Municipalities Hosting Energy Projects Could Receive Greater Tax Share

2026-02-21 - 18:05

A draft bill proposing changes to the taxation of energy infrastructure has been published for consultation, with plans to redirect property tax revenues to municipalities where energy production takes place. As reported by RÚV, the Government of Iceland has opened the proposal for public comment on its consultation portal. What's the Story? A draft bill proposes sending property tax from energy infrastructure to host municipalities. New energy projects would not pay property tax for their first three years. The plans include revenue-sharing rules, a cap on tax income, and a new category called “spatial property”. A power plant in North Iceland. Photo: Páll Stefánsson. The Minister of Infrastructure, Eyjólfur Ármannsson, wants to remove the current exemption that excludes certain energy infrastructure from property valuation. If approved, local authorities hosting such facilities would receive a greater share of tax income. However, electricity distribution infrastructure would remain exempt. The draft assumes that new energy installations would not pay property tax during their first three years of operation. This, the ministry argues, would help developers finance construction and ensure the charges do not hinder projects in their early stages. Eyjólfur Ármannsson said compensation should flow to communities that carry the impact of power generation. “With this, we are also addressing bottlenecks that have delayed the necessary development of energy infrastructure across the country.” The bill also proposes rules on how revenues would be shared between affected councils, alongside a cap — described as a “whale clause” — on per capita tax income linked to heavy industry and energy facilities. In addition, a new legal category known as “spatial property” would be introduced to allow registration of structures extending across multiple plots or municipal boundaries.