Annual reassesment of package travel security for travel agencies - annual reporting

Membership of the Travel Insurance Fund is mandatory.

The sale of package travel and linked travel arrangements is subject to licence according to Act no. 96/2018 on the Icelandic Tourist Board.  

Any entity or person who organizes and sells package travel or facilitates linked travel arrangements must hold a travel agency licence and be a member of the Travel Insurance Fund.

Members of the Travel Insurance Fund must pay a base charge (first five years of operation) and an annual premium to the Fund and provide a security according to the decision of the Icelandic Tourist Board.

The amount of the security and the annual premium are based on the turnover of the travel agency, that is subject to insolvency protection, according to the documents submitted.

Base Charge  

Travel Agencies must pay a base charge to become members of the Travel Insurance Fund.

The base charge is 1,5% of the calculated base security amount (GT) for the first year of operation. The following four years of operations the base charge is 1,5% of the difference between the base security amount (GT) of each year and the highest base security amount GT) of previous years of operations. Please refer to "Calculation of security and annual premium" for further information on calculatin the base charge.

• Base charge year one (1): 1,5% of GT for the year
• Base charge year two (2): 1,5% of the difference between GT year one and GT year two
• Base charge year three (3): 1,5% of the difference between GT year three (3) and the higher of the two GT year one (1) or GT year two (1)
• Base charge year four (4): 1,5% of the difference between GT year four and the highest of GT year three, year two, and year one
• Base charge year five (5): 1,5% of the difference between GT year five and the highest of GT year four, year three, year two, and year one

Please note that no receipts are issued for the payment of the base charge to the Travel Insurance Fund. Instead, a printout of the decision letter announcing the amount and/or a payment receipt from an online bank can be used as supporting documents in bookkeeping.

Administrative fees

The Icelandic Tourist Board is authorized to charge fees from travel agencies to cover the cost of processing applications for membership of the fund, of assessing the amount of premiums and security and administrative costs of the Travel Insurance Fund.

The administrative fees are as follows:

• ISK 35.000 if the total turnover from the previous year, subject to insolvency protection is up to ISK 300 million.
• ISK 75.000 if the total turnover from the previous year, subject to insolvency protection is above ISK 300 million.

Which turnover is subject to insolvency protection

Turnover from package travel and linked travel arrangements is subject to insolvency protection.

Package travel

All payments received by trader for the sales of package travel are subject to insolvency protection. Traders of package travel can be organizers or retailers.

For definition of package travel see here

Linked travel arrangements

The payments received by the travel agency, that facilitates linked travel arrangements, are subject to insolvency protection.

If the travel agency facilitating linked travel arrangement does not collect any payments the tour is not subject to insolvency protection.  

For definition of linked travel arrangement see here

Exempt from insolvency protection

The following are exempt from insolvency protection:

• Tours of duration less than 24 hours, unless overnight accommodation is included,
• Tours that are offered occasionally (non-regular tours) and on a not-for-profit basis and only to a limited group of travellers,
• Tours purchased in relation to the purchaser’s trade or business on the basis of a general contract.

Which party should provide the protection?

Organizer

The organizer is responsible for the insolvency protection for all package-travel the organizer compiles, offers for sale or sells.

The organizer is responsible for the insolvency protection for all package travel that the organizer sells directly to customers.

The organizer is also responsible for the insolvency protection for package travel organised by him/her and sold by others.

• In this instance, the travel agency selling the package travel is considered a retailer.
• The same travel agency can be an organizer of its own tours and at the same time be a retailer selling package travel for other travel agencies. 

The organizer of package travel can enter into a contract with a retailer stating that the retailer is responsible for insolvency protection of package travel compiled by the organizer but sold by the retailer.

• Such contracts can only be made with retailers within the EEA.
• If a contract is made with a retailer outside the EEA, the organizer is still responsible for providing insolvency protection.
• The organizer must be able to present a contract, if requested. Otherwise, the total turnover falls under the insolvency protection of the organizer.

For definition of organizer, see here.

