Iceland's Kilometer Road Tax on Rental Cars: What You Pay in 2026 and 2027
Since 1 January 2026 every car on Iceland's roads pays a kilometer-based road tax. On a Reykjavik Rent a Car rental it is a fixed daily rate, shown in your total before you book. Here is how it works, what it costs, and what it does not cover.
The short answer
- Iceland charges a road usage tax of 6.95 ISK per kilometer for cars under 3.5 tonnes, whatever the fuel type. It replaced most of the fuel tax at the pump on 1 January 2026.
- Rental companies pay it for their fleets and pass it on as a daily rate. At Reykjavik Rent a Car the rate is 1,550 ISK per rental day in 2026, including the administration fee. For rentals in 2027 it is 1,770 ISK per rental day.
- The amount is in your total price before you book. Nothing is measured, estimated or charged after you return the car.
- Unlimited mileage is still included. The daily rate does not change however far you drive.
What the kilometer road tax is
Iceland used to fund its roads mainly through taxes on petrol and diesel. As more cars went electric or hybrid, that income fell while road use did not. The government replaced it with a charge based on distance driven, called kílómetragjald. It started for electric and plug-in hybrid cars in 2024 and has applied to every vehicle since 1 January 2026.
For a passenger car the rate is 6.95 ISK per kilometer. Heavier vehicles pay more on a weight scale. Owners report odometer readings and are billed monthly. Official details are on the government information site vegirokkarallra.is and at Skatturinn.
How it is charged on your rental
A rental company cannot bill each customer by odometer without a separate invoice after every rental, so Icelandic rental companies convert the tax into a flat daily rate. Reykjavik Rent a Car is required to collect it on behalf of the Icelandic government.
| Rental period | Road tax per rental day |
|---|---|
| 2026 | 1,550 ISK, including administration fee |
| Rentals starting from 1 January 2027 | 1,770 ISK, including administration fee |
The rate follows the pickup date, not the booking date. A car booked in 2026 for a trip starting in 2027 is charged at the 2027 rate, and you see that in the total when you book.
What that means in practice:
- The road tax line appears in your booking summary and in your total before you pay. It is a government fee, not an extra rental charge from Reykjavik Rent a Car.
- It is charged per rental day, the same way as the car itself.
- We record the odometer at pickup and return as part of the normal vehicle check, but your road tax does not depend on the reading.
- There is no post-rental road tax bill, whatever distance you drive.
If you are comparing rental companies, check whether the road tax is in the headline price or added later. Some sites show it only at the final step.
Is the flat rate a good deal?
That depends on how far you drive. At 6.95 ISK per kilometer, the 2026 daily rate of 1,550 ISK equals about 223 km of driving a day. Drive more than that and the flat rate costs you less than the tax itself would; drive less and it costs slightly more. In 2027, at 1,770 ISK, the break-even is about 255 km a day.
| Trip | Typical distance | Road tax at 6.95 ISK/km | Flat rate, 2026 |
|---|---|---|---|
| 3 days around Reykjavik and the Golden Circle | 400 km | 2,780 ISK | 4,650 ISK |
| 5 days on the South Coast to Jökulsárlón and back | 1,100 km | 7,645 ISK | 7,750 ISK |
| 8 days on the Ring Road | 1,700 km | 11,815 ISK | 12,400 ISK |
| 10 days Ring Road with the Westfjords | 2,600 km | 18,070 ISK | 15,500 ISK |
The other half of the picture is fuel. Because the kilometer tax replaced fuel tax, pump prices fell by roughly 95 to 105 ISK per litre for petrol and 80 to 88 ISK per litre for diesel. On a 1,700 km Ring Road trip in a car using 7 litres per 100 km, that is around 120 litres, or about 12,000 ISK less at the pump. For most road trips the two roughly cancel out. Current pump prices are in our guide to petrol prices in Iceland.
What the road tax does not cover
The road tax is a national usage fee. It does not pay for anything that is charged locally:
- Tunnel and bridge tolls. Vaðlaheiðargöng near Akureyri and the Hornafjarðarfljót bridge near Höfn are paid online by licence plate. See our road tolls and parking page for prices and deadlines.
- Parking. Reykjavík street zones, Keflavík Airport, national parks and many attractions charge separately. Our Iceland parking guide explains how.
- Fines and insurance. Speeding and parking fines are the renter's responsibility, and no insurance package covers tolls, parking or fines.
Unpaid tolls or parking are sent to Reykjavik Rent a Car and charged to your payment card with a service fee, so it pays to settle them before you return the car.
Privacy
The tax is based on odometer readings only. It does not track where you drive, which roads you use or how you drive. The readings we take at pickup and return are the same ones used to document the vehicle's condition.
Before you book
| Question | Answer |
|---|---|
| Is the road tax in the price I see? | Yes. It is in the total before you confirm the booking. |
| How much is it? | 1,550 ISK per rental day in 2026, 1,770 ISK per rental day from 2027, including administration. |
| Does it depend on how far I drive? | No. Unlimited mileage is included and the rate is fixed per day. |
| Does it apply to electric and hybrid cars? | Yes. The same rate applies to every car under 3.5 tonnes. |
| Will I be charged after I return the car? | No. There is no post-rental road tax charge. |
| Does it cover tolls and parking? | No. Those are paid to each operator separately. |
If anything about your booking total is unclear, email info@reykjavikrentacar.is before you travel and we will go through it with you.