Ákvarðandi bréf nr. 958/2000
Information on importation of goods and service to a customer in Iceland - VAT registration
29. september 2000
G-Ákv. 00-958
The Directorate received you fax, dated September 4th 2000, on September 7th 2000.
According to the information in your fax and information given by phone, on September 8th, your Norwegian customer (named seller) is going to sell assembled goods to an Icelandic customer (named buyer). The seller sends the goods unassembled to Iceland and hires an Icelandic contractor to assemble them for the buyer. According to the Icelandic Value Added Tax Law and Regulation no. 194/1990 (which unfortunately is not available in English) if a service, which is subject to VAT leviation, is offered in connection with import of goods, the goods and the service in question are regarded as a whole and VAT is levied on both the import of the goods and the service. The importer, therefore, has to pay that VAT in order to get the goods out of custom. When the goods are imported to Iceland, an invoice, issued by the seller, where the seller is charging the buyer for the goods and the assembling service, must be enclosed, according to Regulation no. 194/1990, Article 7. The buyer will have to pay VAT on the invoice´s total amount. The Directorate, however, would like to point out that the seller does not have to charge especially for the assembling service that is if the price for the assembling service is included in the price of the goods.
You want to know whether the seller has to register in Iceland on the ground of the business with the buyer. You also want information on which rule apply to the business between the seller and the Icelandic contractor.
This is the Directorate´s answer to your questions:
Service, offered in connection with importation of goods, is subject to a VAT leviation, as mentioned before, but the seller is not obligated to register in Iceland. The same does not apply when service, rendered in Iceland, is not in connection with importation of goods (see Regulation no. 194/1990, chapter III). According to your information the service rendered in Iceland will be in connection with importation of goods. VAT will be levied on the service and the goods in custom and therefore the seller will not be obligated to register in Iceland.
The seller buys an assembling service from an Icelandic contractor and the contractor charges VAT, which the seller has to pay, on the service rendered. But the seller is able to obtain reimbursement of that VAT as a foreign enterprise, if the seller meets with certain stipulations (conditions). The stipulations are:
- The enterprise must be a foreign one, i.e. neither resident in Iceland nor have a permanent establishment here.
- The enterprise must carry on a type of business that would be subject to registration in Iceland if the enterprise in question carried on such business in Iceland.
- The reimbursement of VAT shall be only to the same extent as Icelandic enterprises are allowed input tax credit.
For you to understand which enterprises are subject to VAT registration in Iceland and on which acquisitions Icelandic enterprises are allowed input tax credit, the Directorate encloses an article -Vat in Iceland - published in the Vat Monitor 1995.
To apply for reimbursement your Norwegian customer must use form RSK 10.39 (Application for VAT Reimbursement to Foreign Enterprises) which I understand has already been sent to you.
Enclosed is also information on the legislation on VAT reimbursement to foreign enterprises in Iceland.
Should you need further information please do not hesitate to contact us.
Ríkisskattstjóri
