Dagsetning Tilvísun
24. mars 1992 394/91
In your letters of December l3th 1991 and March l2th 1992 you ask for information on VAT regarding a non-resident company operating a branch in Iceland.
The basic provisions regarding tax liability, registration and payment of VAT apply regardless of the entrepreneur’s domicile or residence. Taxable persons carrying on a trade in Iceland must apply to the relevant tax office for registration. An enterprise must apply for registration no later than eight days before it commences business or, in the case of small entrepreneurs who have previously been non-taxable, as soon as their turnover is supposed to exceed IKR 183.000 per year, i.e. within a twelve-month period.
A non-resident entrepreneur who is a taxable person for VAT purposes in Iceland must appoint a representative if he does not have an office or other business establishment in Iceland. The representative is obliged to fulfill all duties concerning the registration, submitting of returns. etc. on behalf of the non-resident entrepreneur and is jointly and severally with the non-resident responsible for payment of the VAT due.
There are two possible tax rates: the standard 24,5% rate and the so-called-zero-rate. In both cases the input tax incurred may be applied as a credit against the total tax liability. In the case of an exemption from VAT, however, no credit for input tax incurred will be permitted. In order to make VAT a domestic tax, exports are zero-rated (exemption with credit for input tax). Value added tax must be paid to the customs authorities when goods are imported.
Only entrepreneurs registered in Iceland may claim a credit for input tax paid. The creditable tax will be that levied under the Act of Value Added Tax, by entrepreneurs of goods and taxable services, provided such goods and services are connected solely with their business of selling taxable goads and services. An entrepreneur will, therefore, not be entitled to any credit if he delivers goods or renders services which are wholly exempted from VAT (i.e. exempted as opposed to zero-rated). Input tax before the registration is not creditable. Also, VAT charged on goods and services appropriated for private use or for purposes alien to the business is not creditable by the entrepreneur.
The amount of credit which an entrepreneur may claim during a given taxation period is the amount of VAT invoiced to him. In relation to imported goods, the credit may be applied in the period during which they were brought into Iceland.
Yours sinseerly,
Jon Guðmundsson.
Enclosed: Registration form.