Dagsetning Tilvísun
16.01.2005 01/06
Reimbursement of VAT to a foreign enterprise that organizes events abroad.
The Directorate refers to your e-mail and fax, dated November 8th 2005, concerning information of reimbursement of VAT to a foreign enterprise. According to your letter your client is a German enterprise specialised in organizing events abroad. This enterprise wants to organize a journey to Iceland for clerks of another firm in Germany. Following costs will be produced; accommodation, transfers, meals in restaurants, renting cars, guide service. In your letter you inform that it is important to know whether your client may obtain a reimbursement of Value Added Tax for the costs paid in Iceland. For further information you mention that your client is not a travel agency but by organizing events abroad the client is at least a tour operator. Your question is whether it is possible for your client to obtain a reimbursement of VAT for the planned voyage or whether the same rules are applied as for travel agencies.
VAT is levied on all goods and services in Iceland, unless specifically excluded by the Value Added Tax Act. The service of a travel agency and a tour operator is excluded, according to Article 2 of the Act.
Under the provisions of Regulation no. 288/1995, issued by the Ministry of Finance, foreign enterprises, which are neither residents of Iceland nor have a permanent establishment in Iceland, may obtain reimbursement of VAT paid on goods and taxable services which have been purshased or imported for the commercial purposes of such taxable persons in Iceland after Mars 1 st, 1995.
Such reimbursement can be effected to foreign taxable persons which would be subject to registration in Iceland according to Article 5 and Article 6 of the Act if the taxable persons in question carried on such business in Iceland. In accordance with the Icelandic Value Added Tax Act the services of travel agencies are exempt from VAT. VAT liability is not imposed on travel agencies and they do not have to register. Therefore no reimbursement of VAT is allowed to foreign travel agencies.
Another prerequisite shall be that the enterprise shall neither have sold goods nor taxable services in Iceland during the period to which the application refers.
Any reimbursement of Value Added Tax to foreign enterprises shall be only to the same extent as Icelandic enterprises can include the Value Added Tax on purhases of a corresponding nature in the tax on purchases under Article 15 and Article 16 of the Value Added Tax Act. No reimbursement shall thus be granted in respect of Value Added Tax on purchases relating to meals for the owners and emploees of the enterprises or relating to entertainment expenses and presents.
For further information enclosed please find; Rules for reimbursement of VAT to foreign enterprises, i.e. foreign taxable persons, and forms that must be filled out when foreign taxable persons apply for VAT reimbursement in Iceland (RSK 10.29, Application for VAT reimbursement to foreign enterprises, RSK 10.36 and Authorization for VAT reimbursement to foreign enterprises).
Should you need any further information please do not hesitate to contact us again.
Yours sincerely
On behalf of the Director of Internal Revenue