Shopping in Iceland: Tax-free Shopping, VAT refunds and what you need to know

Shopping while travelling is one of the best ways to bring part of your experience home with you, and Iceland offers plenty of items that you won’t find anywhere else.

Icelandic wool jumpers outdoor clothing, blankets, accessories and locally designed gifts are excellent lasting reminders of your trip.

International visitors might also be eligible to receive a refund of part of the VAT (sales tax) paid on qualifying purchases in Iceland. But tax-free shopping isn’t as simple as buying something and showing your passport at the register. There are rules:

• Who qualifies

• How much you spend

• Which paperwork you require

• Plus, what you need to do before leaving Iceland

Here’s how tax-free shopping in Iceland works and what you need to know before you pack your purchases and head for the airport.

Shopping in Reykjavík#

Reykjavík offers everything from small independent boutiques and Icelandic shops to larger shopping centres.

For example:

• Laugavegur is one of the best-known shopping streets, located through central Reykjavík, it’s home to a variety of shops, restaurants, cafés and other businesses.

• Close by, Skólavörðustígur climbs up toward the Hallgrímskirkja church, is a popular area for Icelandic shops, galleries and cafés.

• The remainder of Reykjavík and the surrounding areas also has larger shopping centres, including Kringlan and Smáralind.

For travellers looking for Icelandic clothing, wool products and outdoor wear, you may be able to claim a VAT refund when you leave Iceland.

What is VAT in Iceland?#

VAT, or “value-added tax,” is a tax included in the price of many goods and services sold in Iceland. Unlike pricing in some other countries, this and other taxes are all included in the label price. So, you won’t have any surprises at the cash register.

Iceland currently has two main VAT rates:

1. A standard rate of 24%

2. And a reduced rate of 11% for certain goods or services

When you visit Iceland from abroad, you could qualify to receive a refund of part of the VAT on eligible goods that you purchase in Iceland and take out of the country. This is commonly referred to as “tax-free shopping.”

It’s important to understand that tax-free shopping does not mean that every tourist avoids paying VAT at the cash register. When you make a qualifying purchase what usually happens is at the time of purchase, you obtain the required tax-free documentation from the retailer. The refund process is completed later in connection with your departure from Iceland.

Who is eligible for tax-free shopping in Iceland?#

According to Iceland Revenue and Customs, visitors to Iceland who are neither citizens nor residents of the country are eligible for tax-free shopping. So as long as you do not reside in Iceland and your purchase also meets the requirements for a tax-free refund.

Crucially, there’s also a minimum spend requirement to qualify.

How much do you have to spend to qualify for a VAT refund?#

The current minimum purchase is ISK 12,000 on a single purchase receipt.

The requirement applies to the total amount on one qualifying receipt.

Important: If you’re making a qualifying purchase based on the amount, ask the retailer for a Tax Free form at the time of your shop. The retailer completes the appropriate portion, signs it and attaches the original purchase receipt. You then complete your required personal information before leaving Iceland.

Do you need to keep your receipts?#

Yes. Keep the original purchase receipt together with the Tax Free form provided by the retailer. The original receipt must accompany the form, and the retailer’s signature must be on it.

Do you need to keep the products with you when you travel?#

Yes. You should be prepared to present the goods themselves when your tax-free documentation is validated. At Keflavík International Airport, travellers seeking export validation will be asked to show:

1. The goods they purchased

2. Their Tax Free forms

3. The corresponding receipts

If the purchased goods are packed in luggage you plan to check in rather than in hand luggage, it’s crucial to undertake the tax-free procedure before checking your luggage in.

Can you get a VAT refund after you’ve already left Iceland?#

No. Tax Free forms must be export validated as part of the departure process. At Keflavík, the official instructions are to do so before checking in.

Can you use your tax-free purchases while still in Iceland?#

The purpose of Iceland’s tax-free shopping programme is to refund eligible VAT on goods purchased in Iceland and exported from the country. That means you need to be able to present the goods purchased during export validation.

For that reason, the safest approach is to keep qualifying purchases together, retain the original receipts and Tax Free forms, and have the goods readily available until the export has been validated. If they look used or you have a product that’s half consumed, then it might not be considered an export.

Does the VAT refund apply to hotels, restaurants and things you use during your trip?#

No, because tax-free shopping for travellers is about qualifying goods that are purchased and exported from Iceland, the VAT you pay as part of accommodation, meals or other services used while visiting Iceland don’t qualify.

If you’re unsure whether a purchase qualifies, ask the retailer at the time of purchase.

What about exporting food purchased in Iceland?#

Food is more complicated than an Icelandic jumper, wool blanket or other product, because customs and agricultural rules at your destination country can also determine the food products you’re allowed to take in.

