You take it to a recycle processor that is approved to receive vehicles for demolition and issue a return certificate. You then fill in a request for deregistration and submit it to the Icelandic Transport Authority or Inspection station, attaching the return certificate. Some processors have an electronic connection to the Icelandic Transport Authority and can complete the entire process on site. After you have deregistered the vehicle, you will be paid the deposit fee into your bank account listed on My pages on Iceland.is. Further information is available here.