Iceland plans broad tax and fee increases in 2027

Various Icelandic taxes and state fees are set to rise by 5.2% next year under the assumptions of the proposed 2027 budget, mbl.is reports. The government says the increases, alongside efficiency measures, will help deliver a balanced budget.

The increases are intended to ensure that taxes and fees keep pace with changes in the consumer price index and do not decline in real terms. The economic forecast used for the budget projects annual inflation of 5.2% this year and 3.6% next year.

The following taxes and fees are among those due to rise by 5.2%:

Vehicle tax; the carbon tax; alcohol, tobacco and nicotine taxes; a special fee paid to Ríkisútvarpið; the fee for the Elderly Facilities Construction Fund; accommodation tax; and an infrastructure fee.

Other proposed changes include revised waste-processing fees in line with a proposal from the board of the Waste Processing Fund, although the amount has not yet been determined. Fees for applications for short-term residence permits and Icelandic citizenship would also increase, as would the electricity equalisation fee, although its rate has not been specified.

The government also proposes extending an infrastructure prevention fee linked to the Reykjanes Peninsula for one year. The fee is 0.08 per mille of the fire insurance value of all fire-insured property in Iceland and is collected by insurance companies.

A nature and infrastructure fee would be introduced, requiring tourists to pay for access to natural attractions owned by the state.

The budget proposal also calls for the vehicle kilometre charge to rise by 15.9%, including a 5.2% increase in line with the budget assumptions. The measure is expected to generate 4 billion Icelandic krónur.

A special bank tax is expected to raise 6 billion krónur. Admission to bathing lagoons would be moved to the general value-added tax rate, generating an estimated 4 billion krónur.

The proposed reimbursement rate for value-added tax paid by residential builders and owners on labour carried out at construction sites would be lowered. The change is expected to raise 3.6 billion krónur.

The Central Bank of Iceland’s August forecast projected that inflation would ease rapidly next year and reach 2.9% by the end of 2027.