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Iceland cuts VAT rate from 25.5% to 24% January 2015

  • VAT
  • 11 September 2014 | Richard Asquith

Iceland cuts VAT rate from 25.5% to 24% January 2015

Iceland has announced that it will lower its standard VAT rate from 25.5% to 24% on 1 January 2015.

The reduced VAT rate will be increased from 7% to 12%.  The reduced rate applies to hotel accommodation, broadcast services, newspapers, recorded music and basic foodstuffs.  A number of previously exempt or zero rated supplies will now be subject to the reduced VAT rate, including certain types of transport.

The VAT rate was hiked to 25.5% in January 2010, which was the highest in Europe at the time.  It was part of a raft of austerity measure at the height of Iceland's near bankruptcy during the financial crisis.  Since then, the government has managed to reduce sovereign debt from 90% of GDP to just above 70%.

The announcement in the 2015 budget also included a proposal to scrap the Commodities Tax too.  This tax was introduced in 1998 on a range of new and second hand imported and domestically manufactured goods.  The tax ranges from 15% to 25% of the value of the goods.


VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.