Iceland VAT

Iceland VAT Return Skill (VSK) v2.0

Section 1 — Quick reference

Read this whole section before classifying anything. The workflow runbook is in vat-workflow-base Section 1. Note: Iceland is NOT an EU member. The eu-vat-directive companion skill does NOT apply. Iceland follows its own VSK legislation with EEA adaptations.

Quick reference field table

Field	Value
Country	Iceland (Island)
Standard rate	24%
Reduced rate	11% (food, accommodation, books, newspapers, geothermal hot water, radio/TV licence)
Zero rate	0% (exports, international transport)
Return form	VSK return (Virðisaukaskattsskýrsla)
Filing portal	https://www.skattur.is (Skatturinn portal)
Authority	Rikisskattstjori (Directorate of Internal Revenue)
Currency	ISK (Icelandic Krona)
Filing frequencies	Bi-monthly (standard: Jan-Feb, Mar-Apr, etc.); Monthly (large taxpayers, optional)
Deadline	5th of 2nd month after period end (e.g. 5 April for Jan-Feb)
Companion skill (Tier 1, workflow)	vat-workflow-base v0.1 or later — MUST be loaded
Companion skill (EU directive)	NOT required — Iceland is not EU
EEA status	EEA member via EFTA. No intra-community supplies. No VIES. Goods from EU treated as imports. Services from abroad subject to reverse charge.
Validated by	Deep research verification, April 2026
Validation date	April 2026

Key VSK return fields

Field	Meaning
A	Domestic sales at 24% — base
B	Domestic sales at 11% — base
C	Output VSK at 24%
D	Output VSK at 11%
E	Zero-rated sales (exports)
F	Exempt sales
G	Reverse charge on imported services — base
H	VSK on reverse charge (output)
I	Total output VSK (C + D + H)
J	Input VSK on domestic purchases
K	Input VSK on imports (customs)
L	Input VSK on reverse charge services (input side)
M	Total deductible input VSK (J + K + L)
N	Net VSK payable (I minus M) or refundable

Conservative defaults

Ambiguity	Default
Unknown rate on a sale	24%
Unknown VAT status of a purchase	Not deductible
Unknown counterparty country	Domestic Iceland
Unknown business-use proportion	0% recovery
Unknown SaaS billing entity	Reverse charge (all foreign = import of service)
Unknown blocked-input status	Blocked

Red flag thresholds

Threshold	Value
HIGH single-transaction size	ISK 500,000
HIGH tax-delta on single default	ISK 30,000
MEDIUM counterparty concentration	>40%
MEDIUM conservative-default count	>4
LOW absolute net VSK position	ISK 800,000

Section 2 — Required inputs and refusal catalogue

Required inputs

• Minimum viable — bank statement for the bi-monthly period. Acceptable from: Islandsbanki, Landsbankinn, Arion banki, Revolut Business, Wise Business.
• Recommended — sales/purchase invoices, kennitala (10-digit ID), VSK number (IS + 5-6 digits), prior VSK return.
• Ideal — complete register, customs declarations for imports, prior period reconciliation.

Iceland-specific refusal catalogue

• R-IS-1 — Non-registered — Non-registered entities do not file VSK returns. (Trigger: not registered, turnover below ISK 2,000,000.)
• R-IS-2 — Partial exemption — Mixed supplies require proportional attribution. Use a qualified tax adviser.
• R-IS-3 — Fishing vessel / special investment schemes — Fishing vessel and special investment zone schemes out of scope.
• R-IS-4 — Faroe Islands trade — Faroe Islands are a separate Danish territory, not part of Iceland for VSK. Specialist review needed. (Trigger: trade with Faroe Islands.)

Section 3 — Supplier pattern library

3.1 Icelandic banks (exempt — exclude)

Icelandic banks table

Pattern	Treatment	Notes
ISLANDSBANKI, ÍSLANDSBANKI	EXCLUDE	Financial service, exempt
LANDSBANKINN	EXCLUDE	Same
ARION BANKI, ARION	EXCLUDE	Same
REVOLUT, WISE (fee lines)	EXCLUDE	Check subscriptions
VEXTIR, INTEREST	EXCLUDE	Interest
LAN, LOAN	EXCLUDE	Loan principal

3.2 Icelandic government (exclude)

Icelandic government table

Pattern	Treatment	Notes
RIKISSKATTSTJORI, RSK	EXCLUDE	Tax payment
TRYGGINGASTOFNUN	EXCLUDE	Social insurance
RIKISSKRÁ	EXCLUDE	National registry

3.3 Icelandic utilities

Icelandic utilities table

Pattern	Treatment	Field	Notes
ORKUVEITA REYKJAVIKUR, OR	Domestic 24% or 11%	J	Electricity/hot water — hot water at 11%
RARIK	Domestic 24%	J	Electricity
HS VEITUR	Domestic 11%	J	Geothermal heating at 11%
SIMINN	Domestic 24%	J	Telecoms
VODAFONE IS, NOVA	Domestic 24%	J	Telecoms

