Introduced: 1990
Standard Rate: 24%
Reduced Rate: 11% (accommodation, domestic transport)
Authority: Directorate of Internal Revenue

Iceland’s VAT system is designed to capture tourism comprehensively. Hotels, excursions, and ground services almost always fall within scope, making VAT an important cost consideration for tour operators and event organisers.

Scope for Travel Businesses

• Hotels, guesthouses, hostels, and short-term lodging are taxed at 11 percent.

• Domestic transport, shuttle services, and many cultural activities also fall at 11 percent.

• Tours, excursions, adventure activities, and DMC programmes are generally taxed at 24 percent.

• Food service may fall under reduced or standard rates depending on how it is supplied.

Adventure tourism such as glacier walks, whale watching, hiking tours, and Northern Lights excursions are fully taxable unless specifically exempt.

Refund Position

Iceland does offer VAT refunds for foreign businesses, but they are limited:

Refunds are possible only if:

• The foreign company has no establishment in Iceland.

• The VAT relates to business expenses, not private travel.

• The invoices meet strict documentation rules, including the supplier’s VAT number and correct rate.

• The service falls within refundable categories.

Local travel services, excursions, and tourism activities may not always qualify. Incorrect descriptions or missing VAT details cause rejections.

Documentation and Compliance

• Supplier registration details must appear on the invoice.

• VAT amounts must be itemised clearly.

• Refunds are assessed strictly and require accurate, detailed descriptions.

• Claims without proper documentation are rejected automatically.

Antravia helps

We support conference organisers, DMCs, and travel businesses by reviewing Icelandic invoices before submission, advising on refund eligibility, and minimising the risk of VAT leakage across multi-market travel programmes.

Not sure where to start? Antravia free Consultation

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
See also our Disclaimer page