In Iceland the reduced VAT rate applicable to e-books and electronically published music increased from 7% to 11% as of 1 January 2015. Therefore, it must be ensured that you account for VAT on such sales at the appropriate rates. You can access further information of the overall Icelandic tax rules in 2015 here.
Providing B2C e-services to Iceland?
The fact that Iceland is not part of the EU is sometimes overlooked. However, it is rather important, since Iceland also taxes the B2C supply of e-services. If you are a non-established entity, providing e-services to private individuals in Iceland and its value exceeds the applicable registration threshold, you are required to register and account for Icelandic VAT on your transactions. It should also be noted that the registration threshold of ISK 1,000,000 (approx. USD 7,500) in any 12 months period is relatively easy to exceed. Therefore, you may want to double-check whether Iceland “is on your map” and your local VAT matters are compliant.