Iceland has expanded its distance-based road user charge so it now applies to the whole road fleet, regardless of fuel type, with the new system taking effect from 1 January 2026.
What changed
The reform, approved by the Alþingi in December 2025 and operational from the start of 2026, makes the kilometre fee, or kílómetragjald, a universal, fuel-neutral levy for road-registered vehicles. The scheme had already been applied to electric vehicles and plug-in hybrids from early 2024, and the December decision extended the charge to petrol, diesel, hybrid and electric vehicles, and to motorcycles.
Charges are set by vehicle weight. Passenger cars up to 3.5 tonnes are subject to a published base rate of ISK 6.95 per kilometre, roughly €0.05 at the Central Bank of Iceland exchange rate used by the government. Motorcycles receive a discounted rate, 40% lower than the passenger-car rate, at ISK 4.15 per kilometre. Rates rise across 29 weight brackets, reaching ISK 45.17 per kilometre for the heaviest classes, around €0.31 per kilometre.
The government frames the change as modernising road funding as the vehicle fleet becomes more fuel efficient and electrified, reducing revenue from traditional fuel duties. Official material cited a fall in road-use receipts per kilometre to about ISK 7 by 2023, a decline of 43% since 2006.
How the system works in practice
Operationally, Iceland has chosen a lower-tech reporting model rather than mandating in-vehicle telematics or GNSS tracking. Vehicle owners must submit odometer readings at least annually, and billing is issued monthly in a utility-style arrangement. Readings can be supplied more frequently through the government portal Ísland.is, including at 30-day intervals, which the government says helps keep invoices aligned with actual use.
Odometer readings may also be recorded during vehicle inspections. Some heavier vehicle classes face more frequent reporting requirements. Trailers under 3.5 tonnes are exempt from the fee, while heavier trailers will be phased in over time.
