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December 18, 2025
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Understanding Iceland’s New Kilometer Road Tax
If you are renting a car in Iceland in 2026, you may notice a new line item related to kilometers or road usage. This is not a Zero Car policy change; it is a government-mandated road tax introduced in Iceland and applied to rental vehicles across the country. Our responsibility is to collect it correctly, explain it clearly, and make sure you understand exactly how it works before you arrive.
This article explains what the new kilometer road tax is, why it exists, and how Zero Car applies it in the fairest way possible. For more technical details, we recommend everyone visit the official Roads to the Future website, which outlines the national transition to per-kilometer charging.
Key Facts for Your Rental
What is it? A mandatory Icelandic government tax for road maintenance.
The Cost: Applied as a flat daily rate.
Who pays? Everyone renting a vehicle in Iceland, regardless of fuel type.
The Benefit: No "bill shock" or odometer tracking. You pay one transparent price and drive as much as you like.
What Is the New Kilometer Road Tax?
Iceland has introduced a usage-based road tax that applies to all vehicles, including rental cars. The purpose is straightforward: as the world shifts toward electric and low-emission vehicles, traditional fuel taxes no longer provide enough revenue to maintain Iceland's unique infrastructure.
The kilometer road tax ensures that all vehicles contribute fairly to the upkeep of the roads they use, regardless of whether they run on electricity, petrol, or diesel. This tax is set by the Icelandic government and is mandatory for all car rental companies.
How Zero Car Applies the Tax
While the law is based on kilometers driven, Zero Car has chosen to apply this as a fixed daily road tax.
We believe this is the most traveler-friendly approach. Charging per individual kilometer can be stressful as travelers often find themselves constantly checking the odometer or worrying about the cost of a spontaneous detour.
By using a flat daily rate:
You know the cost upfront: No "bill shock" at the end of your trip.
Total Freedom: You can explore a hidden valley or take the long way around a fjord without calculating the cost of every turn.
Seamless Drop-off: No waiting for staff to verify mileage; you simply return the keys and go.
Why a Daily Rate is Fairer
In Iceland, you plan your trip by days, not by centimeters. Whether you are doing a short loop of the Golden Circle or a 10-day trek around the Ring Road, our model ensures consistency.
It eliminates the frustration of two travelers paying wildly different amounts for the same car just because one took a slightly longer scenic route.
Full Transparency: No Tracking, No Surprises
We believe road taxes should never be hidden. The daily kilometer tax is clearly displayed during your booking and reflected in your final details.
No tracking: We do not monitor your driving behavior or routes.
No penalties: There are no extra fees for "heavy usage."
Zero Profit: Zero Car does not profit from this tax; we collect it on behalf of the government and pass it through exactly as required.
How This Fits Our Philosophy
Zero Car was built on the foundation of Total Clarity. This means full insurance, no excess, no deposits, and no fine-print surprises. Applying the kilometer road tax as a simple daily rate is the only way to stay true to that mission. Our goal is for you to feel informed, respected, and in total control of your budget.
What You Need to Do
There is nothing extra you need to do. The daily kilometer road tax is handled automatically during the booking process. Your only job is to focus on the road ahead and enjoy the landscape.
Whether you choose an electric, hybrid, or traditional vehicle, the process remains exactly the same.
You can book right now
FAQ - Mandatory Road Tax in Iceland
FAQ - Road Tax
Is this tax unique to Zero Car?
No. This is a national Icelandic law. All car rental companies are legally required to collect this tax. Zero Car simply chooses to simplify it into a daily rate for your convenience.
Does the tax apply to petrol, diesel, and electric cars?
es. As of 2026, the per-kilometer tax applies to all vehicle types. This ensures that every driver contributes to the infrastructure they use, regardless of their engine type.
What if I drive very few kilometers? Can I get a refund?
To keep our pricing simple and "Zero Surprise," we use a flat daily rate based on average usage. This prevents the need for invasive GPS tracking or time-consuming odometer checks at drop-off, allowing you a faster and more private rental experience.
For more on our pricing and insurance philosophy, see our About Us page.
Do I need to report my mileage to the government?
No. Zero Car handles all the administration, reporting, and payments to the Icelandic tax authorities. You don't need to fill out any extra paperwork.
Will I be charged more if I drive the entire Ring Road?
No. That is the beauty of our daily rate. Whether you drive 50km or 500km in a day, your tax rate remains the same. You are free to explore without worrying about the meter running.
Check out our Driving in Iceland Guide for help planning your route.
Is this included in the "Zero Excess" policy?
The road tax is a government-mandated fee, separate from insurance. However, like our Zero Excess Insurance, we aim for total transparency: the fee is clearly shown at the time of booking so there are no hidden costs when you arrive.