Retailer

A retailer must hold a travel agency licence, be a member of the Travel Insurance Fund, provide security, and pay annual premium.

• A retailer selling package travel on behalf of an organizer is not responsible for insolvency protection for the tours he sells.
• The insolvency protection lies with the organizer unless the retailer takes on the insolvency protection by contract.
• A retailer who acts as an agent, solely selling package travel organised by a third party, and therefore not responsible for the insolvency protection, must hold a travel agency licence since the sale of package travel is subject to licence.

For definition of retailer, see here.

Accounting and bookkeeping

Bookkeeping must be in accordance with the Regulation on the Travel Insurance Fund.

Special care must be taken to register monthly income (and expenditures) correctly throughout the fiscal year.

• All payments received either for the sale of package travels or for the facilitation of linked travel arrangements, must be recorded the month the tour is executed irrespective of when the payments are received.
• It is illegal to distribute (equalize) income from package travel and linked travel arrangements over the fiscal year.
• The income from package travel and linked travel arrangements shall be easily distinguishable from other operations in the accounts of travel agencies.
• The accounting system of travel agencies must show, in a distinguishable way, the distribution of monthly income and expenses.

Annual accounts 

• Please note that the deadline for submitting annual accounts to the Icelandic Tourist Board is different from that for submitting to the Iceland Revenue and Customs.
• Special regulations apply to the submission of annual accounts of travel agencies to the Icelandic Tourist Board, those regulations precede the general Act on annual accounts.

Calculation of security and annual premium

The Icelandic Tourist Board determines the amount of security and annual premium on the basis of the documents provided.

Amount of security:

The amount of the security is based on income subject to insolvency protection.

When assessing the security amount, the following values are determined:

• G: a base figure which is the average of turnover, subject to insolvency protection, of the two highest-income months of the preceding and current fiscal years.
• N: Average number of days from full payment until the start of a tour,
• h: Average proportion of confirmation payments of total payments,
• d: Average duration of tours in days.

The values are determined for the preceding and current fiscal years. 

A base security amount GT is calculated using the following formula: GT = G*(N/30)+G*h+G*d/30.

Also, to be determined is the previous year’s turnover subject to insolvency protection (V), and the ratio a(V). 

The ratio a(V) shall be:

12% if the annual turnover is less than 300 million ISK, 
12% - 6%*(V-300 million ISK)/700 million ISK if V is between 300 million ISK and 1 billion ISK,
6% - 2%*(V-1 billion ISK)/1 Billion ISK if V is between 1 and 2 billion ISK 
4% - 2%*(V-2 billion ISK)/3 billion ISK if V is above 2 billion ISK

The security amount T is calculated T = a(V)*GT.

The results from the preceding year and the current year shall be compared and the higher figure shall be the amount of the security.

The minimum security amount is ISK 500.000.  

Annual premiums:

Members of the Travel Insurance Fund pay an annual premium. The proportion of the premium is determined by the board of directors and can be between 2,5% and 10% of the security amount.

The Travel Insurance Fund´s board of directors has determined the annual premium for the year 2024 at 2,5%. 

For examples of how the calculation of the base security, security and premium see here.

Due date of the premium and the deadline to submit new security is September 1^st annually.

Decisions on securities and premiums are presented to travel agencies no later than four weeks prior to the due date.

Paid premiums are non-refundable and are not repaid should a travel agency cease operations within the year that premium has been paid for.

If a trader neglects to pay premium on the due date or fails to provide security, the Icelandic Tourist Board is authorized to cancel the trader´s travel agency licence along with membership of the Travel Insurance Fund.

Please note that no receipts are issued for the payment of the premium. Instead, a printout of the decision letter announcing the amount of security and annual premium and/or payment receipt from an online bank can be used as supporting documents in bookkeeping.

Authority to raise the amount of security

Travel agencies are under the obligation to report to the Icelandic Tourist Board if it is foreseeable that turnover subject to insolvency protection will be significantly higher than specified in the documents that were submitted and used to determine the amount of security.

