Register rentalcars on a daily fee/kilometer fee

Registration of vehicles to daily fee / kilometer fee

Car rental companies can choose to pay a daily fee instead of a kilometer fee for vehicles in short-term rentals.

Amount

The daily fee is ISK 1,390 for each started rental day.

This amount is based on an estimated daily mileage of 200 km.

If the daily fee option is selected, it constitutes the final assessment of the kilometer fee, and actual mileage is not used as a basis for the charge.

Conditions

Registering vehicles for the daily fee

To move a vehicle from the general kilometer fee to the daily fee, the following conditions must be met:

The vehicle must be owned or operated by a licensed vehicle rental company (holding an operating permit from the Icelandic Transport Authority).
The allowed total weight of the vehicle must be 3,500 kg or less.
The rental period per contract must be a maximum of 30 consecutive days.
The vehicle must be rented to person unrelated to the rental company (children, spouses or close relatives)

Registering vehicles back to the kilometer fee

To move a vehicle from the daily fee back to the kilometer fee, the following condition must be met:

The vehicle must have been registered for the daily fee for a minimum of 15 days.

How to register

The rental company must register the following with the Director of Internal Revenue:

The specific vehicles for which the daily fee is requested, no later than seven working days before the due date for provisional kilometer fee payments. The registration takes effect the following day.
The odometer reading for all vehicles undergoing a change in registration.

Settlement

A report regarding the daily fee must be submitted to the Director of Internal Revenue no later than the 15th day of the month following the end of the payment period.

If the report is not submitted on time, the assessment will be based on the assumption that the vehicle was in continuous rental throughout the entire payment period.

Daily fee due date

The due date for the daily fee for vehicle rentals is the first day of the second month following the end of the payment period, and the final due date is 14 days later.

Example

Here is an example of how the process works for a car rental company that wants to register a vehicle for a daily fee and then switch back to a general mileage rate:

Registration for daily rate (June 1)
The car rental company decides that a passenger car should go for a daily fee due to many short-term rental agreements that are coming up in the month of June.
- Notification: The rental company sends an electronic notification to the Internal Revenue Service on June 1st.
- Log the odometer reading: Along with the notification, the rental company logs the odometer reading of the car (for example, 50,000 km).
- Effective date: The change takes effect on June 2 (the day after registration).
- Cost: Starting on June 2, the rental company pays ISK 1,390 for each started day that the car is rented out (as long as each rental agreement is 30 days or shorter).
Daily rate period (June 2 - June 16)
- Minimum period: The car must be registered on a daily rate for at least 15 days before it can be changed to the kilometer fee again. This car meets that requirement on June 16.
Registration back to mileage rate (June 17)
The rental company decides to return the car to the traditional kilometer fee (for example, because it is now going on a long-term rental).
- Notification: The rental company registers the change with the Internal Revenue Service on June 17.
- Log the odometer reading: The rental company must again log the odometer reading at the time of the change (for example, 52,500 km).
- Deadline: The notification must be received by the Internal Revenue Service at least seven working days before the next payment due date (which is July 1).
- Effective date: The car will return to the kilometer fee (6.95 kr. per km driven) on June 1st.
Settlement
- The rental company will submit a report by July 15 stating the number of rental days during the period June 2 - 17.
- The daily charge imposed for these days is considered the final kilometer charge for this specific period.

Minimum frequency of odometer logging

Vehicle rental companies may log the odometer reading at any time, but they are required to log at least every six months.

If the vehicle is 10 tons or heavier, the odometer logging must take place at least once a year at a certified inspection center.

Estimated average mileage

If the odometer logging is incomplete, the Director of Internal Revenue's estimate of average driving for vehicle rental companies is used:

If one registration is available: 150 km.
If registration is in arrears: 225 km.

Value Added Tax and Appeals

The kilometer fee, including the daily fee and the fixed mileage charge, does not form part of the value-added tax (VAT) base, provided that it is separated from the rental price on the sales invoice, stated separately, and charged to the renter without any markup.

An administration fee or other similar charge that a car rental company may impose for the collection of the kilometer fee or daily fee is not exempt from VAT. Such a fee therefore forms part of the tax base for VAT.

In cases where a car rental company charges a kilometer fee in advance based on estimated distance driven, but the renter then drives less than estimated, the car rental company must issue a credit note and refund the difference. If the difference is not refunded, it forms part of the VAT tax base.

Registration of vehicles to daily fee / kilometer fee

Service provider

Skatturinn - Iceland Revenue and Customs

Related material

Kilometer fee on vehicles

Laws on kilometer fee for vehicles (in icelandic)