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

Shopping while traveling is one of the best ways to bring a piece of your destination home with you, and Iceland offers plenty of things you won’t find anywhere else.

Icelandic wool sweaters, outdoor clothing, blankets, accessories and locally designed gifts can become 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 about:

• Who qualifies

• How much you spend

• What paperwork you need

• And 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 centers. For example:

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

• Close by, Skólavörðustígur climbs toward the Hallgrímskirkja church and is a popular strip of Icelandic shops, galleries and cafés.

• The rest of Reykjavík and surrounding area also has larger shopping centers, including Kringlan and Smáralind.

For travelers looking for Icelandic clothing, wool products and outdoor wear, you might even 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 (for example the United States), this and other taxes are all included in the sticker price. You won’t have any surprises at the 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, however, 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 register. Normally, you make a qualifying purchase and obtain the required tax-free documentation from the retailer, at the time of purchase. The refund process is then completed 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. What matters is that you do not reside in Iceland and that your purchase also meets the requirements for the tax-free refund.

Namely, 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 are making a purchase that qualifies based on that amount, ask the retailer for a Tax Free form at the time you shop. The retailer fills out 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, travelers seeking export validation will be asked to show:

1. The goods they purchased

2. Their Tax Free forms

3. And the corresponding receipts

If the goods are packed in luggage you plan to check, take care of the tax-free procedure before checking in your baggage.

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 tell travelers to do this before checking in.

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

The purpose of Iceland’s tax-free shopping program 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, it might not be considered an export.

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

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

When 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 sweater, wool blanket or other product, because customs and agricultural rules in your destination country can also determine what food products you’re allowed to bring in.

If you plan to take Icelandic food products abroad, 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.

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 to another country with merchandise purchased abroad, that country could 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. traveler customs rules. Someone traveling onward to an EU country needs to follow the rules applicable when entering that customs territory. That just means 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 sweater, 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.

DO keep your original receipts#

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

DO keep your purchases accessible#

You might need to show the actual goods when obtaining export validation. If you plan on checking baggage, complete the required tax-free process before handing over your suitcase.

DON’T forget the three-month deadline#

Qualifying goods must be exported from Iceland within three months of purchase. That usually works just fine for tourists, because that’s how long the general tourist entry visa is good for (90 days).

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 separate. 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 program’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, and the retailer must sign the form.

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

The qualifying goods must be exported from Iceland within three months of purchase.

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

Very possibly. You should be prepared to do so. When obtaining what’s called export validation, you might 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?#

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

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

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

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 the applicable traveler allowances.

Bring a piece of Iceland home#

Shopping in Iceland can give you something incredible to remember your trip by.

If you’re eligible for tax-free shopping, then a little preparation makes the process much easier. First, make sure your purchase qualifies, then ask for the Tax Free form, keep the original receipt, keep the goods accessible when arriving at the airport, and complete the export-validation process before checking any baggage.

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

Take care of both, and you’ll be able to focus next on the more enjoyable question:

How much of Iceland can you fit in your suitcase?