Blue Lagoon to pay VAT from 2016

Recent changes in VAT legislation mean that Iceland’s famous Blue Lagoon will have to pay VAT on its entrance fees from 1 January.

Until now, the Blue Lagoon has been exempt from VAT on its bathing activities are classed under the VAT-free “swimming, fitness activities and sports activities” category. From 1 January, the Blue Lagoon will have to pay 11% VAT on its entrance fees.

In 2014, some 766,000 people visited the Blue Lagoon, paying ISK 3.7 billion (approx. €25 million) in entrance fees. The company paid hundreds of millions of Icelandic króna (ISK) last year in VAT in respect of other operations, such as catering and retail.

Senior management have long been keen for the Blue Lagoon to lose its VAT exemption, as it considers that the interests of tourism generally are best served within the system that outside of it.

The Blue Lagoon is experiencing very strong growth. Visitor numbers for 2014 were 18% up on the previous year and the company posted a net profit of ISK 1.8 billion (approx. €12.1 million). 90% of all visitors are of non-Icelandic nationality.

Entrance fees are currently ISK 5,300 (approx. €36) in the winter and ISK 6,800 (approx. €46) in the summer. According to CEO of Blue Lagoon, Grím­ur Sæ­mundsen, it has not been decided how this extra VAT will affect entrance fees.

“Should we be lowering prices when visitor numbers are rising year on year?” wonders Sæmundsen. “I don’t really see any good business arguments for doing so. We are bringing in foreign currency for the nation.”