How Iceland's Vehicle Import Tax Works

Why Iceland's Import Tax System Is Uniquely Complex

Iceland is not a member of the European Union, which means vehicles imported into Iceland do not benefit from EU single-market rules on goods movement. Every vehicle entering Iceland from abroad — whether new from a manufacturer or used from a private seller — is subject to Icelandic customs duty and excise taxes. The system is layered, calculated on multiple variables, and can add hundreds of thousands of ISK to the effective purchase price of a vehicle. Understanding it before you buy is essential.

The authority responsible for customs and import duties in Iceland is Tollstjórinn (the Directorate of Customs). Vehicle registration after import is handled by Samgöngustofa.

The Two-Layer Tax Structure

Importing a vehicle to Iceland involves two distinct charges that are often confused:

1. Customs Duty (Tollar)

A percentage levy on the customs value of the vehicle (typically the invoice price for new vehicles, or an assessed market value for used ones). For most passenger cars, the standard customs duty rate is 0% for vehicles from countries with which Iceland has free trade agreements (the EEA, EFTA, and others). However, customs duty can apply at non-zero rates for vehicles from certain countries — check with Tollstjórinn for specific rates based on country of origin.

2. Vehicle Excise Duty (Skráningargjald / Bifreiðagjald á innflutningi)

This is the significant charge — a domestic excise tax on all newly registered vehicles regardless of origin. It is calculated using a formula that weights:

• CO2 emissions (WLTP cycle, in g/km): The primary driver of the tax calculation. Vehicles below 0 g/km (EVs) pay the lowest rate; vehicles above 200 g/km pay the highest.
• Engine displacement (for internal combustion engine vehicles)
• Vehicle weight
• Vehicle price / customs value: A percentage of vehicle value is included in the calculation.

Why WLTP CO2 Rating Matters So Much

The CO2 rating used for Icelandic import tax calculation must be the official WLTP (Worldwide Harmonised Light Vehicle Test Procedure) figure from the vehicle's certificate of conformity (CoC). This is not the NEDC figure (an older, more optimistic testing standard). If a manufacturer's documentation only shows NEDC figures, Tollstjórinn will apply a conversion factor — which typically produces a worse result than the actual WLTP figure. Always ensure you have the official WLTP CO2 certificate for any vehicle you are importing.

EV and Hybrid Import Duty: The Changing Landscape

Iceland heavily subsidised EV imports from approximately 2015 to 2023, with zero excise duty on pure electric vehicles being the most significant incentive. This was a major driver of Iceland's extraordinary EV adoption rates. From 2024 onwards, the Icelandic government began phasing in excise duty for EVs as part of fiscal normalisation and road-funding considerations:

• Full battery electric vehicles (BEVs) now pay a reduced excise duty rather than zero duty — the reduction depends on the vehicle's CO2 equivalent rating under the calculation formula.
• Plug-in hybrids (PHEVs) benefit from partial relief based on their official WLTP CO2 rating.
• Standard hybrids (HEVs) are taxed similarly to petrol vehicles but with some relief for low CO2 ratings.

The political and regulatory situation regarding EV incentives is actively evolving in Iceland. Always verify current rates with Tollstjórinn or a licensed customs agent before completing an import.

Example Tax Calculations

To illustrate the impact, consider three vehicles with a similar purchase price of approximately 6,000,000 ISK:

Example A: Petrol SUV (e.g., Hyundai Tucson 1.6 T-GDI, 154 g/km WLTP CO2)

Excise duty for a vehicle in this CO2 band typically results in a registration tax of approximately 1,200,000–1,600,000 ISK. The effective landed cost including duty and registration exceeds the purchase price by approximately 20–27%.

Example B: Plug-in Hybrid (e.g., Hyundai Tucson PHEV, 32 g/km WLTP CO2)

The dramatically lower CO2 rating results in a significantly reduced excise rate — approximately 400,000–700,000 ISK in registration tax. The PHEV route saves 600,000–900,000 ISK in tax versus the petrol equivalent on the same base vehicle.

Example C: Pure Electric (e.g., Hyundai Ioniq 5, 0 g/km CO2)

Under current (post-2024) policy, a mid-range EV might attract 200,000–500,000 ISK in registration tax. Still dramatically less than a petrol equivalent, but no longer the zero-tax environment of 2020–2023.

Used Car Import: Is It Worth It?

Importing a used vehicle to Iceland is legally straightforward but financially complex. Key considerations:

• Customs valuation for used vehicles is based on assessed market value — Tollstjórinn maintains reference databases and will not simply accept an invoice price that appears below market.
• Shipping costs from Europe (typically via Smyril Line ferry from Denmark via the Faroe Islands, or by dedicated vehicle shipping) add 150,000–350,000 ISK to the landed cost.
• The import process requires the vehicle's original registration documents, CoC (certificate of conformity), and a technical inspection certificate valid for Iceland's requirements.
• Iceland is a left-hand drive country — both LHD and RHD vehicles can be registered, though RHD vehicles are unusual and may face additional scrutiny.

For most individuals, the arithmetic rarely favours importing a used vehicle over buying locally, unless the specific vehicle is unavailable on the Icelandic market or carries a significant price advantage even after all costs are factored in.

The Registration Process with Samgöngustofa

Once import duties are settled with Tollstjórinn, the vehicle must be registered with Samgöngustofa. The process requires:

• Proof of customs clearance from Tollstjórinn
• Original vehicle documents (CoC, foreign registration certificate)
• Valid Icelandic insurance certificate (you must arrange insurance before registration)
• Payment of any outstanding registration fees
• A technical inspection (skoðun) if the vehicle is more than a specified age or if Samgöngustofa requires one

The typical processing time from submitting all documents to receiving Icelandic registration plates is 1–3 weeks for standard cases, though backlogs at Samgöngustofa can extend this during busy periods.