3.4 Insurance (exempt — exclude)

Insurance table

Pattern	Treatment	Notes
SJOVA	EXCLUDE	Exempt
VARDAR	EXCLUDE	Same
TM TRYGGINGAR	EXCLUDE	Same
VIS INSURANCE	EXCLUDE	Same
TRYGGING, INSURANCE	EXCLUDE	All exempt

3.5 Post and logistics

Post and logistics table

Pattern	Treatment	Notes
ISLANDSPÓSTUR, ICELAND POST	EXCLUDE for standard post; 24% for parcel
DHL, UPS, FEDEX	Domestic 24% or import	Check if import

3.6 Transport

Transport table

Pattern	Treatment	Notes
STRÆTO, STRÆTÓ	Domestic 24%	Public bus
ICELANDAIR (international)	0%	International flight
ICELANDAIR (domestic)	Domestic 24%	Domestic flight

3.7 Food retail

Food retail table

Pattern	Treatment	Notes
BONUS, KRONAN, HAGKAUP, NETTO IS	Default BLOCK	Personal provisioning
VEITINGAHÚS, RESTAURANT	Default BLOCK	Entertainment

3.8 SaaS — ALL foreign suppliers (reverse charge — Iceland treats all foreign as import of service)

Since Iceland is NOT EU, ALL foreign SaaS is treated identically: reverse charge under Act 50/1988 Art. 35.

Foreign SaaS suppliers table

Pattern	Billing entity	Field	Notes
GOOGLE	Google Ireland Ltd (IE)	G/H + L	Reverse charge import of service
MICROSOFT	Microsoft Ireland (IE)	G/H + L	Same
ADOBE	Adobe Ireland (IE)	G/H + L	Same
META, FACEBOOK	Meta Ireland (IE)	G/H + L	Same
SPOTIFY	Spotify AB (SE)	G/H + L	Same (even though EFTA/EEA)
NOTION	Notion Labs Inc (US)	G/H + L	Same
ANTHROPIC, CLAUDE	Anthropic PBC (US)	G/H + L	Same
OPENAI, CHATGPT	OpenAI Inc (US)	G/H + L	Same
AWS EMEA SARL	LU entity	G/H + L	Same
GITHUB	GitHub Inc (US)	G/H + L	Same
FIGMA	Figma Inc (US)	G/H + L	Same
CANVA	Canva Pty Ltd (AU)	G/H + L	Same

3.9 Payment processors

Payment processors table

Pattern	Treatment	Notes
STRIPE (transaction fees)	EXCLUDE (exempt)	Financial service
PAYPAL (transaction fees)	EXCLUDE (exempt)	Same
VALITOR, BORGUN	EXCLUDE for transaction fees	Icelandic card processors; fees exempt

3.10 Professional services

Professional services table

Pattern	Treatment	Notes
LÖGMAÐUR, LAWYER	Domestic 24%	Legal
ENDURSKOÐANDI, AUDITOR	Domestic 24%	Accounting

3.11 Payroll (exclude)

Payroll table

Pattern	Treatment	Notes
TRYGGINGAGJALD	EXCLUDE	Social insurance levy
LAUN, SALARY	EXCLUDE	Wages
TEKJUSKATTUR	EXCLUDE	Income tax

3.12 Internal transfers and exclusions

Internal transfers table

Pattern	Treatment	Notes
MILLIFÆRSLA, OWN TRANSFER	EXCLUDE	Internal
ARÐUR, DIVIDEND	EXCLUDE	Out of scope
AFBORGUN, LOAN REPAYMENT	EXCLUDE	Loan principal
HRAÐBANKI, ATM	Ask	Default exclude

Section 4 — Worked examples

Example 1 — Foreign SaaS reverse charge (Notion)

Input: 03.04.2026 ; NOTION LABS INC ; -2,200 ISK Treatment: All foreign services: reverse charge at 24%. Field G (base), Field H (output VSK). Input in Field L. Net zero.

Example 2 — Foreign SaaS (Google — also reverse charge, no EU distinction)

Input: 10.04.2026 ; GOOGLE IRELAND LIMITED ; -127,500 ISK Treatment: Same as Example 1. Iceland does NOT have intra-EU treatment. All foreign = reverse charge.

Example 3 — Entertainment

Input: 15.04.2026 ; GRILLIÐ RESTAURANT ; -33,000 ISK Treatment: Restaurant. Entertainment input VSK not deductible. Block.

Example 4 — EU B2B service sale (no zero-rate — just non-domestic)

Input: 22.04.2026 ; STUDIO KREBS GMBH ; +525,000 ISK Treatment: Service sold to German company. Export of service. Field E (zero-rated export). No output VSK.

Example 5 — Accommodation (reduced rate)

Input: Sales: Hotel room in Reykjavik ; +45,000 ISK Treatment: Accommodation at 11%. Field B (base), Field D (output VSK at 11%).