The Icelandic Tourist Board is authorized to require a higher security from travel agencies if a trader´s operations are considered to entail special risk e.g., if there is significant increase in the sale of package travel that is not reflected in the amount of the security provided by the trader or, if for other reasons, it is likely that the Travel Insurance Fund may suffer a loss. When assessing the risk, the interest of the Fund must be protected at the same time as proportionality is to be observed. The premium is raised proportionally to the increase of the security amount.  

Travel agencies must submit to the Icelandic Tourist Board all documents and information necessary for the assessment of the increase of the security amount.

For further information on the raising of securities, see here.

Documents and information to be submitted for the annual reassessment of the security amount

In accordance with Regulation No. 812/2021, members of the Travel Insurance Fund shall submit the following documents and information no later than April 1st each year:

1. An annual financial report that complies with the Annual Accounts Act, which shall, as appropriate, be signed by an auditor or examiner. Microcompanies are permitted to submit an operating statement and statement of financial position based on the company’s tax return;
2. A statement of the monthly turnover of the preceding year of operation, where the turnover from sales of packages, on the one hand, and from sales of linked travel arrangements, on the other hand, are segregated from other turnover. The statement shall be confirmed by a certified public accountant or examiner. In the case of microcompanies, the managing director is permitted to confirm the statement;
3. A statement of the estimated monthly turnover of the preceding year of operation, where the estimated turnover from sales of packages, on the one hand, and sales of linked travel arrangements, on the other hand, are segregated;*
4. Confirmation by a certified public accountant, examiner or, as appropriate, managing director, that the accounts of the entity required to provide insolvency protection are kept in accordance with the provisions of this Regulation;
5. A statement for the preceding and current year of operation of the proportion of confirmation payments of the total price of packages and the number of days prior to the start of packages that they are fully paid;
6. A statement for the preceding and current year of the number of packages, listed by month, disclosing their duration, number of travellers, and whether packages are being sold by a retailer on behalf of the organiser and, if so, information on the retailer, a statement of the packages sold by the retailer, and which of the two parties fulfils the obligation to provide insolvency protection with respect to the packages sold by the retailer;
7. Information on whether a party that is required to provide insolvency protection executes any of the travel-related service forming a part of a package or linked travel arrangement that the member sells.

*_{Forecast of turnover for the current year should be as accurate as possible. Turnover for the first months of the year should be close to real numbers since the filing for annual reassessment is normally done at the end of March and at that time numbers for the first months should be available.} 

The documents and information must be submitted through the Icelandic Tourist Board web portal https://vefgatt.ferdamalastofa.is.

Please note that if the person doing the filing is not an authorised signatory, that person must be granted a mandate to do so. 

Instructions (in Icelandic) on the filing can be found here.

Information og the breakdown of turnover subject to package travel security and turnover exempt from security and information on sellers responsible for package travel security for tours sold by the travel agency, is registered directly into online forms

The following documents must be uploaded to the web portal:

• Annual financial statement for the previous year
• Confirmation, that the bookkeeping and accounts are kept in accordance with the provisions of the Regulation on the Travel Insurance Fund and that the breakdown of last year’s turnover is correct. (The statement can be downloaded from the web portal after the breakdown of turnover for the previous year has been completed, the signed statement must then be uploaded)

In addition to documents stipulated in the Regulation the following must be uploaded:

• Debt – certificate for public charges see: https://island.is/skuldleysisvottord-fyrirtaekja (legal persons/companies) / https://island.is/skuldleysisvottord-einstaklinga (real persons)
• Debt - certificate(s) from pension fund(s)

A key role of the board of directors of the Travel Insurance Fund is to protect the interest of the Fund and its members, decide on the percentage of premium each year, and assess the potential risk of outflows from the fund, taking into consideration the risks associated with the operations of travel agencies. In order for the board of directors to fulfill their duties they request that travel agencies submit debt certificates for public charges and pension fund charges.

The Icelandic Tourist Board will call for additional documents and information if necessary.

