Bookkeeping for contractors and construction companies in Iceland 2026: VAT, refunds and payroll at a fixed price

Kassify · 6 November 2026

Kassify is an accounting firm that runs the books, VAT returns and payroll for contractors and construction companies at a fixed monthly price, and annual accounting costs are 20% lower than at a traditional accounting firm. The annual accounts and tax return are included in the monthly price, and a certified auditor completes them. AI reads, categorises and matches every transaction, no entry is typed in by hand, and receipts from the site arrive from Messenger and the app.

This page covers who the service is for, the rules bookkeeping in the building trades has to meet, a worked example in krónur, what is included, how the price is set, how the move works and who is responsible for the work.

Who it is for

Owners of contracting and construction companies of every size: tradespeople with their own private limited company and a few employees, contractors who buy work from subcontractors, and developers who build homes for sale or rent. In this business the work happens on site, materials are bought for several jobs at once and invoices go out in stages.

Bookkeeping for a contractor is therefore about more than the entries themselves. Labour and materials are kept apart on every invoice, input VAT is booked in the right period and each building's records are kept together, so payments to subcontractors are ready for the wage statement (launamiði).

The rules the books have to meet

Skatturinn's rules and the laws that apply to contractors and developers, as they stand on 5 November 2026.

How the VAT return itself is prepared and when it is due is in the article on VAT returns.

The VAT refund on site labour in 2026

The refund is 35% in 2026. It was 100% from 1 March 2020 to 31 August 2022, 60% from 1 September 2022 to 30 June 2023, and has been 35% since 1 July 2023. Labour on holiday homes has not been refunded since 1 July 2022.

• A developer registered for VAT that builds residential property for sale or rent claims on RSK 10.17, for each building, no later than the 15th of the month after each two-month period. For November and December 2026 that is 15 January 2027. The refund is paid only if the VAT return for the same period has been filed.
• A homeowner claims directly on RSK 10.18 for maintenance and renovation or RSK 10.19 for a new build. The contractor's invoice has to show the VAT.
• The invoice separates the total payment including materials from each labour item, with VAT. Materials, work normally done in a workshop and design are not refunded.
• Before 20 January each year a developer that has received a refund sends Skatturinn its payroll and contractor information. Otherwise the refund can be reclaimed.

Contractor or employee

A contractor takes on a defined job for payment, is responsible for the work and pays their own payroll charges. An employer is responsible for the payroll charges of the people it pays wages to. Skatturinn looks at, among other things:

• Whether the person works for one or a few clients or offers the service on the open market.
• Who provides the premises, tools and materials.
• Whether payment is for the result of the job or by the hour.
• Who decides where, how and when the work is done, and who is liable for damage.

Someone who works for one client, by the hour and with the client's tools, is closer to an employee than a contractor, whatever the contract is called. The company then owes withholding tax and social security tax. How an employee's payslip is calculated is in the article on payslips.

Example: a bathroom renovation

Assume a contracting company takes on a bathroom renovation in a flat. Every figure here is an assumption of the example: on-site labour of 1.200.000 kr., of which 300.000 kr. is done by a plumber working as a subcontractor, and materials of 800.000 kr., all excluding VAT. Assume also that the company bought the materials for 650.000 kr. excluding VAT.

• The company's VAT. Output VAT is 480.000 kr. Input VAT on the materials is 156.000 kr. and on the plumber's invoice 72.000 kr., 228.000 kr. in all. The company pays 252.000 kr. in VAT on the job.
• The homeowner's refund. 35% of the VAT on the labour, 0,35 × 288.000 = 100.800 kr., claimed on RSK 10.18. That is only possible because the labour is itemised on the invoice.
• The wage statement (launamiði). The payment to the plumber, 372.000 kr. including VAT, goes on his statement in box 06.
• The stages. Assume the job is invoiced in two equal stages, on 20 October and 20 November 2026. The output VAT on the first invoice, 240.000 kr., falls in September and October, due on 7 December 2026. The output VAT on the second, 240.000 kr., falls in November and December, due on 5 February 2027.

One job therefore touches the company's VAT in two periods, the customer's refund and the subcontractor's wage statement (launamiði). And there are usually several jobs running at once.

What Kassify does for contractors

What is left for you: send a photo of the receipt on the spot, approve payments in your online bank and tell Kassify about new staff. Kassify gets in touch when a receipt is missing.

A fixed price, known in advance.

A contractor who prices a job knows what a fixed price is worth. Kassify works the same way: one fixed monthly price, in writing before anything is agreed. It covers bookkeeping and bank reconciliation, VAT returns, payroll, invoicing, the app, the annual accounts and the tax return, and is set by the size of the business.

Annual accounting costs are 20% lower than at a traditional accounting firm. The move costs nothing extra, and e-invoices are part of the monthly price.

The move takes less than 7 days

A contractor rarely changes bookkeeping between jobs. There are usually jobs running: the first stage invoice sent but not the next, and payments received on work that is not finished. Kassify still takes over in the middle of a period. Kassify calls your bookkeeper, the history comes over from Payday, dk, Regla, Netbókhald, Uniconta, Business Central or another system, and the open jobs are reconciled so each stage and each payment lands in the right VAT period.

Less than 7 days later the books are with Kassify, and the move is part of the price. How the conversation with your old bookkeeper goes is in the article on changing bookkeeper.

Who is responsible for the work

The AI books, and accredited bookkeepers and certified auditors review what it does. A question about the VAT on a job gets an answer from a bookkeeper within 24 hours.

At year-end a certified auditor reviews the annual accounts, the company's board signs them and Kassify sends them to the Register of Annual Accounts. The tax return is built from the same numbers. Kassify sends the VAT return every two months, and you pay the VAT yourself from your online bank.

More on the service on the pages for bookkeeping and VAT returns.

Questions

Every receipt booked. Every return on time.

Leave your email and Kassify goes through your jobs and your business with you. The price comes in writing before anything is decided.