MP to demand answers over car rental VAT reassessments

Independence Party MP Rósa Guðbjartsdóttir will demand answers from the finance minister over tax reassessments that have left Icelandic car rental companies facing large additional VAT bills, mbl.is reports.

The dispute concerns the Tax Authority’s reassessment of VAT for 2024 and 2025. The decision substantially increases the principal amount owed, with a further 10% penalty and interest added.

The case involves commissions that car rental companies receive for distributing insurance on behalf of insurance companies. The commissions are paid for arranging the contractual relationship between the insurer and the renter. The companies have treated the commissions as VAT-exempt, as they understood insurance activities and insurance distribution to be exempt. The Tax Authority disagrees and is seeking payment of the tax, even though the companies did not collect it.

Several car rental companies have been charged hundreds of millions as a result. Guðbjartsdóttir said the uncertainty was already affecting financing, with lending companies freezing credit lines for businesses planning to renew their fleets.

She said the situation could also affect car dealerships, which could lose significant sales. Some companies could face bankruptcy and their employees could lose their jobs, while the supply of rental cars available to foreign tourists could also be reduced.

Guðbjartsdóttir said she had received no response from the Tax Authority about how it intended to address the companies’ complaints and requests for a review. She said the finance minister had agreed in parliament early this summer that the issue was concerning and had indicated that the ministry would examine it.

She expects to ask the minister what action he intends to take when parliament reconvenes next week after its summer recess.