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Iceland

Skammtímaleiga Laws in Iceland

Skammtímaleiga Laws in Iceland

Iceland

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Introduction

Introduction to Skammtímaleiga in Iceland

Iceland, famous for its stunning landscapes and unique culture, has become a top destination, attracting tourists to sites like the Blue Lagoon and Northern Lights. With millions of annual visitors, short-term rentals have surged, offering authentic stays and contributing significantly to the economy—tourism now accounts for around 10% of Iceland's GDP, with STRs providing essential income, especially in rural areas. Platforms like Airbnb and Booking.com host thousands of listings. To balance tourism’s benefits with sustainable housing, Iceland has introduced regulations to manage STR demand, ensuring quality of life for residents while supporting the tourism industry.

Overview

Iceland, famous for its stunning landscapes and unique culture, has become a top destination, attracting tourists to sites like the Blue Lagoon and Northern Lights. With millions of annual visitors, short-term rentals have surged, offering authentic stays and contributing significantly to the economy—tourism now accounts for around 10% of Iceland's GDP, with STRs providing essential income, especially in rural areas. Platforms like Airbnb and Booking.com host thousands of listings. To balance tourism’s benefits with sustainable housing, Iceland has introduced regulations to manage STR demand, ensuring quality of life for residents while supporting the tourism industry.

Property

Overview

In Iceland, short-term rental operators can find support through industry associations and tourism organizations that provide resources and advocacy for the STR community. Although there isn’t a dedicated national association specifically for short-term rental owners, the Icelandic Tourist Board and Icelandic Travel Industry Association (SAF) serve as key resources.

These organizations offer support in areas such as best practices for sustainable tourism, compliance updates, and marketing strategies. They also provide a network for property owners to connect with industry professionals. Non-resident owners interested in joining these associations may have membership requirements, including fees, and access to Icelandic regulatory guidance for skammtímaleiga operations.

Property

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short term rentals

What is Skammtímaleiga in Iceland?

What are short Term Rentals in the Country?

In Iceland, short-term rentals are commonly known as "skammtímaleiga" in Icelandic, translating directly to "short-term rental" in English. On popular booking platforms like Airbnb, Booking.com, and Vrbo, these rentals are often labeled as "vacation rentals," "holiday rentals," or "tourist accommodations." In Icelandic law, short-term rentals refer to the rental of furnished accommodations for less than 90 days, often in private residences or secondary properties, allowing tourists to experience local hospitality. These rentals vary in form, from a single room in a Reykjavik apartment to an entire cabin in the Icelandic countryside.

Is Subletting Legal?

Is Subletting Legal in Iceland?

Yes

National Association for STR Owners

What is the maximum length of stay in Iceland?

What is the maximum length of stay?

Currently, there are no nationwide restrictions in Iceland on the maximum length of stay that a guest can have in a short-term rental, provided the rental complies with the licensing limits on total rental days per year. However, local authorities in cities like Reykjavík and Akureyri may impose their own duration limits to regulate the impact on the housing market and ensure availability for long-term residents.

For example, Reykjavík restricts non-licensed properties to a maximum of 90 rental days annually. Akureyri also has similar policies but may vary the rental day cap depending on the type of property (e.g., private home rentals versus dedicated rental units). These local caps aim to prioritize housing availability for local residents, especially in densely populated or tourism-heavy areas.

Is there any National Registration Requirement or Permit?

In Iceland, property owners must register their short-term rental properties with a central government database and, in many cases, obtain a permit to operate legally. The Icelandic Housing Agency manages the national registry for short-term rentals, ensuring each property meets regulatory standards for safety, tax compliance, and community impact.

The Permit is to be renewed annually.

Process for Obtaining a Permit

To obtain a permit, property owners must submit an application through the Icelandic Housing Agency’s portal. The application typically includes proof of ownership, a zoning compliance certificate, and, if applicable, a local municipal permit. Fees for permits vary by municipality and property type but generally range from 20,000 to 60,000 ISK.

Additionally, owners must provide documentation of safety compliance (e.g., smoke detectors, fire extinguishers) and property insurance. The Icelandic Housing Agency inspects the property to ensure it meets national safety and zoning standards before issuing the permit.

Is there a need for Permission from Landlord/Local Council/Neighbors?

Is Short-term rental Income taxable?

