Iceland Introduces New Road Tax Fee for Rental Cars
As of January 1, 2026, Iceland has introduced a new Road Tax Fee as part of a broader reform of how road infrastructure is funded.
Why the new Road tax in Iceland?
Traditionally, road maintenance in Iceland has been funded through taxes on fuel. However, with the rise of electric and fuel-efficient vehicles, this model has become less effective. To address this, the government is shifting toward a usage-based system—ensuring that all drivers contribute fairly, regardless of how their vehicle is powered.
As part of this transition, fuel taxes have been reduced, while a new daily road usage fee has been introduced.
What Does This Mean for Rental Cars?
For rental vehicles, the Road Tax Fee is applied as a fixed daily charge:
- 1,550 ISK per rental day
- Includes an administration fee
- Collected in advance at the time of booking or rental
This makes the cost predictable and easy to manage for travelers.
What Should You Expect?
If you’re renting a car in Iceland, this fee will typically be included in your rental agreement upfront. There are no additional steps required during your trip—everything is handled in advance so you can focus on enjoying your journey.
Final Thoughts
This new system is designed to create a fairer and more sustainable way to fund Iceland’s road network. While it introduces a visible daily fee for rental cars, it also comes alongside reduced fuel taxes and a modernized approach to road usage.