi.is/lagas/nuna/1988050.html) |
| Under-claimed input VAT that may go in the current return | up to ISK 100,000, no later than the last period of the same year | 2026 | [VAT Act, Article 26(1)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Late-payment surcharge | 1% per started day after the due date, up to 10% | 2026 | [VAT Act, Article 27(2)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Charge for a statement filed after an estimate | ISK 5,000 per statement | 2026 | [VAT Act, Article 27B](https://www.althingi.is/lagas/nuna/1988050.html) |
| Late-payment interest | if unpaid one month after the due date, runs from the due date | 2026 | [VAT Act, Article 28](https://www.althingi.is/lagas/nuna/1988050.html) |
| Appeal to Skatturinn / to the Internal Revenue Board | 30 days / three months from the decision letter | 2026 | [VAT Act, Article 29](https://www.althingi.is/lagas/nuna/1988050.html); [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/) |
| Non-registered buyer of listed foreign services | pays VAT if purchases reach ISK 10,000 excluding VAT in a two-month period | 2026 | [VAT Act, Article 35(3)](https://www.althingi.is/lagas/nuna/1988050.html) |
| Small retail receipt accepted as input-VAT evidence without buyer details | ISK 6,000 or less | 2026 | [VAT Act, Article 20](https://www.althingi.is/lagas/nuna/1988050.html) |
| Record retention | 7 years from the end of the accounting year | 2026 | [VAT Act, Article 17](https://www.althingi.is/lagas/nuna/1988050.html) |
| Vans and trucks inside the vehicle input block | gross authorised weight 5,000 kg or less | 2026 | [VAT Act, Article 16(3)(6)](https://www.althingi.is/lagas/nuna/1988050.html); [Regulation 192/1993, Article 2(6)](https://files.reglugerd.is/pdf/0192-1993/current) |
| Voluntary property registration, minimum period | 2 years | 2026 | [VAT Act, Article 6(3)](https://www.althingi.is/lagas/nuna/1988050.html); [Regulation 577/1989, Article 5](https://files.reglugerd.is/pdf/0577-1989/current) |
| Capital-input adjustment thresholds | movables ISK 250,000; building works ISK 500,000 (excluding VAT) | 2026 | [Regulation 192/1993, Article 12(1)](https://files.reglugerd.is/pdf/0192-1993/current); [Skatturinn letter 1/2026](https://www.skatturinn.is/fagadilar/akvardandi-bref/obeinir-skattar/akvardandi-bref-1-2026) |
| Capital-input adjustment periods | movables 5 years; buildings 20 years (clawback) and 6 years (increase); 10-percentage-point ratio trigger | 2026 | [Regulation 192/1993, Articles 12 to 14](https://files.reglugerd.is/pdf/0192-1993/current) |
| Own-account repair and maintenance threshold | ISK 3,457,000 total cost a year | 2026 | [Regulation 576/1989, Article 5](https://files.reglugerd.is/pdf/0576-1989/current); [Skatturinn letter 1/2026](https://www.skatturinn.is/fagadilar/akvardandi-bref/obeinir-skattar/akvardandi-bref-1-2026) |
| Foreign-business refund minimum | ISK 105,500 per two-month claim; ISK 21,100 for a calendar year or its remainder | 2026 | [Regulation 1243/2019, Article 8](https://files.reglugerd.is/pdf/1243-2019/current); [Skatturinn letter 1/2026](https://www.skatturinn.is/fagadilar/akvardandi-bref/obeinir-skattar/akvardandi-bref-1-2026) |
| Foreign-business refund application | by the 15th of the month after the period; lost after six years from the right arising | 2026 | [Regulation 1243/2019, Article 5](https://files.reglugerd.is/pdf/1243-2019/current) |
| Foreign-business refund: repay an excess / appeal | 30 days from notice / three months from the decision | 2026 | [Regulation 1243/2019, Articles 10 and 11](https://files.reglugerd.is/pdf/1243-2019/current) |
| Forms | RSK 5.02 registration; RSK 10.01 VAT statement; RSK 10.24 foreign services; RSK 10.26 annual correction; RSK 10.27 mixed-activity reconciliation; RSK 10.29 foreign refund; RSK 10.36 agent abroad | 2026 | [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/); [Skatturinn: VAT register](https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/virdisaukaskattsskra/); [Skatturinn: VAT overview](https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/almennt-um-vsk/); [Skatturinn: refunds to foreign businesses](https://www.skatturinn.is/atvinnurekstur/skattamal/endurgreidslur-virdisaukaskatts/erlendir-adilar/) |
## The base
1. Confirm the entity, registration status, settlement period and prior statement.
2. Build invoice-backed sales, purchases and import schedules, then classify each line.
3. Reconcile output and supported input VAT, file the current electronic statement, pay the stated amount (or claim the refund) and retain confirmation.
### Classify every supply from evidence
Iceland VAT is generally charged on domestic business transactions and imports unless a direct exemption applies. The published rates are **24% standard** and **11% reduced** (plus a temporary 11% rate on listed fuels from 1 May 2026 to 31 August 2026, shown in the reduced-rate row below). Do not choose a rate from a merchant name, product label or the customer's country alone. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/)
| Classification | Operational treatment | Evidence to retain |
| --- | --- | --- |
| Standard taxable supply | Apply 24% to the VAT-exclusive consideration once the domestic taxable supply is confirmed. | Contract/order, invoice, customer/location and rate calculation. |
| Reduced taxable supply | Apply 11% only when the actual supply fits the statutory list. The conditions matter: hotel/guest rooms at 11%, and other commercial accommodation (private homes, lodges, cottages, hostels) only where the rent period is **less than one month**; campground facilities; food and other products for human consumption as defined in the Act's annex, including alcohol, and catering; passenger transport that is not exempt, including organised tours; travel-agent services for 11%-rated or exempt services; tour guiding; spas, saunas and baths that are not athletic facilities; access to tunnels and road structures; radio/TV subscriptions; books, newspapers and magazines (printed or electronic); music recordings without pictures; **hot water, electricity and oil for heating houses and swimming pools**; and listed contraceptives, reusable and children's diapers and menstrual products. [VAT Act, Article 14(2)](https://www.althingi.is/lagas/nuna/1988050.html) Access to campground electricity, toilets and showers supplied to campsite guests is 11% whether included in the camping fee or billed separately; access unconnected to camping is 24%. [Administrative campground guidance](https://www.skatturinn.is/english/companies/value-added-tax/) **Temporary fuel rate (dated):** fuel under customs tariff numbers 2710.1221, 2710.1229, 2710.1930, 2710.2021, 2710.2029, 2710.2065 and 3826.0000 is 11% on import and taxable sale from 1 May 2026 to 31 August 2026 inclusive, and 24% before and after that window. Sellers must pass the reduction on in full to the final retail price. Input VAT on fuel bought in that window is the 11% shown on the invoice or Customs document (the usual input-VAT conditions and the vehicle block still apply). [VAT Act, temporary provision XLIX](https://www.althingi.is/lagas/nuna/1988050.html) | What was supplied, duration/location where relevant, and invoice description. |
| Zero-rated supply | Charge 0% only after meeting a stated zero-rate condition. See the services test below. Other examples include exported goods, international goods transport and domestic legs of it, passenger transport to/from Iceland, qualifying supplies to inter-country vessels/aircraft (not pleasure boats or private aircraft), and sale, lease, building and repair of ships and aircraft (not ships under 6 metres, pleasure boats or private aircraft). A zero-rated supply remains within VAT scope. | Export/customs or transport evidence; customer establishment and use evidence for services. |
| Exempt supply | Do not charge output VAT. Skatturinn lists, among others, health, social/education, certain culture/sport, listed public transport, postal, qualifying property rental (more than one month) and property sale, insurance, banking/financial, lotteries and certain artistic activities. Exempt-business purchases do not give input VAT credit. | Legal/service facts and any voluntary property-registration evidence. |
| Import of goods | VAT is collected by Customs on the customs value plus duties. A registered business may count import VAT as input tax for goods used in its taxable activity, on the Customs payment document. Blocked categories below still apply. | Customs declaration and payment document, supplier invoice, use. |
| Foreign-service purchase from abroad | Apply the Article 35 buyer-liability test in the foreign-service purchaser workflow and report on RSK 10.24 where it applies. | Supplier invoice/contract, service description, supplier country/Iceland VAT registration or agent status, purchaser's registration and input-credit facts, transaction date and full VAT-exclusive total consideration. [RSK 10.24](https://www.skatturinn.is/media/rsk10/rsk_1024.is.pdf) |
**Services sold to customers outside Iceland (current law).** Skatturinn's English page still describes the older rule that services must be wholly used abroad. The VAT Act as amended by Act No. 63/2024 (in force since June 2024) says:
- A service sold to a **business** that is neither domiciled in Iceland nor operating from a fixed establishment in Iceland is not taxable turnover (0%). This does **not** apply to: rental of property in Iceland under voluntary registration; services connected with property or structures in Iceland; hotel rooms and campsites in Iceland (whatever the rental period) and other accommodation in Iceland let for less than one month; access to road structures; passenger transport carried out in Iceland; admission to cultural, artistic, sporting, scientific, educational and entertainment events (including markets, exhibitions and conferences) held in Iceland, and to baths and spas in Iceland, with related services; restaurant/catering service delivered in Iceland; rental of vehicles handed over in Iceland; telecom and broadcasting actually used in Iceland; and travel-agent, tour-operator and guide services used in Iceland. Those fall outside the zero rate and follow their normal domestic treatment (rate or exemption).
