Icelandic VAT on digital services

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

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

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.

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.

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.