If you plan to take Icelandic food products out of Iceland, it’s best to check the customs and agricultural import rules of your destination before packing them. But yes, if you export them, they might qualify for a VAT refund from Iceland.

Will you owe taxes or customs duties when you arrive home?#

An Icelandic VAT refund concerns tax paid on your qualifying purchase in Iceland, but when you arrive into another country with merchandise purchased abroad, that country will have its own customs rules and declaration requirements (including duties or import taxes).

For example, someone returning to the United States needs to follow U.S. traveller customs rules. Someone travelling onward to an EU country needs to follow the rules applicable when entering the customs territory. So, all it means is that you need to check the rules for your particular destination.

Can you have your purchases shipped home from Iceland instead?#

Maybe you found the perfect Icelandic wool jumper, and then another one. Or your suitcase was already full before you even started shopping.

Some retailers offer international shipping to have products delivered directly to your home. Here’s how that affects VAT refunds.

International shipments are exports from Iceland and imports into the destination country. Shipping charges, customs procedures and destination-country taxes can therefore apply differently. Icewear, for example, includes the taxes for the destination country in the shipping cost offered to customers.

For more information, see our guide to Shopping Online from Iceland: What You Need to Know.

Iceland tax-free shopping: Dos and don'ts#

DO ask for the Tax Free form when you make your purchase#

If your purchase qualifies, ask the retailer for the Tax Free form. The store completes its portion, signs the form and attaches the original receipt.

DO check that you've met the ISK 12,000 minimum#

The current minimum is ISK 12,000 on one single purchase receipt. Don’t assume purchases from different stores can simply be combined to meet the minimum. It needs to be a single purchase.

DO keep your original receipts#

Your original purchase receipt(s) need(s) to accompany the Tax Free form. Keep your receipts and forms somewhere safe together during your travels.

DO keep your purchases accessible#

You might need to show the actual goods when obtaining export validation. If you plan to check-in your luggage, complete the required tax-free process before handing luggage over.

DON’T forget the three-month deadline#

Qualifying goods must be exported from Iceland within three months of purchase. That’s not  usually a problem for tourists, because that’s also the length of the general tourist entry visa.

DON’T assume an Icelandic VAT refund exempts you from taxes everywhere else#

Iceland’s VAT-refund system and your destination country’s customs system are completely separate. Be aware that you might still have declaration requirements, duties or taxes when entering another country with merchandise purchased in Iceland.

FAQ about tax-free shopping in Iceland#

Can tourists get a VAT refund in Iceland?#

Yes. Non-Iceland residents can qualify for tax-free refunds on eligible purchases when the programme’s requirements are met.

What is the minimum purchase for tax-free shopping in Iceland?#

The current minimum is ISK 12,000 on a single purchase receipt.

Do I need my receipt to get a VAT refund?#

Yes. The original purchase receipt must accompany the Tax Free form which must be signed by the retailer.

How long do I have to take the goods out of Iceland?#

Three months.  Qualifying goods must be exported from Iceland within three months of purchase.

Do I need to show my purchases at the airport?#

Quite likely and you should be prepared to do so. When obtaining what’s called export validation, you may be asked to show the goods along with the Tax Free forms and receipts.

Should I get my VAT refund before or after checking my luggage?#

At Keflavík Airport, complete the export-validation process before checking in if you plan to check-in your luggage.

Where do I get my Tax Free form stamped at Keflavík Airport?#

For amounts under ISK 100,000, the current official instructions direct travellers to the Tax Refund Desk for the stamp. Go to the Customs Service Desk for amounts over ISK 100,000.

Is the entire VAT amount refunded?#

The refund is processed through the applicable tax-free company, so check the refund information provided with your Tax Free documentation to understand the amount and method of refund.

Can I claim a VAT refund on something I bought online?#

Online purchases shipped internationally from Iceland involve a different export, shipping and customs process from merchandise purchased in Iceland and personally carried out of the country.

See the Icewear guide to Shopping Online from Iceland: What You Need to Know for information about international online orders.

Do I have to declare my Iceland purchases when I get home?#

That depends on the customs laws of the country you enter, the value and type of goods you bring in, and any applicable traveller allowances.

Bring a piece of Iceland home#

Shopping in Iceland can give you something incredible as a reminder of your trip.

A little forward planning if you’re eligible for tax-free shopping simplifies the process. First, make sure your purchase qualifies, then ask for the Tax Free form and make sure its signed.  Retain the original receipt, make sure the purchases are accessible when arriving at the airport. Complete the export-validation process before checking any luggage in.

Most importantly, remember that getting VAT refunded when you leave Iceland and importing your purchases into your next country are two different things requiring different procedures.

Awareness and forward planning for both, then you’re focus can centre on the more enjoyable question:

How much of Iceland can I fit into my suitcase?