- A service sold to a **non-business** customer who is not resident in Iceland is 0% only for listed services (electronic, telecom, broadcasting, rights, advertising, consulting/engineering/legal/accounting and similar, data processing, non-exempt financial services, employment agency, rental of movables other than means of transport, and related obligations) **and** only where the service is actually used outside Iceland. For these non-business customers, a service relating to property, structures or movables in Iceland is always taxable in Iceland. [VAT Act, Article 12](https://www.althingi.is/lagas/nuna/1988050.html)
- Skatturinn's English page still carves out services related to movable property in Iceland for business customers too; that is the pre-2024 wording. Under current point 2 the only property exception for business customers is services connected with property or structures in Iceland.
For ordinary calculations, use `output VAT = taxable VAT-exclusive sales × confirmed rate`. Keep 24%, 11%, zero-rated and exempt sales in separate schedules. A zero rate is not an exemption: zero-rated supplies keep the right to deduct input VAT, while exempt activities do not. A transfer of inventory and operating assets on the sale of a business to a buyer whose business is registered or required to register is not taxable turnover; the seller must notify the Director of Internal Revenue within eight days of the transfer. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/) and [VAT Act, Article 12](https://www.althingi.is/lagas/nuna/1988050.html)
### Test input VAT before deducting it
Input VAT is deductible only for VAT on goods, business assets and services bought for a VAT-liable business activity. The VAT must be supported by a sales invoice (or, for imports, the Customs payment document), and the vendor must have charged VAT and been VAT-registered at the transaction date. Check the invoice and vendor registration; a bank line alone is not sufficient. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/) and [VAT Act, Articles 15, 16 and 20](https://www.althingi.is/lagas/nuna/1988050.html)
Apply an invoice-control check to every ordinary sales and purchase invoice before it enters the VAT schedules. Subject to the fact-specific Article 21 exception, confirm seller and buyer name and kennitala, seller VAT number, issue date, consecutive invoice number, clear supply description, quantity, unit price, total price, and whether VAT is included. The VAT amount must be shown separately, or the invoice must state that VAT is 19.35% of the total (standard rate) or 9.91% (reduced rate); on a sale to a registered buyer the VAT amount must always appear. One exception: a receipt of ISK 6,000 or less from a retailer, or from a seller that sells almost only to final consumers, is sufficient proof of input VAT even without the buyer's name and kennitala. Escalate a missing or inconsistent control instead of substituting a bank transaction. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/) and [VAT Act, Article 20](https://www.althingi.is/lagas/nuna/1988050.html)
Do **not** include input VAT for the listed blocked categories:
- staff/owner cafeteria or dining and all food purchases, except for resale;
- owner/staff living quarters;
- owner/staff perquisites;
- vacation homes, summer cottages, children's nurseries and similar facilities for owner or staff;
- entertainment and gifts (this covers restaurant meals with clients);
- acquisition, operation and rental of passenger cars, and of vans and trucks (sendi- og vörubifreiðar) with a gross authorised weight of 5,000 kg or less that do not meet the minister's cargo-capacity and cargo-length requirements.
The vehicle block has a statutory exception: a registered business that sells or rents out vehicles, and an operator of passenger cars holding a special Icelandic Transport Authority (Samgöngustofa) licence for passenger transport in tourism, may deduct input VAT on inputs for that business. Such vehicles must be marked as the regulations require, and a later change to a use with less or no deduction must be notified before the change. Do not deduct car VAT merely because the car is used mostly for business. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/) and [VAT Act, Article 16](https://www.althingi.is/lagas/nuna/1988050.html)
### Mixed taxable/exempt activity and private use
**Entity-status screen first.** A VAT-registered body exempt under Income Tax Act Article 4 falls within the overriding [Input VAT Regulation 192/1993 Article 10](https://files.reglugerd.is/pdf/0192-1993/current), which permits only inputs exclusively connected with taxable sales under its general rule. Do not give such a body the ordinary shared-turnover deduction below. Article 10 separately permits qualifying public-service enterprises taxable under VAT Act Article 3(1)(4) to attribute non-property inputs to taxable operations under Article 6, provided those operations are clearly separated financially and in the accounts. Establish that status and its special method before any deduction.
For an ordinary taxpayer outside that override, use [Input VAT Regulation 192/1993, Articles 3–9](https://files.reglugerd.is/pdf/0192-1993/current), after testing invoice evidence and statutory blocks. Keep each activity identifiable in the ledger:
1. **Direct taxable use:** deduct supported VAT on inputs bought solely for the taxable part, subject to the other deduction restrictions. Zero-rated supplies remain taxable activity for input-credit purposes; do not put them in the Article 2 exempt denominator merely because output VAT is zero.
2. **Direct exempt use:** no deduction for inputs solely serving the exempt activity.
3. **Genuinely shared inputs:** multiply their otherwise-eligible VAT by annual VAT-exclusive taxable sales divided by annual total turnover. Exclude operating-asset sales and the other Article 11(3) items from this ratio. Do not apply the shared ratio to every purchase or use an asset disposal to inflate it.
4. **Provisional periods:** the preceding accounting year's ratio may be used during the year; reconcile to the actual annual ratio in the last settlement period. In the first year, calculate a provisional ratio for each period and reconcile in the last period. Skatturinn's reconciliation form for mixed activity is RSK 10.27 ([Skatturinn: VAT overview](https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/almennt-um-vsk/)); use the current version of it.
5. **Private/nonbusiness use:** Article 6 instead limits deduction to the evidenced taxable-business use. Turnover apportionment does not prove private use. Blocked inputs stay blocked even when a business-use percentage is high.
