Dropshipping to Iceland: What You Need to Know

Quick Answer: Iceland: 380K wealthy consumers, not EU (no IOSS), 10-14 day delivery, import duties apply, excellent English, be transparent about fees.

Iceland has 380,000 residents with very high purchasing power and strong e-commerce habits — they're accustomed to ordering internationally because local selection is limited. The challenge: Iceland is not in the EU, which means no IOSS, import duties apply, and customers may pay VAT at delivery. Delivery times run 10-14 days with optimized routing. The opportunity: wealthy consumers, low local competition, and customers who expect international shipping. Be transparent about potential import fees, use English (Icelanders have excellent English), and test the market before committing to localization.

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Market Overview

Why It's Interesting

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What This Means

Practical Consequences

VAT (VSK): 24% standard rate, 11% reduced rate Duty-free threshold: Low — most packages are taxed Customer experience: May receive notification to pay VAT/fees at pickup

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Delivery Times

Why It Takes Longer

• No direct flights China-Iceland (usually via Europe)
• Customs processing outside EU
• Small volume = lower carrier priority

Carriers

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How It Works

1. Package arrives in Iceland
2. Íslandspóstur/customs assesses value
3. VAT + any applicable duties calculated
4. Customer notified
5. Customer pays upon pickup

What Customers Pay

Note: Thresholds and rules may change. Verify current Icelandic customs regulations.

Communication Is Critical

"Delivery to Iceland may incur VAT and fees at pickup. This is Icelandic law for imports."

Be clear before purchase — no surprises.

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Purchasing Power vs Fees

Icelanders have high purchasing power but also expect high prices (they're used to it domestically).

Approaches

Approach 1: Exclude fees

• Show product price excluding import fees
• Clearly communicate fees may apply
• Common for international e-commerce to Iceland

Approach 2: Include estimate

• Add 25-30% to price
• Pay fees for customer (DDP)
• Better experience but more complex

Recommendation: Start with approach 1 + clear communication.

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Options

Recommendation

Start with English. Icelanders have excellent English and are accustomed to English websites. Localize to Icelandic only if volume justifies it.

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1. Shipping Policy

Have a clear section about Iceland delivery:

• Expected time: 10-14 days
• Fees: Import VAT may apply
• Tracking: Yes, full tracking

2. Product Selection

What works:

• Niche products (not available locally)
• Hobby products
• Tech and accessories
• Fashion (limited local selection)

What's harder:

• Everyday items (bought locally)
• Bulky items (high shipping costs)
• Temperature-sensitive (long transport)

3. Marketing

• Facebook/Instagram work well
• Iceland is small — targeting is easy
• Word-of-mouth spreads quickly
• Influencer partnerships can be effective

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Phase 1: Test (1-2 months)

1. Add Iceland as shipping zone
2. Clear communication about fees and timing
3. Run some Facebook ads
4. Measure: conversion, customer satisfaction

Phase 2: Evaluate

1. How many orders?
2. How many complaints about fees?
3. Is it worth continuing?

Phase 3: Optimize (if it works)

1. Consider DDP (you pay fees)
2. Potentially Icelandic localization
3. Local influencer partnerships

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Is it worth it for such a small market?

Depends. 380,000 residents with high purchasing power and low competition can be profitable for niche products. Test with low investment first.

Do I need to register a company in Iceland?

No. You can sell from anywhere. Customs handling happens at import.

How do I handle returns?

Same as other markets — "keep the product + refund" is often simplest for Iceland.

Can I use the same partner as for Sweden?

Yes, most agents can ship to Iceland. Ask specifically about Iceland delivery times and costs.

What if the customer refuses to pay the import fee?

It can happen. Be clear before purchase so customers know what to expect. Returns from Iceland are impractical — consider refund.

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Iceland is a niche market for dropshipping — small but wealthy.

The advantages:

• High purchasing power
• Accustomed to international e-commerce
• Low local competition

The challenges:

• Not EU (no IOSS)
• Import fees for customers
• Longer delivery times

The strategy:

• Test with English and clear communication
• Be honest about fees and delivery time
• Evaluate if volume justifies continuation

Iceland isn't for everyone — but for the right products and the right seller, it can be a profitable niche.

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Guide updated January 2026. Customs rules and fees may change — verify current Icelandic regulations.

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