Iceland's Kilometer Fee (Kílómetragjald): What Rental Car Drivers Need to Know in 2026

What is the kilometer fee?

Iceland's kilometer fee — kílómetragjald in Icelandic — is a road usage charge based on how far you drive. It took effect on January 1, 2026, replacing the old fuel excise tax that was previously baked into every liter of petrol and diesel sold at Icelandic pumps.

The idea is straightforward: instead of taxing fuel at the pump, the government charges vehicles per kilometer driven. Every vehicle registered for road use in Iceland is covered, including rental cars. The fee is tracked through odometer readings — recorded at vehicle inspections and, for rental cars, at pickup and return.

For visitors renting a car, the practical difference is small. You'll see the kilometer fee show up as a line item on your rental invoice, but fuel prices at the pump dropped by a roughly equivalent amount when the excise tax was removed. The net cost of driving hasn't changed much.

Why Iceland introduced it

This has been in the works for years. As more electric and hybrid vehicles hit Iceland's roads, fuel tax revenue started declining while road maintenance costs stayed the same (our roads take a beating from weather, volcanic activity, and heavy tourist traffic). The old system meant EV drivers contributed nothing to road upkeep through fuel taxes, even though they use the same roads.

The kilometer fee solves this by tying the charge to actual road use rather than fuel consumption. Drive more, pay more — regardless of what powers your vehicle. It's a fairer system, and Iceland isn't the first country to move in this direction. The discussion here largely followed models already in use in parts of Europe.

For the Icelandic government, it also creates more predictable revenue for road maintenance. Given that we need to maintain over 13,000 km of roads for a population of around 390,000 people (plus over 2 million annual visitors), stable funding matters.

How rental companies handle it

This is the part that actually matters to you as a visitor. Rental companies in Iceland handle the kilometer fee in one of two ways:

Option 1: Flat daily surcharge (most common)

The majority of rental companies add a fixed daily fee to your rental rate — typically somewhere between 500 and 1,200 ISK per day depending on the vehicle category. This covers the kilometer fee regardless of how far you drive. You'll see it on your invoice as "road usage fee," "kilometer fee surcharge," or something similar.

This is the simplest approach and the one most travelers prefer. You know the total cost upfront, and there are no surprises at return.

Option 2: Actual kilometers charged at return

A smaller number of companies — usually the budget-focused ones — charge based on the actual kilometers you drive. They record the odometer at pickup and return, calculate the fee, and add it to your final bill. The per-km rate is typically passed through at cost or with a small admin markup.

This option can be cheaper if you're doing a short trip with limited driving, but it adds uncertainty to your total cost.

When comparing rental prices, check whether the kilometer fee is included in the quoted daily rate or added separately. Most booking platforms now show it, but not all do.

How much does it cost?

The kilometer fee rate depends on two factors: the vehicle's weight and its emission classification. Here's what it looks like in practice for common rental car categories:

These are approximate 2026 rates. The ISK amounts are set by the government and adjusted annually. Dollar equivalents fluctuate with exchange rates — the figures above use a rate of roughly 140 ISK per USD.

Exchange rates and fee amounts are approximate as of April 2026 and may change.

To put this in perspective: on a typical 10-day trip where you drive around 2,000 km in a mid-size SUV, the kilometer fee totals roughly 15,000 ISK — about $107 USD, or $10.70 per day. That's not nothing, but it's not a budget-breaker either, especially considering fuel costs dropped by a similar amount.

Does it make driving more expensive?

The short answer: no, not really. The kilometer fee was designed to be revenue-neutral, meaning the government collects roughly the same amount as it did through fuel taxes. The fuel excise tax was removed simultaneously, so pump prices dropped.

If you're driving a petrol or diesel rental car, the math roughly cancels out. You'll pay less per liter at the pump and a new per-km fee — the total is similar to what you'd have paid in 2025.

The one group that does see a genuine increase is electric vehicle drivers. Before 2026, EVs avoided fuel taxes entirely (since they don't use fuel). Now they pay the kilometer fee like everyone else. This is by design — the whole point was to make road funding fair across all vehicle types.

For most visitors renting a standard petrol or diesel car, the kilometer fee is essentially a non-event in terms of total trip cost. It's just a different line item on your invoice.

Tips for renters

• Check whether the kilometer fee is included in the rental quote.Some booking platforms bundle it into the daily rate; others list it separately. When comparing prices, make sure you're comparing like with like.
• Ask your rental company how they charge it. Flat daily fee or per-km at return? If per-km, ask for the rate so you can estimate your total.
• Photograph the odometer at pickup and return. This is good practice regardless, but especially useful if the company charges per actual kilometer. It protects you against disputes.
• Don't change your driving plans because of the fee.At $0.04-0.08 per km, the kilometer fee shouldn't influence where you go or how much you drive. Fuel and accommodation are far larger cost factors.
• Budget roughly $10-15 per day for the fee on a typical driving trip. Use our trip cost estimatorto get a full breakdown. If you're staying in Reykjavik with day trips, it'll be less. If you're driving the full Ring Road plus detours, it could be slightly more.

The kilometer fee is one of those things that sounds more complicated than it is. In practice, your rental company handles the mechanics, the cost is modest, and it shouldn't change your plans. Just be aware it exists so the line item on your invoice doesn't catch you off guard.