TL;DR
Icelandic invoices must comply with Regulation 505/2013. They must include the kennitala of both parties, VAT number (if applicable), a unique invoice number, and a clear description of services. FreelancePay generates legally compliant invoices automatically.
1) What Must Be on an Icelandic Invoice
Under Regulation 505/2013 on bookkeeping and annual accounts, the following information must appear on all invoices:
| Field | Details | Required |
|---|---|---|
| Seller name | Your full name or company name | |
| Seller kennitala | Your national ID number (or company ID) | |
| VAT number (VSK nr.) | Required if registered for VAT (revenue > 2M ISK) | |
| Seller address | Legal domicile or primary place of business | |
| Buyer name | Client's name | |
| Buyer kennitala | Client's national ID number | |
| Invoice number | Unique sequential number (e.g., 2026-001) | |
| Date | Issue date of the invoice | |
| Description of goods/services | Clear description of what was delivered | |
| Amount before VAT | Net price | |
| VAT rate and amount | 24% (standard) or 11% (reduced) — or 0% if exempt | |
| Total including VAT | Gross amount the buyer pays | |
| Payment terms | Due date (e.g., net 30 days from issue) |
2) With or Without VAT?
✅ Without VAT — Revenue under 2M ISK
- If your total revenue over the past 12 months is under 2,000,000 ISK you do not need to charge VAT.
- No VAT number is required on the invoice.
- The invoice shows only the net amount.
- You may voluntarily register for VAT before reaching the threshold if beneficial.
💼 With VAT — Revenue over 2M ISK
- When revenue exceeds 2M ISK over 12 months, VAT registration is mandatory.
- All invoices need your VAT number, rate breakdown (24%/11%), and VAT amount.
- You can deduct input VAT on business expenses.
- Don't issue invoices without VAT after registration — this is a legal violation.
3) Sample Invoice
Your Name Here
kennitala: 123456-7890
VAT nr.: 123456
Laugavegur 1, 101 Reykjavík
INVOICE
No. 2026-001
Date: 01.03.2026
Due: 31.03.2026
Bill to:
Client Company ehf.
kennitala: 654321-0987
| Description | Amount |
|---|---|
| Web development services — February 2026 | 322.581 ISK |
Payment to account: 0123-26-123456
↑ Example invoice. FreelancePay generates invoices like this automatically.
4) Electronic vs Paper Invoice
- Electronic invoices are dominant — most clients prefer PDF or online viewing.
- Electronic invoices must comply with Regulation 505/2013 — same as paper.
- Most accounting software, including FreelancePay, handles these requirements automatically.
- Paper invoices are still legal but impractical.
- E-invoicing (PEPPOL) is growing — FreelancePay supports this.
5) How Long to Keep Invoices?
7
years
Under the Accounting Act No. 145/1994 you must keep accounting records for 7 years. Digital copies are fine.
💡 FreelancePay stores all invoices and supporting documents in the cloud. You never need to worry about this.
6) Common Invoice Mistakes
Missing VAT number when registered
Invoice is invalid. Client may refuse to pay VAT portion.
Wrong buyer kennitala
Skatturinn can't verify the transaction. Input VAT deduction issues for client.
No invoice number or duplicate number
Violation of Regulation 505/2013. Bookkeeping errors.
Too vague service description
Tax authorities may question the deductibility for the client.
Charging VAT without being registered
You are personally liable for VAT you collect without a valid registration.
7) FreelancePay — Legal Invoices in Seconds
- All legal requirements automatically met — Regulation 505/2013
- Kennitölur, VAT numbers, and invoice numbers auto-filled
- VAT calculation (24%/11%) automatically correct
- Invoice sent to client and you receive payment the same day
- All invoices stored in the cloud for 7+ years
- Tax filings, VAT, and pension paid automatically — no manual work
