Virðisaukaskatturinn

Virðisaukaskatturinn, commonly known as VAT, is a consumption tax levied on goods and services in Iceland. It is a value-added tax, meaning it is collected at each stage of production and distribution, with businesses able to deduct the VAT they have paid on their inputs. The standard VAT rate in Iceland is 25%, though a reduced rate of 11% applies to certain goods and services, such as food, accommodation, and books.

The VAT system in Iceland is administered by the Icelandic Revenue and Customs (Ríkisskattstjóri). Businesses that exceed a certain annual turnover threshold are required to register for VAT and collect it from their customers. They then remit the collected VAT to the tax authorities, subtracting the VAT they have paid on their own purchases. This system ensures that tax is ultimately paid by the final consumer.

VAT revenue forms a significant portion of the Icelandic government's income and is used to fund public services such as healthcare, education, and infrastructure. The rates and regulations surrounding VAT are subject to periodic review and potential changes by the government. Tourists visiting Iceland may be eligible for VAT refunds on certain purchases, subject to specific conditions and procedures. The Icelandic VAT system is designed to be fair and efficient, contributing to the country's fiscal stability.