Iceland’s parliament has amended the Value Added Tax (VAT) Act 50/1988 to align the sale of services to non-resident businesses with the OECD VAT Guidelines and the EU VAT Directive.
The new legislation clarifies that, in most cases, the VAT will be levied in the country where the receiving business is located (destination principle). The destination principle will now apply as the main rule for cross-border service sales to non-resident businesses, with specific exceptions detailed in Article 12 of the VAT Act.
Non-resident companies may qualify for a VAT refund on service purchases if they meet the conditions outlined in Regulation No. 1243/2019.
This amendment aims to ensure clarity and transparency in the law and to strengthen Iceland’s position in managing VAT for cross-border trade.
