VAT refund in Iceland: A complete guide to tax-free shopping in Iceland for tourists

If you are seeking an adventurous destination near the UK, look no further than Iceland! Often referred to as the Land of Fire and Ice, Iceland offers a treasure trove of thrilling adventure activities, from its dramatic volcanic landscapes to its mesmerising Northern Lights. Vacationing in Iceland means a kaleidoscope of options, and you won't be bored here!

This Nordic island, however, is not exactly a budget-friendly spot. The cost of living is notoriously high, and there's also a hefty VAT of up to 24% to contend with. But don't the high VAT scare you off – as a Brit coming to Iceland to travel, you might qualify for an Iceland VAT refund. If Iceland is your next stop, take a look at this article to see how to make the most of your VAT refund and make your trip a bit easier on your wallet.

And if you are looking for one more way to save even more, consider receiving your Iceland VAT refund through a Wise debit card!

How much is VAT in Iceland?

Let’s first break down the basics! In Iceland, the Value Added Tax (VAT) is known as ”Virðisaukaskattur”, which is abbreviated VSK. The acronym VSK is often used interchangeably with VAT, but they essentially refer to the same type of tax.

The most common rate is the standard rate of 24%, which is applied to most of the goods and services. You might also see the reduced VAT rate of 11%, which is applied to certain goods and services. And, some goods and services are exempt from VAT altogether.

If you need to find out the applicable tier and VAT percentage for your goods, please refer to the table below for a quick reference¹:

How much VAT is refunded in Iceland?

Determining the exact number of your Iceland VAT refund can be quite tricky. One sure thing is that you won't receive the whole amount back. Here's why:

Suppose you use the intermediary refund agent to get your VAT refund in Iceland. In that case, you will probably need to pay an administration fee, which will be deducted directly from your refund amount. These fees can vary based on the agent you choose and the total amount you spend. If you opt to receive your refund through a British credit card, there are also foreign exchange fees to consider.

Typically, you can expect to receive a refund of up to 14% of the total price of the item.

Who is eligible for tax-free shopping in Iceland?

To be eligible for tax free shopping in Iceland, you must meet these conditions²:

• You are not a resident of Iceland and currently living in Iceland for an extended time;
• You will take your purchased goods with you in your personal luggage within three months from the purchase date;
• Your purchase must be at least 12,000 ISK, including VAT, and must be made in one receipt.

How to get VAT refund in Iceland?

Now, here comes the most exciting part: a step-by-step guide to tax-free shopping in Iceland:

Receive a tax exemption form

The process of getting your VAT refund starts right at the store where you shop here in Iceland! First thing's first, make sure the store is part of the VAT refund scheme before buying anything. Not all stores participate in tax-free shopping, so keep an eye out for the tax-free sign or ask the cashier just to be sure. Once you've confirmed the store is in the scheme, ask the sales assistant to fill out a tax-free form for you and sign/stamp your invoice. You'll need this form and the original invoice to claim your VAT refund in Iceland.

The sales assistant may also request to see an officially recognized identity document, so remember to bring one (e.g. your passport) when you go shopping.

Have the forms stamped

It’s important to validate your Iceland tax free form before you check in at the counter. You will need to show your goods, passport, the tax exemption form, and the original receipts.

If your purchase is between 12,000 and 100,000 ISK, just go to the nearest Tax Refund desk and the staff will help you check and validate your eligibility. If your purchase is over 100,000 ISK, head to the nearest Customs office to get your form stamped by the Customs².

Obtain a VAT refund

So now that you have your tax-free form stamped. It’s time to receive your Iceland tax refund for tourists! You can receive your VAT refund in cash, through your credit card, or by check, depending on your chosen refund agency.

So that's the whole process of Iceland tax-free shopping! You now have this simple guide that walks you through the entire Iceland VAT refund process. Even though the cost here is as high as in the UK, with the Iceland VAT refund scheme, you are one step closer to an affordable vacation in Iceland. If you want to get the most ISK from every GBP, it's always a good idea to use Wise!

As mentioned above, you can receive your VAT with your credit card, but you might need to pay extra foreign exchange fees. This is because when your card's main currency (e.g., GBP) differs from the local currency (e.g., ISK), it will be automatically converted every time you use it. The card provider determines the conversion rate, typically with a hidden and cost markup.

With a Wise debit card, you can easily minimise this fee! The card only charges a small fee and converts at mid-market rates, without adding any extra markups. Order your Wise card for a one-time fee of 7 GBP today and enjoy a cheaper Iceland!

Get your card now

Please also be aware that tax rates and regulations may change over time. Always verify the information with official sources for the most accurate and up-to-date guidance.

Sources used for this article:

Sources last checked on 27-Aug-2024.