The Icelandic parliament has on December 18, 2025 a law on the introduction of a kilometer fee for all vehicles adopted, which came into effect on January 1, 2026. Until now, the mileage allowance only applied to electric cars and plug-in hybrids. The mileage allowance is to be paid for road use, regardless of fuel consumption.
The fuel taxes on gasoline and diesel were waived in return starting from 01/01/2026.
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| Vehicles at a gas station in Selfoss (Jan. 2024) |
Officially, it is assumed that for most vehicle owners on average a zero-sum game will be:
The fuel taxes (gasoline tax) will be abolished, instead the mileage allowance (kilometer charge) introduced. The CO2 tax on fossil fuels remains the same. Basically, it doesn't make much difference mathematically. But the value-added tax (value added tax) decreases because so far the gasoline price, including the fuel tax contained in it, was subject to VAT, and with the abolition of the fuel tax, the taxable sales price decreases – and thus also the VAT. (With 77.30 ISK fuel tax per liter in 2025 and a VAT rate of 24%, one now saves 95.85 ISK per liter due to the elimination of the fuel tax.)
All cars of the same weight class (cars and off-road vehicles up to 3.5 tons: 6.95 ISK/km) now pay the same mileage allowance for every kilometer driven. This will reduce costs for some, especially for drivers of large vehicles with high fuel consumption, while costs will increase for others, especially for drivers of small, energy-saving cars. On average, the costs remain the same, according to the government's expectation.
Official authorities, such as the information platform "Vegir okkar allra" of the government, assume for an average gasoline vehicle with a consumption of 7.5 liters per 100 km and a total annual mileage of 14,000 km, taking into account the value-added tax (VSK), a slight relief for the driver.
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| Source: vegirokkarallra.is |
Discussions about falling gasoline prices in the run-up
The government assumes that the abolition of the oil and gasoline tax will be passed on to the customers by the oil companies through the prices. The Ministry of Finance assumed in his calculations reduction of the gasoline price from 95 - 105 ISK per liter and from a reduction of the diesel price by 80 - 88 ISK.
The FÍB, the Association of Icelandic Car Owners, according to their own calculations (not quite as optimistically), expected that with the introduction of the mileage allowance on 01/01/2026 the prices of gasoline at 93 ISK per liter and for Diesel at 80 ISK would fall per liter.
From representatives of oil companies there were initially statements that the price for gasoline and diesel as of January 1 fall less sharply will, as publicly expected. A price decrease per liter of gasoline of around 80 ISK and of diesel of around 70 ISK is to be expected. Due to the increase of the CO² tax last year by 59%, which had not been passed on to the customers in this way, and because of the rising costs, a complete reduction of prices by the eliminated fuel taxes was not possible. Furthermore, one must consider that with gasoline 5% ethanol are mixed in, i.e., for these 5% the fuel tax remains and does not disappear.
Actual price changes on January 1, 2026
I took some photos of the prices at the AO gas station in Selfoss to get an impression for myself. The photos are from the same gas station, the first picture is at noon on December 30, 2025, when we were shopping in Selfoss, the other is from January 4, 2026, during the next shopping trip.
At 30.12. cost a liter gasoline accordingly here 279.7 ISK(equivalent to €1.90); a liter of diesel cost 292.7 ISK (equivalent to €1.99).
At 4 January cost per liter gasoline here then only 183.2 ISK(also around €1.24) and a liter of diesel 205.4 ISK (around €1.39).
With this, the price for gasoline fell by 96.5 ISK, the price for diesel by 87.3 ISK. Thus, the price decline here was even above the expectations of the FÍB.
Actually have all oil companies reduced their prices on 01/01/2026, partly the prices had already fallen on 12/31. According to media reports, the price for one liter gasoline in the capital area on average fallen von 279.7 ISK auf 183.8 ISK, d.h.around 95.9 ISK.
This means that the decline is actually somewhat higher than the calculations of the Icelandic Automobile Owners Association, at the lower end of the Ministry of Finance's expectations, but significantly higher than what the gas station chains had initially projected.
Mileage fee: 6.95 ISK per kilometer driven for cars
For the use of the roads, from January 1, 2026, a mileage fee will now be increased for all vehicles (regardless of the energy source and fuel consumption). The amount of the fee depends on the weight of the vehicle and increases with increasing weight.
For passenger cars and off-road vehicles up to 3.5 tons one pays 6.95 ISK per kilometer driven.
From 3,501 tons the mileage allowance then amounts, for example, to 9.85 ISK per kilometer driven, for vehicles over 9 tons then 13.18 ISK.
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Tour buses in East Iceland
(Photo from November 2025) |
For
vehicles over 10 tons(Trucks and buses) the kilometer fee rises from 13.98 ISK to a maximum of 45.17 ISK (for more than 31 tons).
In the first years, however, a discount is granted here, specifically for coaches (tiered for 2026 and 2027 with a reduction of 50% from 2027) and to 80% by 2029 for trucks over 10 tons that are powered by environmentally friendly energies (methane, methanol, electricity, or hydrogen).
Important appointments
The mileage of the vehicles by January 1 must be at the latest on 20.01.2026 registered online with the relevant government authorities (last day to register).
But I have already seen
advertising (as here, for example, by the N1 gas station) that you can continuously enter your mileage there in the app and that it is then automatically reported to the governmental authorities.
