Iceland’s 2026 Budget introduces the Pillar 2 global minimum tax (IIR and QDMTT), a kilometre-based vehicle tax, and a phased removal of fuel excise duties with higher carbon taxes. 

Iceland’s Finance Minister, Daði Már Kristófersson, presented the 2026 Budget Bill at the parliament on 8 September 2025.

The budget will be discussed in the parliament on 11 September 2025.

The key proposals include the implementation of the global minimum tax under Pillar Two, along with major reforms to the taxation of fuels and vehicles.

Pillar 2 global minimum tax

The budget introduces the implementation of the OECD/G20 Pillar 2 global minimum tax. The measures include an Income Inclusion Rule (IIR) and a Qualified Domestic Minimum Top-up Tax (QDMTT), which will apply to multinational groups with annual consolidated revenue of at least EUR 750 million in two of the four preceding years.

The framework also incorporates various safe harbour provisions, with both the IIR and QDMTT scheduled to take effect for financial years beginning after 31 December 2025, subject to parliamentary approval.

Vehicles taxes

The 2026 budget includes the implementation of a kilometre-based tax on vehicle usage to offset falling revenues from conventional fuel taxes.

Fuel taxes

The budget proposes the gradual removal of traditional fuel taxes, including excise duties on gasoline and diesel, alongside an increase in the carbon tax to preserve incentives for the energy transition.

Cruise ship infrastructure fee

Starting in 2026, the infrastructure fee paid by cruise ships for international travel, per passenger per day while docked in Icelandic ports or other customs areas, will be temporarily reduced from ISK 2,500 to ISK 2,000.

Electricity distribution equalisation fee

The equalisation fee paid by electricity distributors for both priority and interruptible transmission will be increased in 2026 to equalise distribution costs.

Other tax increases

Various taxes will rise by 3.7% in 2026. The increase will apply to alcohol, tobacco, nicotine, gasoline, diesel, the carbon tax, kilometre tax for clean energy and plug-in hybrid vehicles, vehicle and kilometre taxes, and the broadcasting fee.