Road Tax in Iceland

Effective January 1, 2026, Iceland introduced a new Road Tax Regulation along with a 30% reduction in fuel prices. This change moves road taxation away from fuel costs and toward a pay-as-you-use model, ensuring a fairer contribution to the maintenance of Iceland’s road network.

Key Details:

• The new tax applies to all vehicles in Iceland, including privately owned and rental cars, as well as electric, plug-in hybrid (PHEV), petrol, and diesel vehicles.
  
  
• The tax is calculated based on the distance driven during your rental period and will be charged to your credit card at the end of the rental.
  
  
• The rate is ISK 8.81 per kilometer (approximately €0.06 / $0.07) for vehicles under 3.5 tons, regardless of fuel type. This amount includes administration, collection fees, and tax.

Lower Fuel Prices:

To balance the introduction of this tax, the government has removed certain excise duties on fuel, resulting in significant price reductions:

• Petrol: Approximate decrease of ISK 94 (€0.64 / $0.75) per liter.
• Diesel: Approximate decrease of ISK 87 (€0.59 / $0.69) per liter.

Quick Budgeting Examples

Additionally, certain routes in Iceland may be subject to special road tolls imposed by local authorities.
Any toll charges incurred during the rental period will be charged to the renter’s credit card.