Introduction

Boasting a landscape as diverse as it is strikingly beautiful, Iceland is a magnetic destination for the world’s most intrepid travelers. Its ancient glaciers, simmering hot springs, cascading waterfalls, and breathtaking auroras allure vacationers from all corners of the globe. However, the often overlooked gem in the land of fire and ice is its flourishing short-term rental market. Offering an enticing blend of comfort, convenience, and an authentic living experience, short-term rentals have emerged as a popular accommodation choice for a growing number of tourists. Delving into this burgeoning sector, we uncover not just how it complements Iceland's unique tourism industry, but also the challenges and opportunities it presents for property owners, tourists, and the local community. Whether you're an investor, a traveler seeking new accommodation experiences, or a policymaker, this research will give you a comprehensive understanding of Iceland's vibrant short-term rental landscape.

Overview

Overview

In Iceland, there isn't a well-known national association specifically for short-term rental (STR) owners. However, you can still find support and resources through broader hospitality and tourism associations.

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What are short Term Rentals in the Country?

Diving into the exploration of Short-Term Rentals in Iceland, it's a captivating journey that stimulates both financial and cultural intrigue. At their essence, short-term rentals in Iceland refer to the temporary leasing of accommodations such as fully furnished apartments, cottages, or condominium units, for periods below 30 days. These rentals cater to tourists, business travelers, and adventure seekers who desire a warm and personalized experience, as opposed to traditional hotels. Woven into the fabric of Iceland's blooming tourism sector, these short-term rentals represent authentic Icelandic living, backdropped by breathtaking landscapes and immersed in the vibrant local communities. They embody a perfect blend of a comfortable home stay enriched by the ethereal beauty of Iceland, offering ingredients for a truly transformative travel experience.

What is the maximum length of stay?

In Iceland, the maximum length of stay for a short term rental is generally up to 90 days, which falls into the short-term category as per the Icelandic law. Anything beyond that could be considered as a long-term rental, and may not fall under the same rules and regulations. However, there are some exceptions based upon the rental agreement or if special permissions are obtained. It's always advisable for renters to check with the property owner or read rental agreements carefully.

Is there any National Registration Requirement or Permit?

In Iceland, if you're thinking about renting out your place for short stays, there are some steps you need to follow to make sure everything is legal and safe. Here's what you need to know, made simple:

1. **Tell the District Commissioner:** Before you start renting out your property, you need to let the District Commissioner know. They'll give you a registration number. This step checks that your place meets safety and health rules, like being safe in case of a fire and clean.

2. **No National Permit Needed:** You don't need a special permit just to rent out your place, but there are rules to follow. For example, if you're just renting out your own home (called home hosting) for up to 90 days a year, you still need to register each year.

3. **Beyond Casual Hosting:** If you plan to rent out your place for more than 90 days a year or have more than five rooms available, it's a bit different. You'll need an operating license from the District Commissioner because it's more like running a small hotel or guesthouse.

4. **Check Your Agreements:** Make sure you're allowed to rent out your place. This means checking the rules of your community, your mortgage, or any housing support you receive to ensure renting out your place isn't breaking any rules.

5. **Stay Informed:** For all the details on how to apply for registration or a license and what exactly you need, talk to your local District Commissioner or check their website. They'll have all the current information on what you need to do.

Are there National Rules or Regulations Governing Short-Term Rentals in the Country?

Absolutely, there are national rules and regulations governing short-term rentals in Iceland. According to Icelandic law, if you rent out your property for more than 90 days a year, you need to obtain a license from the Icelandic Tourist Board. In addition, if the total compensation received from the rental exceeds 1,000,000 ISK in a year, you need to register as a fully taxable enterprise and satisfy several requirements such as having a fire safety plan and insurance cover. Tenants must also be made aware of emergency exits.

Complete compliance with income tax regulations is also mandatory. This income needs to be reported in your annual tax return as a rental income and will be taxed accordingly. Value-added tax (VAT) obligations may also arise, although there are some exemptions for smaller operators.

Note that local municipals can have additional rules, such as zoning regulations, that limit the ability to rent out property on a short-term basis.

It's strongly recommended that anyone who's considering offering short-term rentals in Iceland should confirm they are in full compliance with any current regulations, as they often change, and the penalties for non-compliance can be significant. It's advised to get legal assistance in order to understand and fulfill all legal requirements.

Is there any National Tax that affects short-term rental?

Yes, in Iceland, short-term rentals are subject to national taxation. This includes personal income tax and VAT (Value Added Tax). Income generated from the rental property must be declared when homeowners file their annual tax returns. Additionally, homeowners offering short-term rentals may be also liable to pay municipal tax depending upon the local laws.

As for VAT, it is generally charged on any service or goods value and usually, tourists can claim it back when leaving the country. However, if the property rental turns over more than ISK 1 million per year, it's mandatory for the homeowner to register for VAT.

I also recommend checking with an Icelandic tax professional or the Icelandic Revenue and Customs (Ríkisskattstjóri) for more specific regulations as tax laws could vary and change from time to time.

Are there any Permits, Licenses, or Registrations for Short-term Rentals in the Country?

Iceland

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