Invoicing and Tax regulation in Iceland

Navigating Iceland’s evolving e-invoicing and tax regulations can be challenging. That’s why this guide provides an overview of the latest requirements, helping you stay compliant and avoid potential penalties.

In the guide, we will cover:

Regulations Timeline

Iceland E-invoicing Requirements (2024 Updated)

Tax Regulations

Digital Reporting

Penalties

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Regulations Timeline

A quick review of all current and upcoming regulations, Iceland mandates regarding e-invoicing and digital reporting. For more details, check out the sections below.

 

Regulations in Effect

B2G e-invoicing is mandatory.

B2B and B2C e-invoicing are voluntary.

 

Upcoming Changes to Iceland E-invoicing

No upcoming regulations.

 

 

Iceland E-invoicing Requirements (2024 Updated)

Since January 1, 2020, all public entities (B2G) in Iceland are mandated to receive and process electronic invoices.

Even though B2C and B2B e-invoicing is optional for now, many Icelandic businesses have already proactively adopted this technology. The benefits of e-invoicing include improved operational efficiency, faster payment processing, better compliance with tax regulations, and significant cost savings, making it a better choice than traditional paper invoices.

To support e-invoicing, Iceland implemented:

The PEPPOL network

European standard format Directive EU/55/2014

Managed by PEPPOL Access Points

 

Governmental Body Responsible for E-invoicing in Iceland

In Iceland, the entity responsible for overseeing and implementing e-invoicing regulations is the Directorate of Internal Revenue (Skatturinn). Additionally, the implementation of e-invoicing standards follows guidelines set by the Ministry of Finance and Economic Affairs.

Click here to visit the Directorate of Internal Revenue website, or here to visit the Ministry of Finance and Economic Affairs website.

 

E-invoicing Formats

Iceland primarily uses the PEPPOL BIS Billing 3.0 format for sending and exchanging e-invoices. They have adopted the PEPPOL eDelivery Network as their primary e-invoicing platform, designed to align with the European Standard EN 16931 and tailored to comply with Icelandic regulations.

 

E-invoice Requirements

Invoices must be issued within 30 days of the provision of a supply. They can be issued in either electronic or paper form and must comply with EU standards, including the necessary components:

Date of Issuance

Unique Invoice Number

Seller’s Information: Full name, address, and VAT identification number

Buyer’s Information: Full name, address, and VAT, if applicable

Description of Goods/Services: Description, quantity, unit price

VAT Information: Total amount excluding VAT, applicable VAT rate, total amount including VAT

Total Amount

Currency: If foreign, should include the conversion rate and calculation

Any Discounts or early payment terms

Payment Terms

Bank Account Details

 

E-invoice Archiving

You must archive invoices for a minimum period of 7 years.

 

 

Tax Regulations

VAT Rates

In Iceland, the standard VAT rate is 24%, applied to most goods and services. Iceland offers a reduced rate of 11%, applied to books, hotel accommodations, certain food products, and heating expenses.

 

Corporate Tax

In Iceland, Corporate Income Tax (CIT) is applied differently depending on the type of your legal entity:

Limited Liability Companies (LLCs) and Limited Partnership Companies (LPCs):

Other Legal Entities (e.g., Partnerships):

 

VAT on Digital Services in Iceland

Digital services in Iceland are generally subject to a standard rate of 24%.

Examples of digital services include:

Websites, web hosting

E-books

Software downloads

Music, films, and games

 

 

Digital Reporting

Iceland has already implemented some digital reporting requirements, with more on the way:

Mandatory digital reports of VAT returns and payments

Mandatory B2G e-invoicing

Voluntary B2B and B2C e-invoicing

Electronic filing of VAT returns is mandatory

 

VAT Registration and Thresholds

All businesses are required to register for VAT if their taxable turnover exceeds ISK 2,000,000 over any twelve-month period.

 

VAT Returns and Payments

The frequency of VAT filing in Iceland depends on the nature and turnover of the business:

Bi-monthly Filing: The deadline is one month and 5 days after the end of each period. For example, for the January-February period, the due date is April 5th.

Monthly Filing: Businesses regularly in a VAT credit position may be permitted to file monthly returns.

Annual Filing: Entities with an annual taxable turnover below ISK 4,000,000 may opt for annual VAT returns.

VAT statements must be filed online through the official tax portal, www.skattur.is.

 

 

Penalties

If a VAT return is not submitted by the due date, the tax authorities may estimate the VAT due. Upon actual submission, a surcharge of ISK 5,000 is imposed.

A penalty of 1% of the outstanding VAT amount is charged for each day the payment is overdue, up to a maximum of 10%.

If the VAT remains unpaid for over a month past the due date, additional penalty interest is applied, calculated based on rates determined by the Central Bank of Iceland.

 

 

Achieve Global Invoicing and Tax Compliance with Space Invoices

One way to comply with (e-)invoicing, tax and reporting regulations in Iceland is to use a provider like Space Invoices.

You will be able to:

Have one API for current and future global tax and invoicing compliance, including Iceland

Save time and money with less than a week-long integration

Support and upsell your clients worldwide, including Iceland

Rest assured all documents are archived and successfully reported to responsible institutions

Become the one-stop shop for current and future clients

Save time and money streamlining the process and eliminate manual errors

Having questions about achieving compliance in Iceland?

We are ready to help.

 

The information in this guide is strictly informative, as regulations and timelines change frequently. While we make every effort to monitor updates and maintain the accuracy of our content, we recommend consulting with a tax professional or e-invoicing specialist for the most reliable and personalized advice. The latest update was made on November 28th, 2024.

Looking to automate real-time reporting and tax compliance for Iceland? Let's talk