On 1 January 2026, Iceland extended its distance-based Road User Charge (RUC) – the Kilometer Fee (kílómetragjald) – to all vehicles (including motorcycles), regardless of fuel source or location. Making Iceland (to my knowledge) the first country to implement a nationwide, fuel-neutral distance-based RUC across the entire vehicle fleet, not limited to trucks or specific road networks.
From EV RUC to RUC for all
Iceland’s approach follows a phased implementation:
- January 2024: Kilometer Fee introduced for EVs and plug-in hybrids
- 19 December 2025: Expansion signed into law
- 1 January 2026: Kilometer Fee applies to all vehicles
How it works (simple, odometer-based)
The Icelandic model is intentionally low-tech:
- Odometer-based reporting (digital submission)
- Odometer reading must be updated at least once per year (every 6 months for trucks)
- Owners may upload readings more frequently for greater accuracy
- Charges are billed monthly (similar to electricity billing)
Rates and fairness logic
The fee is weight-based – vehicles in the same weight class pay the same per-km charge:
Example rate: vehicles ≤ 3,500 kg pay ISK 6.95/km (≈ EUR 0.047 / USD 0.055 per km)
Fuel taxes are reduced (carbon taxes still apply and have been increased) as part of the reform, partially offsetting the shift to distance-based charging. The reform is framed around maintaining overall neutrality for the average petrol vehicle: some will pay less, others more, but on average the total burden is intended to remain similar.
Reporting, deadlines, and compliance
By 20th January vehicle owners have to sign up and report their first odometer readying. If no reading is submitted by the deadline, mileage is estimated using an average driving figure
If the owner fails to report by 1 April, a fine of ISK 20,000 (≈ EUR 135) applies and electronic registration becomes unavailable; the vehicle must be taken to an inspection station for an official odometer reading.
It will be interesting to see what the compliance rate will be. Initial signs are positive with 60,000 vehicles (close to 20%) of the vehicles having registered by the start of 2026.
Why this matters internationally
Many countries are considering a distance-based RUC as a replacement of the fuel tax. Iceland’s rollout shows a credible low-cost pathway for countries considering RUC/MBUF. It will be interesting to see how this evolves, e.g. will Iceland allow different (more tech heavy) reporting options in future?
Sources:
https://www.ruv.is/english/2025-12-19-kilometre-charge-approved-by-althingi-461970?utm
https://island.is/en/news/kilometer-fee-60-thousand-registrations