Special attention is drawn to the fact that the Icelandic Tourist Board can impose administrative fines or cancel the licence of a travel agency that provides wrong or incomplete information for the assessment of the amounts of the annual premium and security, regardless of whether violations are committed wilfully or negligently. A legal person may be subjected to fines pursuant to the provisions of the Penal Code No. 19/1940.

Violations that are committed wilfully or as the result of gross negligence can result in fines or up two years of imprisonment in the case of serious offenses.

Deadline for submitting documents

• All travel agencies must submit documents and information for the annual reassessment of package travel security no later than April 1^st each year.
• Please note that the deadline is mandatory according to law, thus travel agencies must make sure that their annual financial report is completed and signed no later than April 1^st each year. In the case of micro-companies an operating statement and a statement of financial position based on the company’s tax return must be completed no later than April 1^st.
• It is not possible to grant any exceptions from the deadline since it is mandatory by law. The Travel Insurance Fund is a mutual insolvency protection for Travel Agencies. Proportionality must be observed, and all members must be subject to the same rules.

Travel agencies that have not filed for annual reassessment on April 1^st, and submitted all required documents, will be referred for the decision on penalties and possible cancellation of their licence.

Power of attorney

Please note that if the person submitting the documents for annual reassessment is other than the legal representative of the company, that individual must have power of attorney and electronic mandate.

The online filing is accessed using electronic ID. When filing for a company (legal person) a representative of the company who is registered as authorised signatory, logs into island.is and selects the respective company. If the representative doing the filing does not already have a mandate an authorised signatory can grant that person a mandate electronically. Mandates are granted through island.is. Directions on how to grant a mandate can be found here.

When the mandate has been granted the person filing for the annual reassessment logs in using his/her electronic ID and chooses the appropriate company.

Sanctions

Periodic Penalties

The Icelandic Tourist Board may impose periodic penalties on those who do not comply with the decisions of The Icelandic Tourist Board, until they do so. Periodic penalties can range from ISK 50 thousand to ISK 500 thousand per day. 

Administrative fines

The Icelandic Tourist Board is authorized to impose administrative fines on a travel agency that has provided wrong or insufficient information for the reassessment of the annual premium and security, regardless of whether the violation is committed wilfully or as the result of negligence.

Administrative fines may amount up to 5% of the total turnover of the previous year of operations for any trader taking part in a violation. In deciding on the amount of a fine, account shall be taken of the nature and extent of the violation or violations, duration of the violation and whether a violation are repeated.  

If an administrative fine is not paid within a month from the decision of the Icelandic Tourist Board, default interest shall be paid on the amount of the fine.

Violations that are committed wilfully or through gross negligence can lead to fines, or up to two years of imprisonment in case of serious offences.

If a natural person is found guilty according to the aforementioned, a judgement in a criminal case against such person may include a ban on his/her being issued a licence under the Act on the Icelandic Tourist Board, a ban on his/her serving on the board of directors of a company possessing such a license, serving as its managing director or participating in any other manner in the management of an entity that is subject to licence for up to three years.  

If an alleged violation is subject both to administrative fines and penal sanctions, the Icelandic Tourist Board shall assess whether the case should be reported to the police or concluded with an administrative decision. In case of major violations, the Icelandic Tourist Board shall report them to the police. A violation is considered major if it involves significant amounts, if the violation is of a particularly reprehensible nature or committed under any conditions that significantly aggravate the criminality of the violation. Furthermore, the Icelandic Tourist Board may, at any stage of an investigation, refer a case involving violation of law for police investigation.

Cancellation of licence

The Icelandic Tourist Board is authorised and, in some instances, obliged to cancel a licence given certain conditions. For further information, refer to a separate coverage on the cancellation of licence.

Cancellation of licence

The Icelandic Tourist Board is authorized to cancel the licence of a travel agency that fails to provide security, according to the decision of the Icelandic Tourist Board, or pay annual premium on the due date. The Icelandic Tourist Board may also cancel the licence of a travel agency that fails to provide the information necessary to assess the amount of the premium or security.  

