Iceland Kilometre Fee 2026

What is the kilometre fee?

The kilometre fee — kílómetragjald, or km-gjald in Icelandic — is a charge on distance driven. Iceland is moving road funding away from fuel taxes and onto per-km charging, partly because electric cars pay nothing at the pump. Rather than tax the fuel, the country now charges for the distance.

When does it take effect?

It started on 1 January 2026. If you're driving in Iceland now, it applies to your trip.

Who pays, and how much?

The base rate is 6.95 ISK per kilometre for passenger cars and SUVs up to 3.5 tonnes — every normal rental car falls in that band. Heavier vehicles pay a higher, weight-banded rate, but that's outside what you'd rent for a road trip.

It applies to all vehicles regardless of energy source. Petrol, diesel, hybrid and electric all pay the same per-km rate. So no, an EV doesn't dodge it — the whole reform exists because EVs paid no fuel tax.

Does it apply to rental cars?

Yes. And this is the part worth knowing before you book:

• The fee is charged to you, the renter, but it shows up as a separate line item during the booking flow — after you pick your dates, not in the headline daily rate you first see.
• Every Iceland rental company does it this way. It's not a Key Car quirk. If a daily rate looks lower somewhere, check whether the km fee is shown yet.
• You don't log odometer readings or file anything yourself. The rental company handles the admin and passes on the cost.

The practical takeaway: budget for it up front. Use the calculator above to estimate what your route adds before you book, so the line item isn't a surprise.

How is it tracked and paid?

The fee is odometer-based. Owners log readings through the Ísland.is app or website, the N1 app, or at inspection stations, and pay monthly on an estimated average that's settled against the real readings. It's administered by Skatturinn, Iceland Revenue and Customs. For a rental, none of this is your job — it's the company's.

How it compares to the old fuel tax

The km fee replaces most of the old pump fuel duties, so fuel at the pump is cheaper than it was. You pay per kilometre instead. Over a long trip the two roughly cancel out; whether you come out ahead depends on how thirsty your car is and how far you drive. Check live fuel prices to see the pump side of the equation.