Iceland VAT invoicing rules for developers

If your business sells taxable goods or services in Iceland, you need to know which VAT rate applies, when you must register, what a sales invoice must show, and how long to keep records. This guide covers those general rules. Skatturinn (the Icelandic Tax Administration) publishes the rate tables and guidance. The VAT rate is known as VSK.

VAT rates

Iceland has a standard rate of 24%. The reduced rate of 11% covers items such as food, books, newspapers and music recordings, passenger transport, and short-term accommodation. For sales to end consumers, the VAT amount may be stated as 19.35% of the total for the 24% rate, or 9.91% of the total for the 11% rate. Check the rate list before you map a product to a rate.

Registration threshold

Businesses are exempt from VAT registration if their taxable sales are 2,000,000 ISK or less in any twelve-month period from the start of operations. Once taxable revenue excluding VAT goes above that amount, you must register. Voluntary registration is possible for businesses below the threshold that want to reclaim input VAT.

What a sales invoice must show

Skatturinn lists the following content for a sales invoice:

• The issue date.
• The seller's name, national ID number (kennitala) and VAT registration number.
• The buyer's name and national ID number.
• A description of the goods or services sold, with quantity, unit price and total price where practicable.
• Whether VAT is included in the total, and the amount of tax.
• Separate amounts and VAT for each rate, where sales use more than one rate.

When to issue an invoice

Skatturinn's revenue rule says the invoice must be issued at the same time as the sale or delivery. If the buyer pays in full or in part before delivery, the seller may issue an invoice on receipt of payment. Service sellers who do not sell only to end consumers may issue an invoice at the end of each month.

Credit notes and corrections

Issue a credit note (kreditreikningur) when you reverse or otherwise correct a sale. The credit note must reference the original sales invoice and must state the reason for the correction clearly. It must show negative turnover and negative output VAT, broken down by rate. Use the credit note for returned goods, for discounts granted after the invoice is issued, and for correcting an earlier invoice. On the buyer side, the VAT on a credit note is recorded as a reduction of input VAT in the period matching the credit note's date.

Record retention

Keep books, supporting vouchers and other records for seven years from the end of the relevant accounting year. Store the invoices and credit notes you issue within that period.

Next step

See the developer documentation to model Icelandic VAT rates and invoice fields in your integration.