Iceland Lodging Regulations

Overview

Embark on an adventure into the heart of Iceland the short-term rental market is booming. With Airbnb and other platforms, homeowners have the unique opportunity to showcase the raw beauty and cultural richness of Iceland to travelers from around the globe. Despite the allure of the Northern Lights and the mystery of volcanic landscapes, navigating the intricacies of local regulations can be a challenge for new hosts.

Let’s simplify your hosting journey, ensuring you provide unforgettable stays while navigating the legal landscape with ease. Be prepared to transform your property into a gateway for adventurers seeking the magic of Iceland.

Property
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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Short term rentals
What are short Term Rentals in the Country?

Short-term rentals in Iceland, also known as "guest apartments" refer to furnished apartments, houses, or rooms available for rent for periods typically under 30 days. It is known locally as "gestaíbúðir" (guest apartments) or "stuttar leigur" (short rentals), these accommodations offer tourists and visitors a more personal and immersive experience compared to traditional hotel stays.

What is the maximum length of stay?

The duration of short-term rentals in Iceland is typically defined as stays of less than 30 days. These rentals offer a flexible accommodation option for tourists and visitors, providing an alternative to traditional hotel stays. Short-term rentals in Iceland can range from apartments and houses to rooms, catering to a variety of needs and preferences.

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

In Iceland, if you want to rent out your place for short stays, there are rules you need to follow. These rules are part of the Rent Act No. 36/1994. This law covers all types of renting, including short-term rentals. Here's what you need to do if you're a host:

  • Register Your Rental: You have to register with the District Commissioner. When you do this, you'll tell them how often you plan to rent out your place and how much you think you'll earn from it. After you register, they'll give you an identification number.
  • Use Your Identification Number: You need to put this identification number on all your rental ads. This makes your rental official and lets guests know that you're following the rules.
  • Think About Your Neighbors: There was a big court decision that said if you're going to make changes to your place that could bother your neighbors, like making it noisier, you need to get their okay first. This means you should always consider how your rental might affect the people living around you.
Is there any National Tax that affects short-term rental?

In Iceland, income from short-term rentals is taxable, and landlords must navigate various tax obligations:

Income Tax: Rental income exceeding specific exemptions is considered a business activity and taxed accordingly.

VAT: Income over ISK 2,000,000 requires VAT on lodging, at 11% for stays under 30 days. Longer rentals are VAT-exempt.

  1. Lodging Tax: This applies to VAT taxable accommodations, collected per booking.

Consult Icelandic Revenue and Customs for guidance or check the Directorate of Internal Revenue for up-to-date information for detailed insights as compliance with Iceland’s tax laws is essential.

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

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.

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

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.

short term
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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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