VAT in Iceland (2025)
VAT (VSK) applies to most goods and services at 24 %, 11 % reduced. Freelancers must register once revenue exceeds 2 M ISK in 12 months and file every two months.
TL;DR
VAT (24 % / 11 %) applies to most goods and services. Register once revenue exceeds 2 M ISK in 12 months; file every two months. FreelancePay automates this entirely.
Understanding VAT in Iceland
What is VAT (VSK)?
Value Added Tax is a general consumption tax. Contractors must charge VAT on invoices once registered.
- Registration threshold: income in the past 12 months > 2,000,000 ISK — RSK 5.02
- Rates (2025): 24 % / 11 % / 0 % — Official VAT Rules – Skatturinn
Filing and Payment
- VAT returns are filed every two months via skatturinn.is. Due: 15 days after each period.
- Submit zero reports when no revenue exists.
- Pausing? File RSK 5.04 or the tax office estimates your income.
Penalties for Late or Missing VAT Reports
Late filing
5,000 ISK fine
Late payment
1 % per day (10 days) + interest (dráttarvextir)
No filing
Estimated VAT + interest
No closure form
Tax office assumes continued income