Icelandic Cruise Ship Arrivals Plummet Following Implementation of New Infrastructure Tax

New Infrastructure Tax Takes Effect

A new infrastructure tax targeting international cruise ship passengers in Iceland came into effect on January 1, 2025. The fee, set at ISK 2,500 (approximately USD 18 or EUR 18) per passenger for each 24-hour period a ship is anchored in Icelandic customs territory, has replaced a previous accommodation tax. This new charge represents a significant increase, reportedly five times higher than the former rate.

The Icelandic government introduced the tax with the stated goals of leveling the playing field between domestic and foreign tourism companies, generating revenue, supporting infrastructure development, and mitigating the environmental impact of growing visitor numbers.

Sharp Decline in Port Calls and Revenue

Since its implementation, the new tax has led to a sharp decline in cruise ship visits and significant revenue losses across several Icelandic ports. According to a statement from Cruise Iceland, an association representing ports and tourism companies, bookings through 2027 have fallen by half or more in some areas.

Reports indicate that over 80 cruise cancellations occurred in January 2025 alone. Specific ports have been particularly affected:

• Akureyri anticipates 44 fewer ship calls.
• The Westman Islands (Vestmannaeyjar) have recorded 10 cancellations.
• Grundarfjörður has seen 7 cancellations, with more expected for the following year.

Cruise Iceland projects a 14% drop in nationwide cruise bookings for 2026 and a steeper 30% decline for 2027. Local municipalities and harbor funds are now bracing for losses amounting to billions of krónur. An analysis by Cruise Iceland suggests that a 20% contraction in cruise traffic could result in an annual net fiscal loss of approximately USD 3.6 million to the national treasury, potentially rising to USD 12.5 million with a 30% contraction.

Industry Reaction and Government Stance

Cruise lines have reacted by re-evaluating their itineraries, with some reportedly reducing their time in Icelandic waters or opting to forgo Icelandic ports entirely. For instance, MSC Cruises indicated that the new fee could impact the viability of including Iceland in future itineraries. The cumulative effect of the per-passenger, per-day, per-port fee is cited as a major concern for operators, significantly increasing operational costs.

Despite the cancellations and projected revenue losses, the Icelandic government has maintained its stance on the new fee. However, Sigurður Jökull Ólafsson, chairman of Cruise Iceland, stated that while the industry does not oppose contributing, the fee's sudden implementation without adequate notice has been problematic. Cruise Iceland advocates for a more structured, tiered fee system based on port calls rather than the duration of stay, to allow cruise lines sufficient time to adjust pricing and scheduling.