Iceland Reviews Cruise Industry Taxes Amid Economic Concerns

Since January 2025, Iceland has applied a 2,500 ISK infrastructure fee per passenger for every 24 hours in port. AECO, together with Cruise Iceland and CLIA, have repeatedly highlighted the potential consequences of this fee and the speed that it was implemented, including reduced bookings and economic challenges for rural communities. Several operators have already adjusted their itineraries in response to the added costs and uncertainty.

AECO’s Role

AECO has raised the industry’s concerns through consultation responses and op-eds on the infrastructure fee’s economic impact, and by co-signing letters to government ministers with Cruise Iceland and CLIA.

“We have provided fact-based input to decision-makers, ensuring that the economic realities of expedition cruising are clearly understood,” says Gyda Gudmundsdotter, AECO’s Head of Community Engagement and Icelandic point of contact.

VAT on Cruise Tickets

Additionally, an 11% VAT on cruise tickets will take effect following the removal of the customs exemption for cruises on January 1, 2026. AECO and its partners have sought legal advice and submitted formal letters to Icelandic authorities, emphasizing the risk this poses to Iceland’s competitiveness as an expedition cruise destination and requesting that the measure be reconsidered.

“The most important perspectives on this issue have come from local companies, ports, and municipalities—those likely to be most affected by the decline in cruise calls. Our focus has been on amplifying their voices.”

Gyda Gudmundsdotter, Head of Community Engagement

Parliamentary Actions

After AECO, together with Cruise Iceland, presented data to the Parliamentary Committee on Economic Affairs and Trade, it became clear that some ports had seen a drop in bookings of over 50%. This decline poses a significant threat to the finances of rural communities and local harbor funds, with projected losses potentially amounting to billions of Icelandic krónur.

AECO, Cruise Iceland, and local stakeholders—including ports and municipalities—have called for an extension of the customs exemption for cruises and a reconsideration of VAT on tickets, highlighting the lack of clear guidance and instructions for the industry.

As a result of this industry input, the Committee is now reviewing the impact of these changes.

Next Steps

The Committee has indicated its willingness to review the infrastructure fee and consider alternative models. It is expected to submit recommendations on fee structure and tax policy to Parliament later this month. Additionally, any decisions regarding potential extensions are expected before the end of the year.

“The most important perspectives on this issue have come from local companies, ports, and municipalities—those likely to be most affected by the decline in cruise calls. Our focus has been on amplifying their voices, and the Parliament’s new approach to reviewing these matters is a positive development. We are hopeful that our ongoing dialogue will lead to balanced solutions that support both local communities and sustainable cruise operations,” concluded Gyda Gudmundsdottir.