Iceland VAT Rules for Cruise Ship Operators Explained

Iceland's Commissioner of Revenue and Customs (Tax Authority) has published guidelines for the VAT rules applicable to cruise ship operators, with particular emphasis on their activities during domestic voyages in Iceland. The guidelines focus on how and where passengers embark and disembark, rather than the broader operations of the cruise line, and from that perspective explain how VAT rules apply.

Impact on Cruise Ship Operators

In the published guidelines, the Tax Authority emphasized that, under Icelandic VAT Law, VAT applies broadly to all domestic transactions and imports of goods and services, encompassing both new and used goods, as well as labor and services, except for those specifically listed as exempt. 

Furthermore, the guidelines emphasize that any individual or business entity selling goods or providing taxable services on a professional or independent basis is obligated to collect and remit VAT, including foreign operators conducting taxable business in Iceland. Moreover, foreign operators must register with the Icelandic Revenue and Customs before commencing their activities and appoint an Icelandic-based agent to handle registration, tax collection, and payment if they do not have a permanent establishment in Iceland.

Consequently, cruise ship operators on domestic voyages in Iceland are entirely subject to VAT, where their taxable activities include passenger transport, accommodation, and the sale of food and beverages, as well as a wide range of additional onboard services such as spa treatments, beauty care, and leisure activities. Additionally, operators are liable for VAT on the resale of travel-related services, such as organized day tours or other taxable activities, to passengers while the ship is docked in port.

Conclusion

Cruise ship operators must register for VAT in Iceland if they meet all the requirements. For foreign operators without a permanent establishment, the rules require the appointment of an Iceland-based agent, with both the agent and the operator jointly liable for VAT compliance and payment. Once registered, they will be required to charge and remit VAT on all taxable goods and services sold in Iceland, while also gaining the right to deduct input VAT on purchases related to their taxable activities.

Source: Tax Authority