Is there any National Tourism Fund or Tourist Tax?

Is there any Guest Registration and Reporting Requirement?

Is there any National Health and Safety Requirements?

Is there any Platform Accountability Requirement?

Is there any Anti-Discrimination Law?

Is there any Data Sharing Requirements?

Is there any National Insurance Requirement?

Is there any National Zoning law/Cultural Heritage law?

Is there any Environmental Regulations that affects STR?

Is there any National Tenant Protection Law?

Is there any Reporting Requirements for Foreigners?

Is there any Digital Platform Regulation Compliance?

Is there any Consumer Protection Law that affect STR?

Is there any Law that applies to Non-resident Owners?

Is there any classification of STR in the country?

Are there Special National Event Regulations?

Is there any Penalty for Violating National Rules?

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

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

Iceland mandates strict health and safety standards for short-term rentals to ensure guest safety and well-being. Hosts are required to comply with national fire safety regulations, which include the installation of smoke detectors, fire extinguishers, and clearly marked escape routes in all rental properties. Additionally, hygiene and sanitation standards, such as clean bedding, waste disposal, and basic cleaning protocols, are enforced by the Icelandic Directorate of Health.

Iceland may impose additional regulations on short-term rentals to manage increased visitor inflow. For instance, during the Reykjavík Culture Night or major national holidays, local authorities may implement restrictions such as:

Temporary Limits on Rental Days: Hosts may be limited in the number of nights they can rent their property to prioritize housing for residents.
Stricter ID Verification: Enhanced ID checks may be required to prevent overcrowding and maintain security.
Noise and Curfew Rules: To minimize disturbance, stricter noise ordinances and curfews are often enforced in popular areas.

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

Income generated from short-term rentals (skammtímaleiga) in Iceland is subject to various taxes. The main taxes applicable to rental income include:

Income Tax: All income from short-term rentals is subject to income tax. The amount is calculated progressively based on earnings, ensuring that higher-income hosts pay proportionally more.
Value-Added Tax (VAT): Short-term rental hosts may be required to register for VAT if their annual income exceeds a certain threshold, generally around ISK 2 million. Once registered, hosts must remit VAT on all rental income at the prevailing rate.
Local Lodging Taxes: Certain municipalities, particularly high-tourism areas like Reykjavík, may impose additional lodging taxes on short-term rentals. These taxes contribute to local infrastructure maintenance and tourism management.
Real Estate Tax: Property owners may be subject to municipal real estate tax

permits, license

Are there any Permits, Licenses, or Registrations for Skammtímaleiga in Iceland?

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

In Iceland, property owners must register their short-term rental properties with a central government database and, in many cases, obtain a permit to operate legally. The Icelandic Housing Agency manages the national registry for short-term rentals, ensuring each property meets regulatory standards for safety, tax compliance, and community impact.

The Permit is to be renewed annually.

Process for Obtaining a Permit

To obtain a permit, property owners must submit an application through the Icelandic Housing Agency’s portal. The application typically includes proof of ownership, a zoning compliance certificate, and, if applicable, a local municipal permit. Fees for permits vary by municipality and property type but generally range from 20,000 to 60,000 ISK.

Additionally, owners must provide documentation of safety compliance (e.g., smoke detectors, fire extinguishers) and property insurance. The Icelandic Housing Agency inspects the property to ensure it meets national safety and zoning standards before issuing the permit.

Is there any National Association for Skammtímaleiga owners in Iceland?

Is there any National Association for STR owners in the Country?

In Iceland, short-term rental operators can find support through industry associations and tourism organizations that provide resources and advocacy for the STR community. Although there isn’t a dedicated national association specifically for short-term rental owners, the Icelandic Tourist Board and Icelandic Travel Industry Association (SAF) serve as key resources.

These organizations offer support in areas such as best practices for sustainable tourism, compliance updates, and marketing strategies. They also provide a network for property owners to connect with industry professionals. Non-resident owners interested in joining these associations may have membership requirements, including fees, and access to Icelandic regulatory guidance for skammtímaleiga operations.

National Association for STR Owners

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Southern Peninsula

Disclaimer

Lodge compliance is not a licensed tax or financial advisor. Therefore nothing in the above article should be construed as tax, legal, or financial advice. Contact your local tax office for information regarding your personal circumstance.

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