In addition, a registration is carried out during regular inspections by accredited inspection bodies, or one can also, so to speak, make a separate appointment with the official Icelandic biannual inspection (Aðalskoðun or Frumherji) to determine the mileage.
On February 1, 2026, the mileage allowance for January 2026 will then be due. In doing so, the previous consumption of the vehicle is taken as a basis according to the reported mileage.car must the mileage at least once a year report, but you can also the mileage at most every 30 days report again.
At vehicles over 10 tons must the mileage at least every 6 months must be reported, at least once a year the registration must be carried out by a recognized body (e.g., during the inspection), the second registration can also be carried out by the owner or holder themselves.
When one one's mileage not properly recorded, will basically take effect from April 1, 2026 fee of 20,000 ISK charged (equivalent to about €135). You then have to have the mileage registered at an accredited inspection center.
In addition, in this case, during the monthly statements flat-rate from a mileage of 60 km/day for private vehicles Assumed, so 1,800 km per month (and 21,900 km per year). This then corresponds to a due mileage allowance of just over 12,500 ISK per month (almost €85).
The average mileage for private cars, according to the statistical data from the Icelandic Road Administration, was just under 11,000 km (which corresponds to a mileage allowance of around 6,300 ISK per month). So, one usually has a good financial reason to properly report the kilometers actually driven. (I admit, for example, if you live in Hveragerði and commute to Reykjavík for work 4-5 days per workweek, with a one-way distance of around 45 km and about 190 working days, you would already reach over 17,000 km per year just for trips between home and workplace. In that case, the assumed annual mileage of 21,900 km could indeed be realistic.)
Exemption from mileage allowance
Certain vehicles are exempt from mileage allowance, e.g. vehicles of rescue teams, appropriately marked vehicles of foreign embassies, or vintage cars registered before 1965 and which demonstrably do not have a odometer, where no odometer has been installed, or where the odometer can no longer be repaired.
Rental car
For car rental companies, the short-term introduction The mileage allowance as of 01/01/2026, with the decision of 12/18/2025, presents a particular challenge. As far as I have gathered, companies are now informing their customers by email about the introduction of the mileage allowance, with the costs for this being invoiced separately to the customers. The resulting increased rental costs apparently do not always meet with understanding from the renters. However, I have also heard that some rental car companies charge an additional processing fee of 1.81 ISK per kilometer (= €0.012) on top of the mileage allowance.
At rental car must the odometer reading at least every 6 months be reported to the relevant official authorities, who registration is however at any time allowed.
For long-term rentals, it is the responsibility of the tenant registered in the vehicle register to report the mileage to the official authorities.
Foreign travelers with their own vehicle
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Cars on the way to the Norröna (Nov. 2025)
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At
Travelers, who your foreign
private vehicle e.g., with the
Norröna for their
vacation bringing to Iceland or having shipped here, in any case, will be with the
entry the
mileage recorded. How much must be paid then depends on the duration of the stay and the weight of the vehicle; the details are regulated in Art. 11 of the new law:
For stays of up to 30 days one pays for motor vehicles a flat rate according to the attached table.
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| Source: althingi.is |
For Motorcycles with a weight of max. 400 kg pays for up to 10 days a flat rate from 8,300 ISK (about €56), for 11 to 20 days from 12,450 ISK (just under €85) and for 21 days and more then 14,525 ISK (just under €99).
If the vehicle more than 30 days in a row if one stays in Iceland, one pays mileage allowance according to the general rules and the mileage recorded at departure. The previously paid flat rates will be credited. However, if you have driven little, you must at least the flat rate for more than 20 days pay.
If you come to Iceland with a private car or a motorhome up to 3.5 tons with the Norröna and stay here for three weeks, you pay 24,325 ISK (equivalent to around 165 €). For a motorhome over 5 tons, you pay 34,475 ISK (just over 234 €) for three weeks.
For example, if you stay for six weeks, you pay the regular mileage allowance, but at least the above-mentioned flat rates.
Comparison calculations
The Olíugjald (fuel tax) was 77.30 ISK per liter in 2025. The value-added tax rate on gasoline is generally 24%. So far, 95.85 ISK per liter of gasoline was due here. This amount is now being eliminated.
In a economical small car, which perhaps consumes 4.8 liters per 100 km, that would be 43.2 liters of gasoline for an average monthly mileage of 900 km. For this, in 2025, 4,140 ISK gasoline tax including VAT was due. In 2026, one now pays mileage allowance of 6,225 ISK for 900 km per month. So, that is significantly more expensive.
In a larger SUV, which perhaps consumes on average 11 liters per 100 km, in 2025 with a monthly mileage of 900 km, for 99 liters of gasoline, a gasoline tax including VAT of 9,490 ISK had to be paid; the new kilometer charge of 6,225 ISK for such vehicles is clearly cheaper.
One average mid-range car, which perhaps has an average consumption of 8 liters per 100 km, would then have with a Island tour around roughly 1,400 km Last year, for 112 liters of gasoline, one had to pay motor vehicle tax including VAT of around 10,735 ISK (about €72.80). Now, for 1,400 km, one has to pay a mileage allowance of 9,730 ISK (about €66).
Seen in this way, an average tourist who drives around the island once in a mid-range car, covering 1,400 km, saves almost €7 under the new regulation from 2026.
