VSK-IS: VAT and E-Invoicing Requirements for Public Contracts in Iceland

Quick answer: There is no formal law forcing suppliers to e-invoice the Icelandic public sector, but since 1 January 2020, all Icelandic public authorities are only able to accept and process structured electronic invoices that comply with the European standard EN 16931 (implemented locally as ÍST TS-236, delivered via the Peppol network). In practice, this means a PDF invoice sent by email will not be accepted for a public contract — so if you supply goods or services to a government body, you need to send a compliant e-invoice. Business-to-business (B2B) invoicing remains voluntary and simply requires the buyer's consent.

Why this is a "de facto" mandate, even without a formal supplier law

Regulation 44/2019, which transposes EU Directive 2014/55/EU into Icelandic law, requires public contracting authorities — at both the state and municipal level — to be able to receive and process structured e-invoices compliant with EN 16931. It does not, on paper, force suppliers to issue e-invoices. But because public bodies are only required to accept this format, a supplier who sends a PDF or paper invoice may simply find it isn't processed. That's why, in practice, invoicing public contracts electronically isn't optional for most suppliers, even though the underlying rule is written as an obligation on the buyer, not the seller.

EN 16931, TS-236, and Peppol: three names, one compliance picture

Suppliers often see all three terms on the same page and assume they're separate requirements. They're really layers of the same system:

EN 16931 is the European semantic standard defining what data a structured e-invoice must contain.
ÍST TS-236 is Iceland's national specification, based on Peppol BIS Billing 3.0, that applies EN 16931 with Icelandic-specific requirements.
Peppol is the network and message format used to actually transmit the e-invoice between supplier and public authority.

In short: EN 16931 defines the content, TS-236 adapts it for Iceland, and Peppol is how it gets delivered.

What this means practically for a supplier

If your accounting software already supports Peppol/UBL 2.1 e-invoicing, check that it can generate a TS-236-compliant invoice for Icelandic public buyers.
If you're a cross-border supplier, the same applies — Icelandic public entities receive e-invoices via Peppol regardless of where the supplier is based.
Keep archived copies of e-invoices for at least seven years (longer — 20 years — for invoices related to immovable property).

Small suppliers without e-invoicing software

Not every small business has an accounting system that can generate a structured e-invoice directly. For suppliers in this position, a manual portal route (commonly referred to as Skuffan) exists so an invoice can still be entered and delivered in a compliant format without needing full e-invoicing infrastructure on the supplier's side. This is worth checking before assuming you need to buy new accounting software just to invoice one public contract.

B2B invoicing is a different story

None of this applies to ordinary business-to-business invoicing in Iceland. E-invoicing between two private businesses remains entirely voluntary and depends on the buyer's consent — a PDF invoice is perfectly valid in a normal B2B relationship. The mandatory-in-practice rule is specific to invoicing public contracting authorities.

Common mistakes

Assuming a PDF is fine because "it's just a formality." Since public bodies are only required to process EN 16931-compliant structured invoices, a PDF may simply be rejected or delayed.
Confusing the B2G rule with a general Icelandic e-invoicing law. There is no B2B or B2C e-invoicing mandate in Iceland.
Assuming this only applies to large suppliers. Any business invoicing a public contracting authority is affected, regardless of size — this is where the Skuffan portal route matters most.

Important / Heimild og fyrirvari

VSK.is is an independent informational resource and is not affiliated with Skatturinn, Fjársýsla ríkisins, or any Icelandic government body. E-invoicing rules and technical standards can be updated. Always confirm current requirements directly with the contracting authority or Fjársýsla ríkisins before submitting an invoice for a public contract.

Frequently Asked Questions

Not as a formal supplier-side law, but since public bodies can only accept EN 16931-compliant structured e-invoices since 2020, it functions as a mandatory requirement in practice.

EN 16931 defines the required invoice data structure, TS-236 is Iceland's national implementation of that standard, and Peppol is the network used to actually deliver the invoice.

It's risky — public bodies are only required to accept structured EN 16931/TS-236 e-invoices, so a PDF may not be processed.

No. B2B e-invoicing in Iceland remains voluntary and only requires the buyer's consent — the structured e-invoice requirement is specific to public contracts.

A manual portal route (commonly known as Skuffan) is available so smaller suppliers can still submit a compliant invoice without needing full e-invoicing infrastructure themselves.

Generally seven years, extending to 20 years for invoices related to immovable property.