Do I have to pay tax on what I sell online?
It depends on scale: selling your own used items is generally tax-free, but regular selling for profit counts as business and is taxable. The tax authority draws a clear line. Selling your old sofa, used children's clothes or the stuff from the storeroom online is not taxable turnover — it is a private sale of your own belongings, often below the purchase price. But if you make it your trade to buy and sell, or produce goods to sell, the income becomes taxable and you must declare the profit under the Income Tax Act no. 90/2003. The myth is twofold: that all online selling is taxed, and the reverse, that online selling is always tax-free because it is between individuals. Both are wrong. Then VAT comes in: if turnover from selling goods or services tops ISK 2,000,000 in any 12-month period, you must register for VAT under the VAT Act no. 50/1988, while below that threshold registration is not required (and you may not charge VAT either). Regular selling therefore triggers both income tax on the profit and possibly VAT registration.
📋 The rules
- Selling your own used belongings (e.g. the old sofa) online is generally not taxable turnover; it counts as a private sale, not a business.
- If you make it your trade to buy and sell or produce goods to sell, the income becomes taxable and you must declare the profit (Income Tax Act no. 90/2003).
- If turnover from selling goods or services tops ISK 2,000,000 in any 12-month period, you must register for VAT (Act no. 50/1988).
- Below the ISK 2,000,000 threshold VAT registration is not required, but then you may not charge VAT or issue an invoice with VAT.
- The difference lies in regular profit-seeking: a one-off sale of your own things is tax-free, but repeated selling to profit is a business with reporting and possibly VAT duties.
🔓 Exceptions
- Bazaars, tombolas and charity sales — including online sales — can be exempt from VAT if the activity lasts no longer than 5 days a month (or 25 days for an annual event).
- A gain on personal belongings is generally tax-free, but the sale of taxable assets (e.g. securities or business equipment) follows its own capital-gains rules.
- If you sell goods abroad or through a foreign marketplace, special rules on VAT, customs and reporting can apply that depart from a simple domestic sale.
⚠️ Penalties & fines
What triggers sanctions is an undeclared business, not selling your old things. If regular selling for profit is not declared, Skatturinn can reassess the tax for earlier years (typically six years), add a surcharge, typically 25%, and charge default interest on the unpaid tax. If you neglect VAT registration although turnover tops ISK 2,000,000, Skatturinn can estimate the turnover and levy VAT with a surcharge, which can be painful when a whole period's VAT lands afterwards. Where there is intent or gross negligence, the case can end in a tax investigation and fines. A hidden cost lies in wrong self-assessment: many think online selling between individuals is automatically tax-free and do not realise they have crossed into a business until enforcement wakes up, for example because of repeated ads or deposits. At the other end, some overestimate the duty and wrongly declare taxable sales of one-off private items that are in fact exempt. The sensible course is to judge whether there is regular profit-seeking and to keep records of purchase and sale prices where there is any doubt.
📎 Official sources
- Skatturinn · VAT, tax liability and rates →
- Skatturinn · registering on the VAT register (ISK 2,000,000 threshold) →
- Althingi · Income Tax Act no. 90/2003 →
❓ Frequently asked
Do I have to pay tax on what I sell online?
It depends on scale, because selling your own used items such as an old sofa or children's clothes is generally tax-free and does not count as a business. But if you make it your trade to buy and sell or produce goods to sell, the income becomes taxable and you must declare the profit under the Income Tax Act no. 90/2003.
When must I register for VAT?
VAT registration is required when turnover from selling goods or services tops ISK 2,000,000 in any 12-month period under the VAT Act no. 50/1988. Below that threshold registration is not required, but then you also may not charge VAT or issue an invoice showing VAT.
Is selling my own used items tax-free?
Yes, selling your own used belongings that you owned for personal use is generally tax-free, since such a sale is often below the original purchase price and does not count as a business. The difference lies in regular profit-seeking, because a one-off sale of your own things is not the same as buying and selling repeatedly to profit.
What if I do not declare online selling in business?
If regular selling for profit is not declared, Skatturinn can reassess the tax for earlier years, add a surcharge and charge default interest on the unpaid tax. If you neglect VAT registration although turnover tops the threshold, Skatturinn can also estimate the turnover and levy VAT with a surcharge, so the cost can become substantial.
Is a bazaar or charity sale exempt?
Bazaars, tombolas and charity sales, including online sales, can be exempt from VAT if the activity lasts no longer than five days a month. For an annual event it may run for up to 25 days, but that does not change the general rule that regular business for profit is taxable.
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