[Regulation 192/1993, Articles 3–6](https://files.reglugerd.is/pdf/0192-1993/current); [VAT Act, Articles 12 and 16](https://www.althingi.is/lagas/nuna/1988050.html)
**Buildings and vehicles have special rules.** For separately identified building parts, Article 7 uses construction-cost attribution, with floor area permitted where the parts are comparable in quality. Attribute repair/improvement work directly where possible and require the invoice to identify the worked-on part; shared exterior/services work can use the specified floor-area method. A rented building is not taxable-use property merely because the tenant is a business: establish the landlord's voluntary registration. For the same building part used for both activities, Article 8 refers to Articles 3–6 where Article 7 cannot allocate it. Owner/staff residential accommodation remains blocked. [Regulation 192/1993, Articles 2 and 7–8](https://files.reglugerd.is/pdf/0192-1993/current)
Article 9's listed vehicles have an exclusive-taxable-use acquisition rule, subject to its narrow documented commuting exception for qualifying goods vehicles and its output-tax/notification conditions. Do not claim a turnover percentage of a passenger car merely because it has some taxable business use. A final vehicle result needs the vehicle category, equipment, use, registration and applicable exception. [Regulation 192/1993, Articles 2 and 9](https://files.reglugerd.is/pdf/0192-1993/current)
**Specified blocked-input exceptions.** The regulation permits certain structural cafeteria/dining-room building inputs and fixtures, and ordinary eligible raw materials/energy/services for taxable food sales to staff; loose dining-room furniture/equipment remains blocked. It also distinguishes low-value items plainly intended for advertising from blocked gifts. Establish each exception from the actual supply rather than reclassifying restaurant entertainment as advertising. [Regulation 192/1993, Article 2](https://files.reglugerd.is/pdf/0192-1993/current)
### Capital-input adjustments when use changes
Maintain a separate asset adjustment register. [Regulation 192/1993, Articles 12–16](https://files.reglugerd.is/pdf/0192-1993/current) supplies the following method:
| Screen | Rule | Source |
| --- | --- | --- |
| Movable asset or asset group | Cost at least ISK 250,000 excluding VAT | Regulation Article 12(1)(1) |
| Building/structure works | Total relevant works at least ISK 500,000 excluding VAT | Article 12(1)(2) |
| Mixed-use ratio change | A fall of at least 10 percentage points triggers the specified clawback; a rise of at least 10 points can support an additional deduction, relative to acquisition or the previous specified adjustment | Articles 12(3), 13(3) |
| Movable change-of-use window | Five years from the end of the ordinary two-month period of acquisition | Article 14(1) |
| Property change of use | Clawback window twenty years from when the input VAT was recorded; increased-deduction window six years from when the right to deduct arose | Article 14(2) |
| Later-year remaining share, movables | 80% next calendar year, 60% second following year, falling by 20 percentage points per year | Article 14(3)(1) |
| Later-year remaining share, property | 95% next calendar year, 90% second following year, falling by 5 percentage points per year | Article 14(3)(2) |
| Change within the calendar year of acquisition | Movables: 96.67% after the next two-month period, 93.34% after the following one, then falling 3.33 points per period to year end. Buildings: 99.17%, 98.34%, then falling 0.83 points per period | Article 14(3) |
| Ratio-change annual correction | One fifth for movables or one twentieth for structures of the indexed VAT amount to be adjusted, under the statutory ratio-change method | Article 14(4) |
For a change within the acquisition/works settlement period, compute input VAT on the changed basis in that period. For a later change, first index the VAT under Article 14 using the construction index at the specified period ends, then apply the appropriate adjustment share. Identify a full change of use separately from an annual ratio change; the schedules are not interchangeable. Post the adjustment to the input account for the adjustment period and complete the authority's required adjustment report. Keep original VAT, original deduction ratio, dates, prior adjustments, actual new use, index values and the calculation together. [Regulation 192/1993, Article 14](https://files.reglugerd.is/pdf/0192-1993/current)
Before reversing, test Article 12's exceptions, including taxable disposals, qualifying zero-rated disposals, specified forced sales and voluntarily registered rental. For a property/business transfer, Article 15 permits assumption of adjustment obligations only to the extent of the buyer's entitlement; the seller adjusts any balance. Both parties notify Skatturinn within eight days, with the year/period amounts, proportions and the buyer's assumption statement. A sale described as “VAT-free” does not extinguish an adjustment obligation. [Regulation 192/1993, Articles 12 and 15](https://files.reglugerd.is/pdf/0192-1993/current)
The property-registration method below supplies the stated eligibility/application steps; neither method establishes a property's actual use, approval or the special vehicle exception without their documents. Those determinations and the actual accepted reporting route remain for review.
Build a purchase schedule with supplier, date, invoice number, VAT-exclusive amount, VAT shown, vendor VAT status, business use, classification and deduction result. Reconcile the deductible total to the purchase ledger and evidence before netting it against output VAT.
### Property: voluntary rent registration and special construction registration
**Identify the property and the approval route.** Obtain the address, property number, plans, floor areas/parts, ownership, actual and intended use, tenant/buyer, lease/sale agreement, work dates and existing registration decisions. Ordinary exempt property rental/sale does not itself allow construction input VAT. VAT Act Article 6 distinguishes voluntary registration for the rental service from special developer registration; approval for one is not automatic approval for the other. Residential premises are excluded from the property routes below. Identify any genuinely separate commercial part; do not include a part used wholly or partly as housing. [VAT Act, Articles 2 and 6](https://www.althingi.is/lagas/nuna/1988050.html); [Regulation 577/1989, Articles 1 and 4–5](https://files.reglugerd.is/pdf/0577-1989/current)
**A. Commercial rent, frjáls skráning.** An application identifies the specific property/part and includes a written lease, the tenant's signed consent to the registration and VAT on rent, and evidence that this consent is registered on the property. Keep ownership/lease-party evidence. The minimum registration period is **two years**; an indefinite lease needs the stated intention to rent for at least that period. Establish the approved start date before invoicing or recovering inputs. Regulation Article 5 ordinarily refers to the tenant's occupation date, while current administrative guidance describes application receipt or later occupation. This skill does not infer unrestricted retrospective entitlement from the former wording: obtain the authority's actual approved date and resolve an earlier-period claim explicitly. [Regulation, Articles 4–5](https://files.reglugerd.is/pdf/0577-1989/current); [Current registration procedure](https://www.skatturinn.is/atvinnurekstur/virdisaukaskattur/skraning-a-vsk-skra)
After approval, charge ordinary **24%** output VAT on the covered rent. Regulation Article 6 includes security money required from the tenant; do not assume every deposit is outside the base merely because it is refundable. Establish the actual arrangement and later settlement/credit-note treatment separately so the same consideration is not taxed twice. Below-market rent needs the Article 8 valuation test. The tenant deducts rent VAT only to the extent its own general input rules permit it; a consenting tenant's exempt/private use does not acquire full credit from the landlord's approval. [Regulation, Article 6](https://files.reglugerd.is/pdf/0577-1989/current); [VAT Act, Articles 8, 14 and 16](https://www.althingi.is/lagas/nuna/1988050.html)
Eligible post-registration property maintenance, operations and administration inputs follow the ordinary deduction/attribution rules above. **New construction or substantial pre-occupation improvements need the special-registration analysis**, rather than a retrospective deduction solely from later rent registration. Notify a change defeating registration conditions within **eight days** and compute the capital-input adjustment. A new tenant requires the new lease and registered consent; an ownership change requires the new owner's application and proof of lease succession, rather than automatic transfer of the former owner's approval. For the same continuing lease, Article 4 provides the stated document simplification. Record vacancies: under Article 5, the specified nonuse of six months or more, including the stated early-termination/reletting circumstances, does not count towards the adjustment period. Do not age away the obligation through that vacancy. [Regulation, Articles 4–5 and 7–8](https://files.reglugerd.is/pdf/0577-1989/current); [Current procedure](https://www.skatturinn.is/atvinnurekstur/virdisaukaskattur/skraning-a-vsk-skra)
