Correction of property tax assessment for lodging spaces

Because the property has a valid business license and is used for tourism-related business activities. All such structures are in C tax. From 2017 to 2024, it was possible to apply for a Class II lodging business license in residential properties. Today, registered and approved commercial property is required for this.

A tax is 0.18% of the property's assessed value, while C tax is 1.60%.

No, homestay doesn't require a business license and isn't considered a commercial activity. Homestay conditions are available on the District Commissioner of Greater Reykjavík's website.

Business licenses are revoked by the District Commissioner, and the tax category is corrected afterward.

Yes, homestay is allowed if you meet specific conditions and registration requirements. Guidelines are available on the District Commissioner of Greater Reykjavík's website.

No, this correction isn't retroactive.

Business licenses for Class II lodging establishments are valid year-round and considered full-year operations.

After a legal change on January 1, 2017, the classification of lodging establishments changed. Homestays were defined separately, while Class II lodging establishments were defined as lodging without meal services, according to Article 3 of the Act. The Act did not specifically require Class II lodging establishments to be in designated commercial properties, despite being a business activity subject to both a business license from the licensing authority and an operating permit from a public health committee.

As a result, properties with valid business licenses, whether registered as residential or commercial, were classified under tax category A or C, or a mix of both. This legal development has led to inconsistencies in tax assessment and does not align with the actual use of properties, according to the third paragraph of Article 3 of the Municipal Revenue Act 4/1995 and Regulation on Property Tax No. 1160/2005. This development aligns with neither the purpose nor the goal of Act No. 85/2007, which aims to promote increased stability in operations, as per Article 2 of Act No. 85/2007.

With the amendment to the law effective May 13, 2024, Class II lodging establishments must now be in registered commercial properties. There is now reason to review the classification of tax categories according to Article 3 of Act No. 4/1995, standardize assessments, and make corrections where necessary. This correction promotes equality, transparency, and legitimate expectations for operators, aligning with current laws and good administrative practices.

The correction took effect on January 1, 2025, but will not be retroactive. A fee notice with the corrected assessment will appear on island.is on January 27.