How to Calculate Duties and Taxes on Imports to Iceland requires understanding the country's specific customs valuation and tax rules. Unlike many countries, Iceland applies a 0 ISK commercial de minimis threshold for both import duties and Value Added Tax (VAT), meaning all commercial shipments are subject to charges. The calculation is based on the product's classification using an 8-digit import tariff code, its customs value (CIF), and its country of origin, all overseen by the Iceland Revenue and Customs authority.
Import duties, or tariffs, are calculated based on the type of goods being imported and their origin. Iceland uses an 8-digit import tariff code structure, which extends the international 6-digit Harmonized System (HS) code for national requirements. While tariffs have been eliminated on many consumer goods, such as clothing and electronics, duties still apply to other categories, particularly agricultural products. The correct 8-digit code is essential for accurately determining the duty rate and ensuring compliance with trade agreements, such as those Iceland holds as a member of the European Free Trade Association (EFTA) and the European Economic Area (EEA).
The process to calculate import tax in Iceland begins with determining the Customs Valuation Basis. For imports, Iceland uses the C.I.F. (Cost, Insurance, Freight) value as the dutiable value, in line with WTO valuation rules. This means the total value used for calculating duties and taxes includes the cost of the goods, the cost of freight (shipping), and the cost of insurance to the Icelandic port of entry. This is a critical factor when using an import tax calculator Iceland businesses rely on to estimate landed cost.
Once the dutiable value is established, the applicable duties are calculated. The duty rate is applied to the CIF value. Following this, the main import tax, Value Added Tax (VAT), is calculated. The standard VAT rate is 24%, with a reduced rate of 11% applying to essential goods like foodstuffs, books, and certain services. The VAT is applied to the sum of the CIF value plus the calculated Customs Duty. This is how import duty is calculated in Iceland, along with the total tax liability.
Because the commercial duty de minimis threshold is 0 ISK, customs duties in Iceland are technically applicable to all commercial shipments, though the rate may be 0% for many consumer items. Similarly, the tax de minimis is 0 ISK, meaning VAT is charged on all commercial imports regardless of value. Importers must also account for other potential charges, such as Commodity Taxes (excise duties) on specific goods like alcohol, sugar, and vehicles, and Recycling Fees. All commercial declarations must be filed electronically through the National EDI/WEB-Customs Clearance System.
Determine the Customs Valuation (CIF): Calculate the total value by adding the Cost of Goods (FOB), International Freight, and Insurance costs.
Classify the Goods: Identify the correct 8-digit import tariff code (HS Code) to find the specific duty rate and any applicable Commodity Taxes.
Calculate Customs Duty: Multiply the CIF Value by the applicable duty rate (Duty = CIF Value x Duty Rate). Note: The commercial duty de minimis is 0 ISK.
Calculate VAT: Apply the standard (24%) or reduced (11%) VAT rate to the total of the CIF Value plus the calculated Customs Duty (VAT Base = CIF + Duty; VAT = VAT Base x VAT Rate).
Commercial Shipment (Value 5,000 ISK): Since the commercial duty and tax de minimis is 0 ISK, both duty (if applicable) and 24% VAT will be charged. The importer must file a full electronic customs declaration.
Gift Shipment (Value €40): Shipments classified as gifts between private individuals are exempt from all duties and taxes if the value is below the €45 threshold, simplifying the customs process.
Trade Agreement Goods: Goods originating from an EFTA/EEA country may qualify for a preferential (often 0%) duty rate, but the 24% or 11% VAT will still be applied to the CIF value.
Assuming a De Minimis Threshold: Do not assume a low-value exemption exists for commercial imports; all commercial shipments are subject to VAT and duty (if applicable) from 0 ISK.
Incorrect HS Code: Using a 6-digit HS code instead of the required 8-digit import tariff code can lead to incorrect duty rates, delays, and penalties from Iceland Revenue and Customs.
Excluding Freight/Insurance: Failing to include freight and insurance costs in the customs valuation (CIF) will result in an under-declared value and subsequent reassessment by customs officials.
Iceland's customs regime includes several special provisions. The most notable is the total exemption for gifts between private individuals, which are exempt from all import charges up to a value of €45. For businesses, the elimination of tariffs on consumer goods has significantly reduced the duty burden on items like clothing and electronics. Furthermore, Iceland permits the use of Free Trade Zones and bonded warehouses, allowing for the storage and some processing of goods before they are formally cleared for free circulation, which can offer tax deferral benefits.
Iceland Revenue and Customs provides a tariff register and information, but importers typically use commercial import tax calculator tools that apply the 8-digit HS code, CIF valuation, and the 24% or 11% VAT rate to estimate the final landed cost.
Import duty is calculated by applying the specific tariff rate (found using the 8-digit import tariff code) to the shipment's CIF (Cost, Insurance, Freight) value. The duty is then added to the CIF value to form the base for VAT calculation.
The standard Value Added Tax (VAT) rate on imports to Iceland is 24%. A reduced rate of 11% applies to certain goods, including most foodstuffs, books, and magazines.
No. The commercial de minimis threshold for both duty and VAT is 0 ISK. All commercial imports are subject to VAT and any applicable customs duties, regardless of their value.