Understanding Iceland VAT Registration Triggers and Thresholds

Iceland asks one question of everyone: are your taxable sales in the country above ISK 2,000,000 in any 12-month window? Presence in Iceland does not change that question, which makes Iceland simpler than many jurisdictions and different from most US states. Kintsugi tracks your position against the threshold and tells you when you cross it.

• The threshold is ISK 2,000,000 of taxable sales, in the region of EUR 14,000

• It is measured over any rolling 12-month period, not a calendar year

• An office, staff, a warehouse, or a server in Iceland does not force day-one registration. The threshold still applies

• A non-resident business selling only to business customers has no registration duty, whatever the volume

• You charge VAT from your first sale after your registration takes effect, not from the day you crossed

• Sales you made before your registration was effective are not covered by it

‌

The Threshold

The threshold rose from ISK 1,000,000 to ISK 2,000,000 on 1 January 2017. Older guidance still quoting ISK 1,000,000 is out of date.

‌

What Counts Toward The Threshold

For a non-resident seller with no presence in Iceland, the threshold is measured on consumer sales of electronic services into Iceland.

Counts:

• Consumer sales of electronic services into Iceland

• Sales made through a marketplace or platform, because Iceland has no deemed-supplier regime and you remain the liable seller

Does not count:

• Sales to Icelandic business customers, because those are reverse-charged and your customer accounts for the VAT

• Exempt supplies

• Refunded sales, which come off at the date of the credit invoice

• Goods you ship in where your customer is the importer of record, because you have no Iceland VAT obligation on those

A business established in Iceland measures the threshold more broadly, across business and consumer sales, goods and services, domestic zero-rated supplies, and sales to related parties. Export turnover for services used outside Iceland, and exempt supplies, are left out. That situation sits outside Kintsugi's Iceland registration and filing scope.

‌

Crossing The Threshold

Sales you made after the breach but before your registration became effective sit in a gap. Iceland can assess VAT on them retroactively. Raise them with us when you submit, so they can be assessed separately rather than surfacing later.

‌

Registering Before You Cross

You can ask to register below the threshold. Two things to weigh first:

• Registering early gives you a clean, correct treatment on consumer sales from the outset, which matters if you expect to cross soon

• VOES gives you no input VAT recovery, so registering early brings no recovery benefit

If you sell only to Icelandic businesses, registering brings no benefit at all, because the reverse charge already handles those sales and a VOES registration would not change them.

‌

What Kintsugi Monitors

Kintsugi tracks three kinds of exposure in Iceland:

• Economic exposure, meaning your taxable sales against ISK 2,000,000

• Physical exposure, meaning an office, branch, staff, contractors, third-party warehousing, a trade show with sales, or a server in Iceland

• Collected-tax exposure, meaning tax you have already collected there without meeting either of the above

Physical exposure is reported for your awareness. It does not by itself mean you have to register, because Iceland keeps the threshold test in place regardless of presence. It does change which scheme applies to you, though, so tell us when it appears.

‌

FAQs

Q: I have a contractor in Reykjavík. Do I have to register immediately?

A: No. Iceland keeps the ISK 2,000,000 test in place even when you have people or premises in the country. Kintsugi flags the presence so you know it is there, and the threshold still decides the obligation. Tell us about the presence, because it moves you from VOES to the Standard scheme.

Q: Do my sales to Icelandic businesses count toward the threshold?

A: Not for a non-resident seller with no presence in Iceland. Those sales are reverse-charged, so they sit outside your threshold figure. If every Iceland sale you make is to a business, you have no registration duty regardless of the total.

Q: Is the threshold a calendar year figure?

A: No, and this catches people out. It is any rolling 12-month window, so a strong quarter can pull you over mid-year even if no single calendar year would.

Q: Do sales through a marketplace count?

A: Yes. Iceland has no marketplace facilitator regime, so the marketplace does not take on your VAT liability and those sales count toward your threshold.

Q: I crossed ISK 2,000,000 in March. When do I start charging VAT?

A: Your liability starts on your first sale after the breach, so submit the registration request promptly. You start charging once the registration is effective, and you cannot add Iceland VAT to invoices before that date. Sales in between should be raised with us.

Q: What is ISK 2,000,000 in dollars?

A: The króna floats, so the dollar figure moves. It sits in the region of EUR 14,000. Kintsugi tracks your position in ISK, which is the figure the authority uses.

‌

This article is general information about how Kintsugi works, not tax advice for your specific situation.

Need Help?

For further concerns, we're always here to help. If you can't find the answer you're looking for, reach out to us using the chat in the bottom right corner of your screen.