**B. Construction for qualifying sale/rental, sérstök skráning.** For the sold-property route, obtain the executed contract with the VAT-registered buyer, approved plans/identified commercial part, the buyer's intended-use declaration and its undertaking to assume the input-adjustment obligation. Register the declarations on the property and quantify the obligation. Registration of the buyer alone does not prove full deduction or extinguish the seller's residual adjustment: use the Article 15 transfer workpaper above. For an unsold commercial project, Article 3 requires approved taxable-use intentions and the unconditional bank guarantee indexed to the construction index. A landlord constructing for approved taxable rental also needs the lease/registered-consent and special-registration evidence; do not invent a buyer where the rental branch applies. **Guarantee waiver for that rental branch:** Regulation 577 Article 5 permits Skatturinn to waive the Article 3 bank guarantee where Regulation 515/1996 Article 4(2) and Article 5 conditions are met. Support the genuine profit-seeking development, substantial investment linked to future taxable activity, foreseeable revenue and business/financing evidence, and retain the authority's waiver decision. This is not an automatic exemption or a general waiver for every unsold developer. [Regulation 515/1996, Articles 4–5](https://files.reglugerd.is/pdf/0515-1996/current) [VAT Act, Article 6](https://www.althingi.is/lagas/nuna/1988050.html); [Regulation 577/1989, Articles 1–5](https://files.reglugerd.is/pdf/0577-1989/current); [Current procedure](https://www.skatturinn.is/atvinnurekstur/virdisaukaskattur/skraning-a-vsk-skra)
Keep a separate construction workpaper for **each property**. First test the developer/self-construction scope under Regulation 576/1989, including owner/employee design/construction work and equipment use. Its ordinary construction method has limited input deductions; special registration must be established before treating the additional contractor/material inputs as recoverable. Output is based on the supported ordinary market value, or the specified calculated selling value including overhead/profit if market value is unavailable, not bare payroll cost. For Article 5 repairs/maintenance, the **2026 annual total-cost (taxable-value) threshold is at least ISK 3,457,000**, effective 1 January under Skatturinn's letter 1/2026. This gates the relevant Article 2/4 repair work; it is not a VAT amount or a per-invoice allowance. Do not use the regulation's historic printed 648,100 as the current threshold. The actual Article 6 value and applicable calculated-price instructions still require their own support. Preserve labour/time, equipment, materials, contractor invoices, valuations and direct/shared allocation. [Regulation 576/1989, Articles 1–7](https://files.reglugerd.is/pdf/0576-1989/current); [2026 indexed amounts](https://www.skatturinn.is/fagadilar/akvardandi-bref/obeinir-skattar/akvardandi-bref-1-2026)
Under Regulation 577 Article 2, show the required construction output and supported input on the separate property statement, **submitted without payment**. On approval, the stated output collection is cancelled and eligible input refund is authorised. VAT the builder has already paid on the building, and the Regulation 576 Article 3(2) input VAT, is refunded no later than 30 days after Skatturinn approves the registration (Article 2(4)): reconcile paid output, unpaid/cancelled output and input so a cancellation does not become a second cash refund. Keep the approval, property statements, payment ledger and refund/offset decision; this is not an ordinary rent-period netting shortcut or proof of bank receipt. The guarantee is released only on a statutory event: sale to a registered buyer who takes over the adjustment obligation, voluntary registration of the property, the builder's own taxable use, or (under current procedure) full payment of the obligation. The release request shows the indexed adjustment balance, and only qualifying parts are released. [Regulation 577/1989, Articles 2–3](https://files.reglugerd.is/pdf/0577-1989/current); [Current guarantee-release procedure](https://www.skatturinn.is/atvinnurekstur/virdisaukaskattur/skraning-a-vsk-skra)
The authority currently requests a written application with the property's dates, plans/use, cost breakdown and whether employees or contractors build it. For approved retrospective registration it requests past **RSK 10.01 paper statements** and input-ledger movements because electronic past-period filing is unavailable for that route. This does not establish retrospective eligibility or permit replacement of ordinary electronic returns. Retain application/acceptance evidence and confirm the actual current submission route; no application, message or filing is sent by this skill. [Current registration instructions](https://www.skatturinn.is/atvinnurekstur/virdisaukaskattur/skraning-a-vsk-skra); [Regulation, Article 9](https://files.reglugerd.is/pdf/0577-1989/current)
### Foreign-service purchaser workflow
Article 35 of the VAT Act makes the Icelandic buyer pay VAT on services bought from a business domiciled or established abroad. It does not turn every foreign invoice into a VAT charge.
1. Record the foreign seller, country, invoice/contract, transaction date, service type and VAT-exclusive total consideration. Check whether the seller, its agent or representative is on the Icelandic VAT register for that activity; if so, the buyer route does not apply. [VAT Act, Article 35](https://www.althingi.is/lagas/nuna/1988050.html)
2. Find which buyer group applies:
- **Buyer in exempt activity** (for example a bank, insurer, clinic or school): pays VAT on the full consideration of any taxable-type service bought from abroad for that activity. No threshold.
- **VAT-registered buyer**: pays VAT only **to the extent** that VAT on the service could not be deducted if it had been bought in Iceland, for example a service used for a blocked purpose (entertainment, staff perquisites) or the exempt share of mixed activity. A registered buyer who could deduct all of it pays nothing on this route. VAT must always be paid under this article where the service is supplied or used in connection with an import of goods, even if it would otherwise be deductible; report it on RSK 10.24.
- **Any other buyer** (for example a private person, or a business below the registration limit and not registered) who buys rights, advertising, consulting/engineering/legal/accounting and similar services, data processing, non-exempt financial services, employment agency, rental of movables (other than means of transport) or related obligations: pays only if these purchases total **ISK 10,000 or more excluding VAT in the ordinary two-month period**.
3. For a liable purchaser, calculate `foreign-service VAT = liable VAT-exclusive consideration × applicable Icelandic rate`. The Act applies domestic rules, so this is normally 24%; a service that would be 11% if bought in Iceland is self-assessed at 11%. For a registered buyer with a partly deductible service, the liable part is the non-deductible part; apply the established attribution method above and retain the non-deductible share. Hold the result if the needed attribution evidence is missing. Complete **RSK 10.24** with the service line(s), supplier and buyer details, the VAT-exclusive consideration, the VAT, and the stated use purpose (the form prints 24%; show a lower applicable rate separately). Submit with payment by the fifth day of the second month after the ordinary two-month period in which the purchase falls. Late payment carries the same 1% daily surcharge, up to 10%, as domestic VAT. Retain the form, invoice and input-credit analysis.
This is a purchaser-liability payment route. Do not also claim the same amount as ordinary input VAT. [VAT Act, Article 35](https://www.althingi.is/lagas/nuna/1988050.html) and [RSK 10.24](https://www.skatturinn.is/media/rsk10/rsk_1024.is.pdf)
### VOES return and separate foreign-business refund
Use this branch after the seller/customer/supply screening above. VAT Act **Article 5B** permits qualifying foreign B2C suppliers to choose simplified rather than ordinary registration; the simplified scheme is not compulsory merely because Icelandic VAT is due. Preserve the registration approval, activity and effective date. The authority's registration booklet says a company approved for simplified registration can apply in its own name without an Icelandic representative. That exception does not remove the representative requirement for a different ordinary foreign-service registration. [Article 5B](https://www.althingi.is/lagas/nuna/1988050.html); [registration booklet, section 4.3.6](https://www.skatturinn.is/media/baeklingar/VSK_Skraning_a_vsk_skra.pdf)
1. **Prepare the application evidence.** Record company/trading name, address/country, activity, contact/email/web address, home TIN, relevant supply category, Icelandic start date and expected twelve-month sales. Obtain the home-country company-registration certificate and any name-change evidence. The public application begins with a contact email and an emailed application link; retain the eventual authority approval and access details. No application or email was submitted in preparing this method. [Current application instructions](https://www.skatturinn.is/atvinnurekstur/virdisaukaskattur/skraning-a-vsk-skra); [public application](https://voes.rsk.is/Application/Register)
2. **Build the B2C sales schedule.** Identify actual customer status/location, supply, period, price including/excluding VAT and the applicable rate. Electronic delivery alone does not make every supply 24%: Article 14 expressly includes qualifying electronic books at 11%. Keep unrelated goods/imports, business customers and supplies by an Icelandic establishment out of an assumed simplified branch. The authority says VAT on a VOES invoice cannot be treated as a business input credit; resolve misclassified customers and invoicing instead. [Articles 5B, 14, 34–35](https://www.althingi.is/lagas/nuna/1988050.html); [registration restrictions](https://www.skatturinn.is/atvinnurekstur/virdisaukaskattur/skraning-a-vsk-skra)
3. **File and pay output only.** VOES uses January–February and the subsequent aligned two-month periods. Return and payment are due one month and five days after period end, moving to the next working day on an Icelandic holiday/weekend. Report in ISK using the authority's specified VAT foreign-exchange reference for the due date; retain the dated rate and conversion. **Do not offset purchase VAT in this return.** Reconcile output to the portal statement, payment and receipt. Actual accepted portal fields, late corrections and disputed FX need their own evidence. [VOES return instructions](https://www.skatturinn.is/english/companies/value-added-tax/)
