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