The Complete Guide to the Iceland Road Tax (Kilometer Fee)

Picture this: You're behind the wheel of your rental, cruising along Iceland's legendary Ring Road, watching glaciers shimmer under the midnight sun. The Westfjords beckon. The Highland F-Roads call your name. And here's the best part—you're doing it with complete clarity on what you're paying for.

As of January 2026, Iceland has transformed how travelers contribute to maintaining these iconic roads. The shift? A new kilometer-based tax that ensures everyone—from electric vehicle drivers to 4x4 adventurers—pays their fair share for the rugged infrastructure that makes your Iceland road trip possible.

At GO Iceland, we believe in total transparency. No surprises. No hidden fees. Just you, the open road, and the confidence that comes from knowing exactly what you're paying for. Let's break down everything you need to know about Iceland's kilometer fee so you can focus on what matters: your adventure.

Quick Facts About Iceland's Road Tax

Starting January 1, 2026, all vehicles in Iceland pay a kilometer-based road tax of 6.95 ISK per kilometer for standard passenger cars and SUVs. Here’s what you need to know.

• The tax is based on distance driven, not just fuel consumption. You pay for how many kilometers you travel on Iceland's roads, not how much gas you pump.
• The tax replaces traditional fuel taxes, which means fuel prices at the pump have dropped by approximately 80-94 ISK per liter.
• The fee applies equally to all vehicles: electric, hybrid, diesel, and gasoline. No vehicle is exempt—if you're driving in Iceland, this tax applies to you.
• The goal is to maintain the rugged roads travelers love. From the smooth asphalt of the Ring Road to the challenging gravel of F-Roads, this tax funds the infrastructure that makes Iceland accessible.
• Payment is usually handled through the rental agency. You won't be paying the tax directly at gas stations or dealing with the Icelandic government directly. Your rental company, like GO Iceland, manages everything on your behalf.

What is the Iceland Kilometer Fee?

For decades, Iceland funded its road maintenance through traditional fuel taxes built into the price of gasoline and diesel. Every time you pumped gas into your tank, a portion of your payment went toward keeping those roads in shape.

But here's what changed: As fuel-efficient vehicles and electric cars became more popular, fuel tax revenue started dropping. Yet, the roads still needed the same level of maintenance—or even more, thanks to Iceland's booming tourism industry.

Enter the kilometer fee (officially called kílómetragjald in Icelandic).

Think of it like a utility bill, but for roads. Instead of paying based on fuel consumption, you now pay based on actual road usage. Drive 100 kilometers? You pay for 100 kilometers. Drive 1,500 kilometers around the Ring Road? You pay for 1,500 kilometers.

The beauty of this system is its fairness: A driver in an electric Tesla Model 3 exploring the South Coast and a driver in a diesel Land Cruiser tackling the Highlands both contribute equally to maintaining the roads they use. No vehicle gets a free pass.

What Changed in 2026?

Iceland didn't invent the kilometer fee in 2026—it's been around since 2024, but only for electric and plug-in hybrid vehicles.

January 1, 2026, marked the big shift: The kilometer fee expanded to include all vehicles, regardless of fuel type.

Here's what's new:

• Universal Application: Gasoline, diesel, hybrid, hydrogen—every vehicle now pays the kilometer fee.
• Standardized Rate: 6.95 ISK per kilometer for passenger cars and SUVs up to 3.5 tons.
• Fuel Tax Removal: Traditional fuel taxes removed, meaning significantly lower prices at the pump (approximately 80-94 ISK less per liter).

Bottom line: You're not paying more overall—the cost has simply shifted from the fuel pump to a transparent, distance-based charge.

How it Works for Car Renters

Here's the good news: You don't need to become an expert in Icelandic tax law or spend your vacation tracking odometer readings. Rental companies are legally required to handle the kilometer fee on behalf of the Icelandic government.

When you rent with GO Iceland, here's what happens:

• We’ll record your odometer reading at pickup
• You drive and explore Iceland—no tracking required on your part
• We’ll record your odometer reading at drop-off
• We will calculate the total kilometers driven and report it to the Icelandic Revenue and Customs
• We’ll handle payment to the government and pass the cost to you transparently

How is the Tax Calculated?