**A separate refund application is conditional.** Regulation 1243/2019 Article 2 expressly extends the foreign-business refund route to simplified Article 5B registrants, and to the stated nonregistrable Icelandic-establishment case. This is not input credit in a VOES return. Establish all Article 3 conditions: foreign taxable-business use; no ordinary Article 5 registered/registrable activity in Iceland during the claim period under Article 3(c); the foreign enterprise's activity **would require Article 5 registration if carried on in Iceland**, separately under Article 3(d); domestic-equivalent input entitlement under Article 3(e); and a vendor registered when the purchase occurred. Do not collapse the hypothetical-registration test into the input-credit test. Exclude purchases for **resale and final consumption in Iceland**, including the regulation's foreign travel-operator example; preserve the narrow combined-import-VAT/subcontractor exception separately. Meals/employee benefits, entertainment/gifts and blocked vehicle expenditure do not become refundable through foreign status. [Regulation, Articles 2–3](https://files.reglugerd.is/pdf/1243-2019/current); [Icelandic refund guidance](https://www.skatturinn.is/atvinnurekstur/skattamal/endurgreidslur-virdisaukaskatts/erlendir-adilar/)
Build an invoice/customs-document register showing vendor status, actual VAT paid, use, exclusions and the resulting eligible amount. Use **RSK 10.29**, with compliant document copies and a home competent-authority business certificate valid for one year, plus any additional requested evidence. A representative needs unambiguous written authority (Article 9); where the agent lives abroad, Skatturinn asks for form RSK 10.36 with a copy of the agent's passport or ID. Preserve submission and the decision, rather than treating the schedule total as an approved refund. [Regulation, Articles 5–6 and 9](https://files.reglugerd.is/pdf/1243-2019/current); [current application/document instructions](https://www.skatturinn.is/atvinnurekstur/skattamal/endurgreidslur-virdisaukaskatts/erlendir-adilar/)
For ordinary processing, apply by **the fifteenth of the month after the aligned two-month period**, or the stated year/remainder period. A late application moves to the next processing cycle; the ultimate statutory limit is **six years from the right arising**. Effective **1 January 2026**, Skatturinn's letter 1/2026 confirms the Article 8 minimums: **105,500** for a two-month claim, or **21,100** for a full calendar year or its remainder. Apply the correct period before testing the amount. The regulation's printed 75,000/15,000 are December 2019 CPI 473.3 bases; the English page's 101,000/20,200 are expressly 2025 figures. Neither supersedes the dated 2026 letter. Recheck the next year's indexed amounts. [Regulation, Articles 4–8](https://files.reglugerd.is/pdf/1243-2019/current); [2026 authority letter](https://www.skatturinn.is/fagadilar/akvardandi-bref/obeinir-skattar/akvardandi-bref-1-2026); [Icelandic timetable](https://www.skatturinn.is/atvinnurekstur/skattamal/endurgreidslur-virdisaukaskatts/erlendir-adilar/); [older English amounts](https://www.skatturinn.is/english/companies/vat/)
**Keep these source discrepancies explicit:** the English page says applications are at least fifteen days after the period and six years after calendar-year end, whereas the current regulation and Icelandic page say by the fifteenth of the following month for normal processing and six years from the right arising. Its broad no-Iceland-sales summary also omits the express simplified-registration extension. Use the current regulation's separate gates and resolve an actual deadline/eligibility dispute before filing. A refund decision, collection, overpayment or appeal requires its own notice: Article 10 requires repayment of an excess within **thirty days from notification of the decision** and applies statutory surcharge/interest rules; Article 11 separately gives three months **from the date of decision** to appeal. Keep those date triggers distinct. [Regulation, Articles 2, 5, 7 and 10–11](https://files.reglugerd.is/pdf/1243-2019/current); [conflicting English summary](https://www.skatturinn.is/english/companies/vat/)
## Deadlines and filing
The ordinary settlement periods are Jan–Feb, Mar–Apr, May–Jun, Jul–Aug, Sep–Oct and Nov–Dec. The electronic VAT statement and payment are due **one month and five days after period end**: for example, Jan–Feb is due 5 April, moved to the next business day if the date is a weekend or Icelandic public holiday. A registered person must file electronically even with no sales; otherwise Skatturinn estimates the VAT. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/)
The return requires total VAT-exclusive sales by tax rate, zero-rate sales, and total output and input VAT. Do not reproduce historic, unlabeled return-field letters: use the current Skatturinn filing screen and match each value to the schedules. After filing, payment can be made through Icelandic online banking. A foreign-bank payment must use the current official instructions and identify the VAT registration number, year and period. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/)
Use this working sequence:
1. Lock the legal entity and settlement period; check whether the business is registered and whether a special period applies.
2. Reconcile invoices, credit notes, import documents and payment records to a sales and purchase schedule. Do not record gross bank deposits as sales without the underlying evidence.
3. Classify each sale as 24%, 11%, zero-rated, exempt or unresolved; total each group excluding VAT.
4. Compute output VAT for confirmed taxable sales. Keep zero-rated and exempt values visible even where output VAT is zero.
5. Test each purchase for a valid VAT invoice or Customs document, registered vendor, VAT-liable business use and blocked/mixed-use status; total only supported deductible input VAT.
6. Compute `net VSK = total output VAT − deductible input VAT`. A positive difference is payable. A negative difference is refundable: file the credit statement by the same deadline. If the statement is filed on time and accepted, the refund is paid within twenty-one days after the filing deadline. Unpaid public charges and taxes are set off against it first, and no refund is paid while an earlier period's VAT rests on an estimate. [VAT Act, Articles 15, 24 and 25](https://www.althingi.is/lagas/nuna/1988050.html)
7. Enter the totals in the live electronic statement, review the confirmation, pay any stated liability or record the refund, and archive the submission, ledger and support.
### Period choices, amendments and record controls
A taxpayer with taxable sales below **ISK 4,000,000 in a whole calendar year** may request annual settlement for the following year; apply before 15 February for that year. The annual due date is 5 February. Six-month settlement is available only to agriculture, with due dates of 1 September (January–June) and 1 March (July–December). Monthly settlement can be available where input VAT is generally higher than output VAT because a major share of turnover is exempt, or where reduced-rate sales dominate but standard-rate input VAT dominates; apply at least one month before the next period. A changed settlement period must start at the beginning of a two-month period and applies for at least two years. These are application-based alternatives, not automatic selections. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/), [Skatturinn VAT-register guidance](https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/virdisaukaskattsskra/) and [VAT Act, Article 24](https://www.althingi.is/lagas/nuna/1988050.html)
A business re-registered after Skatturinn removed it from the VAT register must use **monthly** periods for at least two years, with the due date 15 days after each month ends. The same applies on registration where the individual, or an owner, board member or manager of the company, was bankrupt, or was involved in a company that went bankrupt, within the previous five years (the Act sets the exact tests). Confirm the period on the registration record before applying the ordinary timetable. [VAT Act, Article 24](https://www.althingi.is/lagas/nuna/1988050.html)
Notify Skatturinn of a post-registration change in operations, including a different activity or VAT-taxable cessation, within eight days. Keep VAT accounts, sales documents and vouchers available to the authority. Every taxable person must keep the books, settlements and documents behind its VAT returns for seven years from the end of the accounting year. For a foreign company using an Icelandic representative, the representative must keep the complete VAT accounts and supporting documents in Iceland for at least seven years after the accounting year. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/) and [VAT Act, Article 17](https://www.althingi.is/lagas/nuna/1988050.html)
### Correct a filed ordinary statement
1. Identify the exact settlement period, original filing/assessment status, the omitted or wrong record, and the schedules that change. Preserve the original statement, correction calculation and evidence.
2. Before assessment for that period is complete, the taxpayer can correct the submitted statement electronically. Skatturinn states that assessment is completed one month after the due date. Use the live service rather than a paper workaround unless the authority's stated exception applies.
3. Under-claimed input VAT of up to ISK 100,000 may instead be included in the statement for the period in which it is discovered, but no later than the statement for the last period of the same operating year. Larger or later input corrections go through the formal correction route.
