Icelandic VAT on digital services

Iceland subjected foreign providers of electronic/digital services to VAT from 1 November 2011.

Definition of Icelandic digital services

Services delivered via the internet or other electronic networks subject to VAT include:

Downloads or streaming movies, music, software and images
Apps
Automated databased services
Online news and journals
Website hosting and webpage hosting
Remote systems administration
Data warehousing and disc space
Use of search engines
Automated e-learning without human intervention
Voice-over IP services
Broadcast TV and radio

VAT registration

The Icelandic VAT registration threshold for digital services is ISK 2 million per annum. Providers can use the Value Added Tax on Electronic Services (VOES) simplified registration. This does not permit claiming an input VAT suffered. Applications should be prepared online with the Directorate of Internal Revenue.

If the provider sells their services through an intermediary marketplace, then they are not required to account for the VAT.

VAT compliance

Providers of digital services are required to issue VAT compliant invoices. Returns, listing all transactions and VAT calculations, can be submitted on a quarterly basis. Returns must be submitted by the 20th of the month following the reporting quarter.

VAT records must be kept for at least 5 years.

Icelandic VAT on electronic services - Avalara

B2B transactions

If the foreign provider’s customers are Icelandic resident businesses, then the provider does not charge VAT. Instead, the customer accounts for the VAT through the reverse charge mechanism.

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Icelandic VAT on digital services

Definition of Icelandic digital services

VAT registration

VAT compliance

Icelandic VAT on electronic services - Avalara

B2B transactions

Need help with your UK VAT compliance?

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