Incentives and Legislation
The incentives and legislations section is undergoing a comprehensive annual update for 2025, due to be published by 18th April 2025.
The last annual update was to represent situation as of 2024, publihsed on 23rd April 2024.
Incentives and legislation that aim to increase uptake of alternative fuels vehicles and infrastructure.
If you know of other national or local incentives that should be included in this section, please send us an email, or use the button on the right, and let us know. We review the proposed changes and implement the updates on a short notice.
The incentives and legislations section is undergoing a comprehensive annual update for 2025, due to be published by 18th April 2025.
The last annual update was to represent situation as of 2024, publihsed on 23rd April 2024.
Incentives and legislation that aim to increase uptake of alternative fuels vehicles and infrastructure.
If you know of other national or local incentives that should be included in this section, please send us an email, or use the button on the right, and let us know. We review the proposed changes and implement the updates on a short notice.
- Purchase Subsidies
Grants for electric car purchases ranging from ISK 400,000 to 900,000
Total of ISK 2.5 billion has been granted since January 2024
Digital process for grant applications has been streamlined with automated processing- Registration tax benefits
Vehicles emitting up to 75 g/km (NEDC) are taxed at a rate of 5%
BEVs, hydrogen vehicles, and most PHEVs are exempt from registration tax due to their zero or minimal emissions
- Ownership tax benefits
The ownership tax structure for BEVs in Iceland underwent significant changes in 2024, with the introduction of a kilometer-based road tax. This system continues into 2025, representing a shift from traditional fuel taxes to a usage-based model.
Introduced in January 2024, this tax applies to electric, hydrogen, and plug-in hybrid vehicles:BEVs and hydrogen vehicles: ISK 6 per kilometerPlug-in hybrids: ISK 2 per kilometer The tax is calculated based on odometer readings, which must be logged at least once a year. Payments are made monthly, with settlements adjusted based on actual driving distances.
- VAT benefits
BEVs and hydrogen vehicles: VAT exempt up to a maximum of ISK 1,440,000 per vehicle.Plug-in Hybrid Electric Vehicles (PHEVs): VAT exempt up to a maximum of ISK 960,000 per vehicle.These exemptions are capped at 15,000 vehicles of each type
- Other financial benefits
Free parking is availble for up to two hours for BEV's in Reykjavik and Akureyri
- AF infrastructure incentives
Incentives for charging infrastructure
- AF Infrastructure Incentives
Grants are available from he City of Reykjavik to multi-appartment buildings when installing charging facilities.
- Announced policy changes (effective later in 2025 and after)
As of 2025, the kilometer-based road tax, which was introduced for electric and hybrid vehicles in 2024, will be expanded to include all vehicles, including those powered by diesel and petrol.
Electric and hydrogen vehicles: 6 ISK per kilometer (unchanged from 2024)
Plug-in hybrids: 2 ISK per kilometer (unchanged from 2024)
Diesel and petrol vehicles: Rate to be confirmed, but expected to be higher than for electric vehicles
This expansion aims to create a more equitable taxation system across all vehicle types and to further incentivize the adoption of low-emission vehicles.While no official announcements have been made regarding changes to purchase subsidies for 2025 and beyond, the government may consider adjustments based on market trends and the rate of BEV adoption.
- Interesting links
- Institutions involved in Incentives
Iceland Revenue and Customs
Incentives and Legislation
The incentives and legislations section is undergoing a comprehensive annual update for 2025, due to be published by 18th April 2025.
The last annual update was to represent situation as of 2024, publihsed on 23rd April 2024.
Incentives and legislation that aim to increase uptake of alternative fuels vehicles and infrastructure.
If you know of other national or local incentives that should be included in this section, please send us an email, or use the button on the right, and let us know. We review the proposed changes and implement the updates on a short notice.