Iceland: Guidelines on VAT obligations for cruise ship operators

Clarifying VAT obligations for cruise ship operators on domestic voyages within Iceland

Iceland Revenue and Customs in late August 2025 issued guidelines clarifying the value added tax (VAT) obligations for cruise ship operators on “domestic voyages” within Iceland.

A cruise ship on domestic voyages refers to a cruise ship that embarks passengers in Iceland, carries them between ports in Iceland (generally around the country), and subsequently disembarks them again in Iceland, without calling at a foreign port.

The general rate of VAT is 24%, however, specific goods and services (i.e., passenger transport, accommodation services, and the sale of foodstuffs and other goods for human consumption) are subject to a reduced VAT rate of 11%.

Operators of cruise ships on domestic voyages are required to register their activities in the VAT register at least eight days before operations. If the operator of a cruise ship on domestic voyages is a foreign entity that does not have a permanent establishment in Iceland, they must register by means of an agent.

For more information, contact a KPMG tax professional in Iceland:

Tina Paic | tinapaic@kpmg.is

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Iceland: Guidelines on VAT obligations for cruise ship operators

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