4. After the annual reconciliation identifies a difference between the returns and annual accounts, use **RSK 10.26**. A taxpayer with a settlement period shorter than two months cannot use RSK 10.26 for after-year corrections and instead files one RSK 10.01 statement for each affected period. Do not apply either correction route to a mixed-activity allocation or capital-use adjustment without the applicable specialised method.
[Skatturinn VAT-register correction guidance](https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/virdisaukaskattsskra/) and [VAT Act, Article 26](https://www.althingi.is/lagas/nuna/1988050.html)
## Penalties and interest
Failure to file permits an estimated assessment. Filing a statement after an estimate adds an ISK 5,000 charge for each statement not filed on time. Late payment has a 1% penalty for each started day after the due date, up to 10%; the same penalty applies to estimated VAT and to an excessive refund. If the VAT is still unpaid one month after the due date, late-payment interest is also charged, and the interest runs from the original due date. Sufficient cause can support cancellation of the penalty. An appeal to the Director of Internal Revenue is generally due within 30 days of the decision; a further written appeal to the Internal Revenue Board is due within three months of the decision letter. Use the live account/notice and current procedural instructions for an actual dispute. [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/) and [VAT Act, Articles 27 to 29](https://www.althingi.is/lagas/nuna/1988050.html)
## Cross-border points
Classify outbound services using the current Article 12 business/nonbusiness tests in the base section; a customer's foreign address alone does not prove zero rating. For foreign purchases use the Article 35 purchaser workflow above, including registration, credit entitlement, service class and the specific 10,000-per-period test where applicable. A foreign seller must establish whether ordinary registration, a representative or VOES applies before filing. Imports require Customs evidence and the import-base rule, separately from services. [VAT Act, Articles 4, 12 and 35–36](https://www.althingi.is/lagas/nuna/1988050.html)
## Worked examples
These cases are arithmetic illustrations from the cited rules, not filing results. They assume the evidence and eligibility stated in each case; they do not establish VAT treatment for a different supply. Rules applied: [Skatturinn: Value Added Tax](https://www.skatturinn.is/english/companies/value-added-tax/), [VAT Act No. 50/1988](https://www.althingi.is/lagas/nuna/1988050.html) and [RSK 10.24](https://www.skatturinn.is/media/rsk10/rsk_1024.is.pdf).
| Case | Facts and calculation | Expected VSK result |
| --- | --- | --- |
| Standard domestic sale with supported input | Registered Icelandic business sells a confirmed 24% domestic service for ISK 100,000 excluding VAT: output `100,000 × 24% = 24,000`. It has a valid invoice for a wholly taxable-business purchase of ISK 20,000 plus ISK 4,800 VAT: deductible input 4,800. | **ISK 19,200 payable** (`24,000 − 4,800`). |
| Reduced-rate sale | Registered business lets a hotel room (a stay of less than one month) for ISK 50,000 excluding VAT. | **ISK 5,500 output VAT** (`50,000 × 11 ÷ 100`); input VAT depends on separately tested purchases. |
| Zero-rated export | Registered seller has a documented qualifying export of goods for ISK 250,000 and a valid input-VAT invoice for ISK 4,800 used in the taxable/zero-rated activity. | **No output VAT** on the export and **ISK 4,800 refundable**. File the credit statement by the normal deadline; if filed on time and accepted, the refund is due within twenty-one days after the deadline, less any set-off for unpaid taxes. |
| Input is blocked | Registered business buys owner/staff food for ISK 10,000 plus ISK 2,400 VAT. | **No deductible input VAT** for that purchase. |
| Registration screen | A new business has ISK 1,950,000 of taxable sales (excluding VAT) in the relevant 12-month period and it is **not** yet clear that sales will reach ISK 2,000,000. | Within the ISK 2,000,000-or-less exemption. As soon as it becomes clear sales will reach ISK 2,000,000 in a 12-month period, it must notify and register. Do not issue/collect VAT without first resolving registration status. |
| Missed ordinary return | A registered business makes no sales in Mar–Apr. | It still files the electronic return by **5 June** unless that day moves to the next business day. |
| Foreign specialist service used in exempt activity | An exempt Icelandic business buys a foreign specialist service (standard-rated, 24%, if bought in Iceland) for ISK 100,000 from a supplier with no Iceland VAT registration/agent. | Complete RSK 10.24 with the buyer/supplier, date, service, ISK 100,000 VAT-exclusive consideration and **ISK 24,000 VAT** (`100,000 × 24 ÷ 100`); pay by the form's stated deadline. |
| Foreign service used by a registered buyer for a blocked purpose | A fully taxable registered business buys ISK 50,000 of foreign consultancy (standard-rated, 24%, if bought in Iceland) used wholly for staff perquisites, from a supplier with no Iceland VAT registration/agent. | VAT would not be deductible if bought in Iceland, so the buyer pays **ISK 12,000 VAT** (`50,000 × 24 ÷ 100`) on RSK 10.24 and claims no input VAT. If the same service were used wholly in taxable activity, nothing would be payable on this route. |
| Small foreign purchase by a non-registered buyer | An unregistered sole trader below the registration limit buys ISK 8,000 of foreign advertising in Jan–Feb and nothing else from abroad in that period. | Below the ISK 10,000 per-period threshold: **no RSK 10.24 payment**. At ISK 10,000 or more in the period, VAT at the applicable rate (24% for advertising) on the whole amount would be due. |
| Consultancy sold to a foreign business | An Icelandic registered consultant sells ISK 300,000 of advice to a Norwegian company with no domicile or fixed establishment in Iceland; the advice does not relate to property or structures in Iceland. | **0%, no output VAT**; input VAT on related costs stays deductible. If the same customer instead bought hotel rooms in Iceland, 11% would apply. |
| Temporary fuel rate | A registered fuel retailer sells diesel under tariff number 2710.1930 for ISK 100,000 excluding VAT in July 2026, and the same again in September 2026. | July sale: **ISK 11,000 output VAT** (`100,000 × 11 ÷ 100`). September sale: **ISK 24,000** (`100,000 × 24 ÷ 100`). A registered buyer deducts the VAT actually invoiced, subject to the usual conditions. |
| Correction before assessment | A Mar–Apr electronic statement omitted a supported ISK 100,000 standard-rate domestic sale. The period's assessment is not complete. | Preserve the correction schedule and submit the electronic correction for that period. The missing **ISK 24,000 output VAT** (`100,000 × 24 ÷ 100`) is included in the revised period data; do not invent a separate delta box. |
### Recomputable arithmetic controls
The blocks below test the stated ordinary sale, reduced-rate room, supported zero-rated refund, foreign-service boundary and dated fuel cases. Inputs require the eligibility/evidence in the corresponding table row. A passing block does not establish that eligibility.
```oa-check
name: Iceland standard sale less supported input VAT
inputs:
net_sale: 100000
supported_purchase_net: 20000
steps:
- output_vat: net_sale * 0.24
- deductible_input: supported_purchase_net * 0.24
- net_payable: output_vat - deductible_input
expected:
output_vat: 24000
deductible_input: 4800
net_payable: 19200
```
```oa-check
name: Iceland qualifying reduced-rate room and zero-rated export
inputs:
room_net: 50000
export_net: 250000
export_supported_input: 4800
steps:
- room_output: room_net * 0.11
- export_output: export_net * 0
- export_net_payable: export_output - export_supported_input
expected:
room_output: 5500
export_output: 0
export_net_payable: -4800
```
```oa-check
name: Iceland foreign service, confirmed blocked purpose
inputs:
foreign_service_net: 50000
allowed_input: 0
steps:
- buyer_vat: foreign_service_net * 0.24
- liability: buyer_vat - allowed_input
expected:
buyer_vat: 12000
liability: 12000
```
The statutory non-registered-buyer threshold is 10,000 or more, with VAT on the whole qualifying consideration. The following block assumes that exact boundary has already been met; it does not replace the purchaser/status/service tests.
