When I landed in Reykjavík on my birthday, I had plans to hit the ground running but as I stood in line to clear customs, something didn’t feel right. All of the other passengers had on warm winter coats but where was mine? I looked around frantically for my jacket but I quickly realized that I forgot it at home. I cried a little on the inside because I knew how expensive things cost in Iceland but on the bright side, this was a teachable moment, I learned a lot about tax free shopping in Iceland.
By the way, here’s the stylish raincoat that I bought in Iceland.
How To Claim Your Tax Free Refund
Tax Free Shopping In Iceland Guide
What is tax free shopping?
Tax free shopping is when you buy goods in a foreign country and get a refund for a portion of the sales tax. Refundable sales tax has all sort of names like goods and services tax (GST), value added tax (VAT) or consumption tax. In Iceland, it’s called tax free shopping.
Tax free shopping is another way to save money especially when you’re traveling to an expensive country like Iceland.
What is tax free shopping in Iceland?
Tax free shopping in Iceland applies to goods that are purchased in Iceland for 6,000 ISK ($56 USD or 46,00 €) or more. In other words, the original receipt must show at least 6,000 ISK spent, this can include sales tax. It also doesn’t matter how many items you buy to reach the minimum spend, as long as they are on the same receipt, you are good to go.
Some even say that you can combine several receipts from the same vendor but I’d double check that first.
Only visitors or non-Iceland residents are eligible for tax free shopping in Iceland and you can only claim up to 14%. Restaurants, hotels and tour activities do not qualify for tax refunds in Iceland.
Other Iceland Tax Free Restrictions
- You have to exit the country with your goods and claim the refund within 3 months of purchasing
- Foreigners with permanent residence in Iceland are not entitled to refunds
- You have to have the items with you during departure
Things to Know When Shopping in Iceland
When you’re shopping in Iceland, after you make a qualifying purchase, ask the store clerk to fill out a tax free form. To claim your refund, the original receipt must be signed by the vendor and it has to be attached to the tax free form.
When I bought my raincoat in Iceland, the tax free form was conveniently located below the total on the receipt. The vendor stamped my receipt and handed me an information packet that not only included a guide to help me get the most out of tax free shopping in Iceland but it also had a pouch where I stored my receipt (and Iceland tax free form). The information section was in English but also translated into German, Russian and Chinese.
Overall the form was easy to complete. I included my name, address, country of origin, credit card number (the credit card I used to buy the goods), passport number and signature.
As a recap, here’s a summary that breaks down who does what:
Retailer Fills Out
- Retailer signature/or stamp
You Fill Out
- Full name
- Passport number
- Customer signature
- Credit card number
Customs Fills Out
- Stamp with date and signature
How to Get VAT Refunds in Iceland
Before checking in and passing through security, follow the “Tax Refund” signs. The customs office is right across from the cafeteria. In case you need help locating the kiosk, your Iceland tax free information packet has a simple map that you can follow.
Why claim refunds before checking-in?
It’s important to claim your Iceland tax free refund before checking in because customs may ask to see your purchase(s). They may also ask for your passport and boarding pass.
Also, once you clear security, you will not be able to claim your refund again. And just in case you’re wondering, you can’t mail your forms in later.
In my case, the customs officer did not ask to see my raincoat. She checked that all the information on the form was complete and stamped my receipt. She then asked if I’d like my refund in cash or credited back to my credit card. I chose the later since this was the free option. If you choose cash, you’ll have to pay a service fee. Surprisingly, this all took a few seconds.
Remember, if your receipt doesn’t have a stamp or signature from the vendor, you will not be eligible for a refund.
Other Departure Points
If you aren’t flying out of Keflavik Airport, you can still claim your tax free refund onboard sailboats, cruise ships, and private planes. In these cases, the customs officers will come onboard before departure.
How long does it take to get your Iceland tax refund?
After you submit the form, it takes anywhere from six to eight weeks for you to get your refund so sit tight.
I received my refund eight weeks later.
Danielle is a travel finance strategist, writer, speaker and podcaster. She paid off $63,000 of student loan debt in 4 years, bought a house at 27 and has traveled to 26 countries. She refuses to let her financial responsibilities hold her back from living life on her own terms.