Used Goods & Resellers Act No. 50/1988 2026 Fiscal Year

VAT on Used Goods in Iceland: Private Sales, Charity Shops, and Resellers (Margin Scheme)

A complete legal and accounting guide to Icelandic VAT on second-hand merchandise: Private individual exemptions, car dealerships, charity shops, and the statutory Margin Scheme.

Author: Commercial Tax & Accounting Board Jurisdiction: Iceland (Skatturinn) Reading Time: 11 min read

Core Rules for Used Goods VAT

  • Private Sales Exempt: Person-to-person sales of personal belongings carry zero VAT.
  • Margin Scheme for Resellers: Dealerships calculate 24% VAT exclusively on profit margins.
  • Hidden VAT on Invoices: Resellers cannot display VAT amounts on invoices to buyers.
  • Charity Exemption: Non-profit humanitarian shops are exempt under Article 2.

1. Legal Principles for Second-Hand Goods in Iceland

Under Icelandic tax law (Act No. 50/1988 on Value Added Tax), sales of personal goods between private individuals are completely non-taxable (0% VAT). However, commercial dealerships, vintage boutiques, antique shops, and vehicle traders that buy used items from private citizens and resell them are subject to 24% VAT. To prevent double taxation, Iceland provides a statutory Margin Scheme (álagsaðferð). Read the Icelandic guide on VSK og sala á notuðum vörum.

Seller Entity Type VAT Scheme Tax Base & Legal Treatment
Private Individuals (P2P) Exempt (0%) Non-commercial sales of used private belongings carry zero VAT obligations.
Car Dealerships (Used Vehicles) Margin Scheme 24% VAT is calculated solely on the gross dealer mark-up (Selling Price − Purchase Price).
Charities & Second-Hand NGOs Article 2 Exempt Donated goods sold by non-profit humanitarian foundations are legally exempt from VAT.

2. Invoicing Restrictions Under the Margin Scheme

When an Icelandic reseller uses the margin scheme, they are strictly prohibited from showing the VAT amount on the customer invoice. This prevents commercial buyers from claiming an illegal input tax credit on the underlying non-taxed private acquisition cost.

Used Goods Profit Margin VAT Calculator

Calculate the 24% VAT portion embedded in the commercial gross profit margin.

Gross Dealer Margin: 300,000 ISK
Embedded VAT Due (24 / 124): 58,065 ISK
Net Retained Dealer Profit: 241,935 ISK

Frequently Asked Questions (Algengar Spurningar)

❓ Can a company buying a used car from a dealer deduct input VAT under the margin scheme?
No. Because the VAT is charged on the dealer margin without invoice line disclosure, the buyer cannot claim any input VAT.
❓ What happens if a used car is sold at a loss?
No VAT is due on loss-making sales, but negative margin balances cannot create refundable VAT.
❓ Are international charity donations exempt?
Donated humanitarian goods imported by recognized non-profit foundations are exempt under customs and VAT statutory exemptions.
Statutory Disclaimer & Verification: This guide is prepared based on Act No. 50/1988 and regulations regarding VAT on the sale of used motor vehicles and personal property.