```oa-check
name: Iceland qualifying foreign advertising at exact threshold
inputs:
period_net_consideration: 10000
steps:
- vat_on_whole_consideration: period_net_consideration * 0.24
expected:
vat_on_whole_consideration: 2400
```
```oa-check
name: Iceland listed fuel, July and September 2026
inputs:
july_net_sale: 100000
september_net_sale: 100000
steps:
- july_output: july_net_sale * 0.11
- september_output: september_net_sale * 0.24
- combined_output: july_output + september_output
expected:
july_output: 11000
september_output: 24000
combined_output: 35000
```
### Mixed-activity annual reconciliation
Assume an ordinary taxpayer outside the Article 10 exempt-body override, taxable turnover 12 million and exempt turnover 8 million, excluding a separate 2 million operating-asset sale from the ratio. Supported direct taxable input VAT is 120,000, direct exempt VAT 48,000, genuinely shared VAT 240,000 and separately blocked VAT 24,000. The annual ratio is **60%** and total allowable input is **264,000**. If provisional deductions already claimed in earlier periods total 280,000 and there are no other annual inputs, the final-period reconciliation reverses **16,000**. Map the reconciliation to the current form rather than inventing a delta box. [Regulation 192/1993, Articles 2–5](https://files.reglugerd.is/pdf/0192-1993/current)
```oa-check
name: Iceland mixed VAT direct attribution and annual shared-cost reconciliation
inputs:
taxable_turnover: 12000000
exempt_turnover: 8000000
operating_asset_sale_excluded_from_ratio: 2000000
direct_taxable_vat: 120000
direct_exempt_vat: 48000
shared_vat: 240000
blocked_vat: 24000
earlier_provisional_claims: 280000
steps:
- annual_ratio: taxable_turnover / (taxable_turnover + exempt_turnover)
- shared_deduction: shared_vat * annual_ratio
- direct_exempt_deduction: direct_exempt_vat * 0
- blocked_deduction: blocked_vat * 0
- annual_allowed: direct_taxable_vat + shared_deduction + direct_exempt_deduction + blocked_deduction
- final_period_reconciliation: annual_allowed - earlier_provisional_claims
expected:
annual_ratio: 0.60
shared_deduction: 144000
annual_allowed: 264000
final_period_reconciliation: -16000
```
### Partly creditable foreign service
Assume an ordinary shared foreign consultancy service with VAT-exclusive consideration 100,000, applicable rate 24%, an established **60%** deductible share under the above method, and no import-of-goods override or seller Icelandic registration. Article 35 purchaser liability applies to the 40% non-deductible part: **9,600**. Do not also deduct that amount as ordinary input VAT. The supported split and Article 35 eligibility must precede this calculation. [VAT Act, Article 35](https://www.althingi.is/lagas/nuna/1988050.html), [Regulation 192/1993, Article 5](https://files.reglugerd.is/pdf/0192-1993/current)
```oa-check
name: Iceland foreign service purchaser liability for an established exempt share
inputs:
foreign_service_net: 100000
rate: 0.24
established_deductible_share: 0.60
steps:
- nondeductible_share: 1 - established_deductible_share
- buyer_liability: foreign_service_net * rate * nondeductible_share
expected:
nondeductible_share: 0.40
buyer_liability: 9600
```
### Private use is a separate test
An otherwise eligible purchase carries VAT 120,000. Evidence establishes 75% taxable-business use and 25% private use, without a category-specific block. Deduct **90,000**, under the actual-use test rather than an assumed turnover ratio. [Regulation 192/1993, Article 6](https://files.reglugerd.is/pdf/0192-1993/current)
```oa-check
name: Iceland VAT private-use attribution on otherwise eligible input
inputs:
input_vat: 120000
evidenced_taxable_business_share: 0.75
steps:
- deductible: input_vat * evidenced_taxable_business_share
- nondeductible: input_vat - deductible
expected:
deductible: 90000
nondeductible: 30000
```
### Movable asset changes wholly to non-creditable use
Assume a qualifying movable asset acquired in 2024 with original deductible VAT 240,000, full original credit, and a full change to non-creditable use in 2026, with no Article 12 exception. Established construction-index values for the relevant period ends are 100 and 120. The indexed VAT is **288,000**; the second-following-calendar-year remaining share is 60%, so clawback is **172,800**. The index inputs are hypothetical, not published index figures. This is a full change-of-use case, not the distinct annual ratio-change computation. [Regulation 192/1993, Articles 12 and 14](https://files.reglugerd.is/pdf/0192-1993/current)
```oa-check
name: Iceland movable capital input full change of use, indexed remaining share
inputs:
original_deductible_vat: 240000
original_index: 100
adjustment_index: 120
established_remaining_share: 0.60
steps:
- indexed_vat: original_deductible_vat * adjustment_index / original_index
- clawback: indexed_vat * established_remaining_share
expected:
indexed_vat: 288000
clawback: 172800
```
### Commercial rent with required security money
Assume the specific commercial premises and period have approved voluntary registration, all lease/consent conditions are met and there is no private/residential use or valuation dispute. VAT-exclusive rent is 1,000,000 and the landlord requires 200,000 security money falling within Regulation 577 Article 6. Output VAT is **288,000** on 1,200,000, with **1,488,000** collected including VAT. Proved, fully eligible post-registration maintenance input VAT is 24,000, giving **264,000** net VAT before other transactions. The tenant's credit is not assumed; later return/application of security needs its own reconciliation. These are invented case amounts. [Regulation 577/1989, Articles 6–7](https://files.reglugerd.is/pdf/0577-1989/current); [VAT Act, Article 14](https://www.althingi.is/lagas/nuna/1988050.html)
```oa-check
name: Iceland approved commercial rent includes required security in output base
inputs:
rent_excluding_vat: 1000000
qualifying_security_excluding_vat: 200000
standard_rate: 0.24
supported_maintenance_input_vat: 24000
steps:
- output_base: rent_excluding_vat + qualifying_security_excluding_vat
- output_vat: output_base * standard_rate
- gross_receipt: output_base + output_vat
- net_period_vat: output_vat - supported_maintenance_input_vat
expected:
output_base: 1200000
output_vat: 288000
gross_receipt: 1488000
net_period_vat: 264000
```
### Approved special construction statement: cancellation is not cash twice
Assume a fully qualifying commercial property has approved special registration, a registered buyer with the required registered declarations, and no blocked/shared inputs. Supported construction output base under Regulation 576 is 3 million, giving **720,000** at 24%; it was shown but **not paid**. Proved eligible input VAT is 240,000 equipment, 4.8 million materials and 2.4 million contractors: **7.44 million** in total. Under the assumed Article 2 approval, collection of the unpaid 720,000 is cancelled and the eligible-input refund claim is **7.44 million**. Do not add the cancelled unpaid output again as cash received. Approval, public-debt offsets and actual payment remain separate evidence; the example does not calculate an indexed guarantee or assume every construction invoice is eligible. [Regulation 577/1989, Articles 1–2](https://files.reglugerd.is/pdf/0577-1989/current); [Regulation 576/1989, Articles 2–3 and 6](https://files.reglugerd.is/pdf/0576-1989/current)
```oa-check
name: Iceland special property registration separates unpaid output cancellation from input refund
inputs:
proved_construction_output_base: 3000000
standard_rate: 0.24
eligible_equipment_input_vat: 240000
eligible_material_input_vat: 4800000
eligible_contractor_input_vat: 2400000
qualifying_output_vat_already_paid: 0
steps:
- unpaid_construction_output_cancelled: proved_construction_output_base * standard_rate
- eligible_input_refund_claim: eligible_equipment_input_vat + eligible_material_input_vat + eligible_contractor_input_vat
- total_supported_refund_claim: eligible_input_refund_claim + qualifying_output_vat_already_paid
expected:
unpaid_construction_output_cancelled: 720000
eligible_input_refund_claim: 7440000
total_supported_refund_claim: 7440000
```