Example 6 — Import of goods

Input: Customs declaration: Computer from US ; ISK 240,000 + ISK 57,600 import VSK Treatment: Import VSK paid to customs. Input in Field K.

Section 5 — Tier 1 classification rules (compressed)

5.1 Standard 24% (Act 50/1988, Art. 14(1))

• Standard 24% — Default. Sales: Field A/C. Input: Field J. (Act 50/1988, Art. 14(1))

5.2 Reduced 11% (Art. 14(2))

• Reduced 11% — Food, accommodation, books, newspapers, geothermal hot water, radio/TV licence. (Art. 14(2))

5.3 Zero rate (Art. 12, 42)

• Zero rate — Exports: Field E. International transport: Field E. (Art. 12, 42)

5.4 Exempt

• Exempt categories — Financial, insurance, healthcare, education, postal, gambling, residential rental.

5.5 Reverse charge — ALL foreign services (Art. 35)

• Reverse charge all foreign services — No EU/non-EU distinction. All services received from abroad: self-assess at 24%. Field G (base), Field H (output). Input in Field L. (Art. 35)

5.6 Imports of goods

• Imports of goods — Import VSK assessed by customs. Input: Field K.

5.7 No intra-community rules

• No intra-community rules — Iceland has NO intra-EU acquisition/supply mechanism. Goods from EU countries are imports. Services from anywhere are reverse charge.

5.8 Blocked input

• Entertainment — blocked
• Personal use — blocked
• Motor vehicles — restricted (deductible only if exclusively for business)

Section 6 — Tier 2 catalogue (compressed)

6.1 Vehicle costs — Default: 0%. Question: "Exclusive business use?"

• Vehicle costs default/question — Default: 0%. Question: "Exclusive business use?"

6.2 Entertainment — Default: block.

• Entertainment default — Default: block.

6.3 Foreign SaaS — Default: reverse charge at 24%.

• Foreign SaaS default — Default: reverse charge at 24%.

6.4 Owner transfers — Default: exclude.

• Owner transfers default — Default: exclude.

6.5 Tourism/hospitality — Default: 11%. Question: "Confirm accommodation vs food service."

• Tourism/hospitality default/question — Default: 11%. Question: "Confirm accommodation vs food service."

6.6 Import goods — Default: check customs declaration.

• Import goods default — Default: check customs declaration.

6.7 Cash withdrawals — Default: exclude.

• Cash withdrawals default — Default: exclude.

Section 7 — Excel working paper template

Per vat-workflow-base Section 3. Column H accepts Iceland VSK field codes (A-N). Bottom-line: Field N (net payable/refundable = Field I minus Field M).

Section 8 — Iceland bank statement reading guide

Islandsbanki and Landsbankinn use semicolons, DD.MM.YYYY. ISK amounts.

• Icelandic language glossary — leiga (rent), laun (salary), vextir (interest), millifærsla (transfer), reiðufe (cash)

ISK only. Convert foreign at Central Bank of Iceland rate.

Iceland uses IBAN with IS prefix but is NOT in the EU SEPA zone for all purposes.

Section 9 — Onboarding fallback

9.1 Entity type — Inference: ehf. = company; einstaklingsrekstur = sole trader.

• Entity type inference — ehf. = company; einstaklingsrekstur = sole trader.

9.2 VSK registration — Fallback: "VSK-registered?"

• VSK registration fallback — Fallback: "VSK-registered?"

9.3 Kennitala — Fallback: "Kennitala? (10 digits)"

• Kennitala fallback — Fallback: "Kennitala? (10 digits)"

9.4 VSK number — Fallback: "VSK number? (IS + 5-6 digits)"

• VSK number fallback — Fallback: "VSK number? (IS + 5-6 digits)"

9.5 Filing period — Bi-monthly default.

• Filing period default — Bi-monthly default.

9.6 Tourism/hospitality — Fallback: "Tourism or accommodation business?"

• Tourism/hospitality fallback — Fallback: "Tourism or accommodation business?"

9.7 Exports — Fallback: "Do you export goods or services?"

• Exports fallback — Fallback: "Do you export goods or services?"

Section 10 — Reference material

Sources

• Source 1 — Log um virðisaukaskatt (Act No. 50/1988, as amended)
• Source 2 — Regulation No. 630/2008
• Source 3 — EEA Agreement (cross-border service rules)
• Source 4 — Central Bank of Iceland exchange rates

Known gaps

1. Fishing vessel schemes not covered.
2. Svalbard-equivalent special zones not detailed.
3. Tourism sector-specific rules could be expanded.

Change log

• v2.0 (April 2026): Full rewrite. Icelandic banks (Islandsbanki, Landsbankinn, Arion). EEA-not-EU distinction clarified throughout.
• v1.0 (April 2026): Initial skill.

End of Iceland VAT Return Skill v2.0

This skill is incomplete without vat-workflow-base v0.1+. Note: eu-vat-directive is NOT required for Iceland.

Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional before filing or acting upon.

The most up-to-date, verified version of this skill is maintained at openaccountants.com.