The kilometer fee is straightforward, but understanding the exact rate for your vehicle helps you budget accurately.

For most travelers renting a standard car, SUV, or 4x4, you'll pay 6.95 ISK per kilometer.

Quick Math Examples:

• 100 kilometers = 695 ISK (approximately €4.50 / $5.00)
• 500 kilometers = 3,475 ISK (approximately €22.50 / $25.00)
• 1,500 kilometers = 10,425 ISK (approximately €68 / $75)

At GO Iceland, we’re keeping it simple for our customers. We will be implementing a per-day charge, so you don’t need to worry about any complicated calculations. Leave that with us. If you have specific questions about the daily cost, you can contact us or speak to us after you’ve booked your rental car.

Real-World Cost Examples

Let's put the kilometer fee into perspective with popular Iceland road trips:

Golden Circle Day Trip (300 km)

• Route: Reykjavíik → Þingvellir → Geysir → Gullfoss → Kerið Crater → Reykjavík
• Kilometer fee: 300 km × 6.95 ISK = 2,085 ISK (~€13.50 / $15)
• Fuel cost: 30L × 270 ISK = 8,100 ISK (~€52 / $58)
• Total trip cost: ~10,185 ISK (~€66 / $73)

Full Ring Road Circuit (1,500 km)

• Route: Complete Route 1 around Iceland (7-10 days)
• Kilometer fee: 1,500 km × 6.95 ISK = 10,425 ISK (~€68 / $75)
• Fuel cost: 150L × 270 ISK = 40,500 ISK (~€263 / $290)
• Total trip cost: ~50,925 ISK (~€331 / $365)

Westfjords Adventure (800 km)

• Route: Reykjavík → Stykkishólmur → Ísafjörður → Látrabjarg → Reykjavík
• Kilometer fee: 800 km × 6.95 ISK = 5,560 ISK (~€36 / $40)
• Fuel cost: 80L × 270 ISK = 21,600 ISK (~€140 / $155)
• Total trip cost: ~27,160 ISK (~€176 / $195)

FAQ: Iceland Road Tax Summarized

Do I pay this at gas stations?

No. The kilometer fee is separate from fuel purchases. When you fill up, you're only paying for fuel (now 80-94 ISK per liter cheaper). Your rental company handles the kilometer fee reporting and payment.

Does it apply to F-Roads?

Yes. The kilometer fee applies to all public roads in Iceland, including paved highways, gravel roads, Highland F-Roads, mountain passes, and all legally drivable routes. Important reminder: F-Roads require a 4x4 vehicle.

Does this make renting a car more expensive?

Not necessarily. In 2025, high fuel costs (370 ISK/liter) included hidden road taxes. Starting in 2026, lower fuel costs (260-280 ISK/liter) are offset by the visible kilometer fee. For a 500 km trip, the 2026 total cost is actually slightly cheaper with the added benefit of transparency.

Can I avoid this fee?

No. The kilometer fee is a mandatory Icelandic government tax that applies to all vehicles using public roads. There are no exemptions for tourists. 

The Bottom Line: Travel Smart, Budget Accurately

Iceland's new kilometer fee isn't something to fear—it's actually a step forward in transparent, fair road funding. Here's what you need to remember:

• You're not paying more overall. Cheaper fuel prices essentially offset the kilometer fee for most trips.
• It's fairer. Every vehicle contributes equally based on road usage, not fuel type.
• Your rental company handles everything. No paperwork, no government payments, no hassle.
• It's transparent. You see exactly what you're paying for road maintenance.
• GO Iceland has you covered. With clear pricing and professional service, we make sure the kilometer fee is just another smoothly handled detail.

Ready to book your Iceland road trip with confidence? Browse our fleet of reliable, affordable rental cars and start planning your adventure today. From compact cars for the Golden Circle to rugged 4x4s for the Highlands, GO Iceland has the perfect vehicle for your journey—with complete transparency on every cost, including the kilometer fee.

Questions about the kilometer tax or your rental? Contact us at +354 567 3000 or go@goiceland.com. Our team is here to help make your Iceland experience unforgettable.