### VOES output and refund controls
Assume a foreign seller already holds valid VOES approval, supplies Icelandic consumers and has supported VAT-exclusive sales of ordinary software subscriptions 1,000,000 at 24% and qualifying electronic books 500,000 at 11% in one period. Output payable is **295,000**. Even supported purchase VAT is not offset in that return. Eligibility, a particular product's classification, any foreign-currency conversion and actual submission remain separate checks. [Articles 5B and 14](https://www.althingi.is/lagas/nuna/1988050.html); [VOES instructions](https://www.skatturinn.is/english/companies/value-added-tax/)
```oa-check
name: Iceland VOES mixed rates with no input offset
inputs:
software_sales_net: 1000000
qualifying_e_book_sales_net: 500000
standard_rate: 0.24
reduced_rate: 0.11
steps:
- software_output: software_sales_net * standard_rate
- book_output: qualifying_e_book_sales_net * reduced_rate
- voes_payable: software_output + book_output
expected:
software_output: 240000
book_output: 55000
voes_payable: 295000
```
Separately assume a foreign-business refund register contains **150,000 of actual VAT**, including 12,000 on employee meals, 24,000 of blocked passenger-car costs and 60,000 on tourist services bought for resale/final consumption in Iceland. These categories are disjoint, and the remaining 54,000 meets the stated business-use/document/vendor tests. The eligible arithmetic amount is **54,000**: **51,500 below** the 2026 two-month minimum, but **32,900 above** the year/remainder minimum. The latter numeric test does not itself prove the claim period, other conditions or an approved refund. Do not submit the same invoices twice or subtract the amount from VOES output. [Regulation, Articles 2–3 and 8](https://files.reglugerd.is/pdf/1243-2019/current); [2026 minima](https://www.skatturinn.is/fagadilar/akvardandi-bref/obeinir-skattar/akvardandi-bref-1-2026); [blocked costs](https://www.skatturinn.is/atvinnurekstur/skattamal/endurgreidslur-virdisaukaskatts/erlendir-adilar/)
```oa-check
name: Iceland separate foreign-business refund excludes blocked and resale costs
inputs:
total_vat_in_register: 150000
employee_meal_vat: 12000
blocked_car_vat: 24000
iceland_resale_consumption_vat: 60000
two_month_minimum_2026: 105500
year_or_remainder_minimum_2026: 21100
steps:
- excluded_vat: employee_meal_vat + blocked_car_vat + iceland_resale_consumption_vat
- eligible_vat_before_application_gates: total_vat_in_register - excluded_vat
- shortfall_for_two_month_minimum: max(0, two_month_minimum_2026 - eligible_vat_before_application_gates)
- excess_over_year_remainder_minimum: max(0, eligible_vat_before_application_gates - year_or_remainder_minimum_2026)
expected:
excluded_vat: 96000
eligible_vat_before_application_gates: 54000
shortfall_for_two_month_minimum: 51500
excess_over_year_remainder_minimum: 32900
```
## Ask the client first
- What do the Icelandic VAT registration record and current settlement period say? Has the business ever been removed from the VAT register and re-registered?
- What invoice, supplier/customer status, business use and rate/exemption facts support each transaction?
- Are imports, foreign services, VOES, mixed exempt activity, property, vehicles or a correction involved?
- For property, which exact premises/parts, actual use, approvals/start dates, leases, registered consents/declarations, construction costs, guarantee and prior input-adjustment balances support the claimed route?
- For VOES or a foreign-business refund, which registration/establishment/customer facts, sales and FX records, home certificate, vendor/use/exclusion register, applicable indexed minimum, claim period and prior decisions prove the separate routes?
- Has a statement already been filed or an assessment/penalty notice been issued?
## When to refuse or refer
- Registration, rate, exemption, place, Customs or input-VAT evidence is missing.
- VOES eligibility, a special scheme, property/vehicle legal classification or an attribution/adjustment input is unresolved. The ordinary mixed-activity method above requires source documents and a supported allocation.
- A required invoice, vendor-registration check, Customs document, prior statement or assessment notice is unavailable.
- The business was re-registered after removal, or is under the bankruptcy-linked monthly regime, and the settlement period on the registration record is not available.
### Stop conditions
Use a separate sourced method or professional review for disputed mixed-use attribution, property registration outside the stated method or with unresolved approval/start-date/use facts, imported goods/customs valuation and import-VAT deferral, VOES eligibility, foreign representative arrangements, special investment/fishing schemes, vehicle-resale margin rules, a missing VAT invoice, a supplier that was not registered, and an estimated assessment or appeal. The method above includes ordinary direct/shared attribution, annual reconciliation and the stated capital-adjustment rules, alongside confirmed domestic taxable rates, zero-rated evidence (including services to foreign businesses under current Article 12), exempt outputs, supported input VAT, invoice controls, the Article 35 foreign-service purchaser route, refunds of excess input VAT, corrections before assessment and the ordinary return timetable.
<!-- openaccountants-cta-block -->
## Talk to an accountant
For advice on your facts, [contact OpenAccountants](https://www.openaccountants.com/contact).
## Sources
| Source | URL | Read on |
| --- | --- | --- |
| VAT Act 50/1988, consolidated text 158a (1 October 2026), Articles 4, 5, 5B, 6, 12, 14 to 17, 20, 24 to 29, 35 and temporary provision XLIX | https://www.althingi.is/lagas/nuna/1988050.html | 2026-10-30 |
| Skatturinn, Value Added Tax (English) | https://www.skatturinn.is/english/companies/value-added-tax/ | 2026-10-30 |
| Skatturinn, VAT register: registration, periods and corrections | https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/virdisaukaskattsskra/ | 2026-10-30 |
| Skatturinn, VAT overview (mixed activity, RSK 10.27) | https://www.skatturinn.is/atvinnurekstur/ad-hefja-rekstur/almennt-um-vsk/ | 2026-10-30 |
| Skatturinn, form RSK 10.24 (foreign-service purchases) | https://www.skatturinn.is/media/rsk10/rsk_1024.is.pdf | 2026-10-30 |
| Input VAT Regulation 192/1993, Articles 1 to 16 | https://files.reglugerd.is/pdf/0192-1993/current | 2026-10-30 |
| Regulation 577/1989 on voluntary and special registration for property, Articles 1 to 9 | https://files.reglugerd.is/pdf/0577-1989/current | 2026-10-30 |
| Regulation 576/1989 on VAT on own-account construction, Articles 1 to 7 | https://files.reglugerd.is/pdf/0576-1989/current | 2026-10-30 |
| Regulation 515/1996 on VAT registration, Articles 4 and 5 | https://files.reglugerd.is/pdf/0515-1996/current | 2026-10-30 |
| Skatturinn, registration on the VAT register (property registration, VOES application) | https://www.skatturinn.is/atvinnurekstur/virdisaukaskattur/skraning-a-vsk-skra | 2026-10-30 |
| Skatturinn, VAT registration booklet, section 4.3.6 (VOES) | https://www.skatturinn.is/media/baeklingar/VSK_Skraning_a_vsk_skra.pdf | 2026-10-30 |
| Skatturinn, VOES public application entry (no application started) | https://voes.rsk.is/Application/Register | 2026-10-23 |
| Regulation 1243/2019 on VAT refunds to foreign businesses, Articles 1 to 13 | https://files.reglugerd.is/pdf/1243-2019/current | 2026-10-30 |
| Skatturinn, VAT refunds to foreign businesses (Icelandic) | https://www.skatturinn.is/atvinnurekstur/skattamal/endurgreidslur-virdisaukaskatts/erlendir-adilar/ | 2026-10-30 |
| Skatturinn, Reimbursement of VAT (English; 2025 amounts and older timetable) | https://www.skatturinn.is/english/companies/vat/ | 2026-10-30 |
| Skatturinn, determining letter 1/2026 (20 January 2026): VAT base amounts from 1 January 2026 | https://www.skatturinn.is/fagadilar/akvardandi-bref/obeinir-skattar/akvardandi-bref-1-2026 | 2026-10-30 |
Not yet confirmed: whether any bill to amend the VAT Act tabled in autumn 2026 changes a 2026 figure (the earlier text said bills were tabled in September 2026; this was not checked).
## Today's figures and who stands behind this skill
This file is an AI skill (tax rules your AI follows) from OpenAccountants, copied on 2026-10-30. Rates, thresholds and deadlines change. For the current version of this skill, its official sources and the named accountant (if any) who stands behind it, call `get_skill` with slug `iceland-vat` on the OpenAccountants connector (https://www.openaccountants.com/connect), or read https://www.openaccountants.com/skills/iceland-vat. If neither is available, confirm every figure against the official source pages cited above before relying on it.
