VAT refund in Iceland : 6 years retroactivity for foreign companies
The VAT refund can be claimed in Iceland by foreign companies which are not established and not conducting taxable operations within the country.
Not imposing any reciprocity requirements, the Tax authorities of Iceland are granting VAT refunds to eligible companies from all around the world, without obligation to appoint a local representative.
The advantageous retroactivity of 6 years enables the VAT recovery for longer tax periods.
Thus, in addition to the current year’s expenses, foreign companies can still claim back the Icelandic VAT incurred between January 2018 and December 2023. But the VAT reclaim for 2018 must be done latest on 31/12/2024.
Icelandic VAT recovery procedure
VAT rates: The following rates are applicable on goods and services in Iceland:
- Normal rate 24 %
- Reduced rate 11 %
Refundable expenses: Under the provisions of Regulation no 1243/2019, the Icelandic VAT can be recovered by non-resident companies on most business expenses used for non-exempted operations outside Iceland. However, some expenses are expressively excluded from the VAT recovery entitlement:
- Meals
- Entertainment and gifts
- Passengers cars and related expenses
- Living quarters and vacations homes for owner and staff
Timeline: The Icelandic VAT can be claimed for 2 months, for one calendar year, or for its remining period below two months. The application must be filed at least 15 days after the period in question and not later than 6 years after the end of the calendar year to which the application refers.
Claimable amounts: The minimum amount of the VAT reclaim shall be at least ISK 12.700 for a calendar year and of its remaining period, and not less than ISK 65.500 for other periods.
Refund application: The VAT refund application must be sent to the Icelandic Tax Administration by post and include the following documents:
- VAT refund application form RSK 10.29 and declaration signed by the authorised person
- Original compliant tax invoices
- Original certificate of business activities from the competent authority in the country of establishment
- Power of attorney for the appointed VAT agent
Opportunities
BtoBnice accompanies businesses in VAT recovery worldwide.
For any operational support with VAT refund in Iceland, we invite you to contact our VAT expert: contact@btobnice.com