If a licence is cancelled as the result of the aforementioned, the travel agency cannot become a member of the Travel Insurance Fund, and hence not obtain a travel agency licence, until the premiums in default have been paid, and if applicable, the Fund has been reimbursed for any amount paid out of the fund to travellers.

The Icelandic Tourist Board cancels the licence of a travel agency in the event of insolvency or bankruptcy of a licensed trader.

If a licence is cancelled due to the aforementioned reasons the cancellation of the licence, along with a call for claims, is published in the Official Gazette and in other prominent manner, as may be considered appropriate at any time. Travelers shall file their claims in writing and the claims shall be submitted within two months from the publication of the call for claims. The board of directors of the Travel Insurance Fund may extend the deadline for filing the claims by three months when special circumstances warrant. Claims shall be supported by sufficient documentation showing proof of claim. Any expenses incurred following the insolvency or bankruptcy of a trader shall be covered by the trader’s security.  

The only claims covered by the Travel Insurance Fund are those arising from the aforementioned reasons. The Travel Insurance Fund pays all legitimate claims that are submitted and enforces the trader’s security. In the event that the trader’s security does not fully cover the claims of travellers, the Travel Insurance Fund has a claim against the travel agency in question or its bankruptcy estate. A claim held by the Fund will rank in accordance with paragraph 1 of Article 112 of the Act on bankruptcy etc. No. 21/1995 in the course of the bankruptcy proceedings.

The cancellation of a licence due to any other reason than the aforementioned shall be published in the Official Gazette, on the website of the Icelandic Tourist Board and in any other prominent manner, considered appropriate at any given time. Any clams that may arise are not covered by the Travel Insurance Fund and those who consider themselves to hold clams towards the travel agency must direct those to the agency.

Right of recourse

Upon the payment to travellers from the Travel Insurance Fund, the fund acquires a claim towards the trader in question or the bankruptcy estate. The Travel Insurance fund can enforce the trader’s security to settle the claim. In the event of the bankruptcy of a trader, a claim held by the Fund, that has not been paid in full out of the security provided by the trader, will rank in accordance with paragraph 1 of Article 112 of the Act on bankruptcy etc. No. 21/1995 in the course of the bankruptcy proceedings.

Request for revision

According to article no. 24 of the Administrative procedures act no. 37/1993, legal representatives of travel agencies can apply for revision of the amount of package travel security. A party has the right to have a case reviewed if:

1. The decision was based on insufficient or wrong information as to the facts.
2. Circumstances that affected the decision have changed in a material way.

Revision must be requested within three months from the date of the decision.

The legal timeframe for requesting revision is three months form notification of the decision. Decisions on package travel security are sent to travel agencies at the end of July and hence request for revision must be filed before the end of October. The time is counted from the date of the last decision. If a case has been appealed to the minister when a request for revision is received the request will be dismissed.

A prerequisite for a case to be reviewed is that there has been considerable change of facts or circumstances affecting the decision.

Please note that a request for revision does not postpone the legal effects of the decision. Travel agencies must therefore provide security and pay the annual fee and base charge, if applicable, no later than September 1st each year, before a request for appeal will be processed.

Appealing to the Minister

The administrative decisions of the Icelandic Tourist Board can be appealed to the Minister.

A decision taken by the Icelandic Tourist Board regarding securities can be appealed to the Minister within four weeks from the date of notification to the person subject to the decision. Appealing to the minister does not delay the entry into force of the decision.

The decision to cancel a licence, issued according to the Act on the Icelandic Tourist Board No. 96/2018, can be appealed to the Minister within four weeks from date of notification. Appealing to the Minister does not delay the entry into force of the decision.

A decision to impose periodic penalties may be appealed to the Minister within fourteen days of notification to the person subject to the decision.  Periodic penalties shall not begin to accrue until this period has passed. Periodic penalties are legally enforceable after expiry of the time limit for appeals, but an appeal to the Minister will delay enforcement until a final decision has been rendered. Action brought before the courts will not delay enforcement.

Administrative complaints regarding other decisions than those on periodic penalties or securities follow the Administrative Procedures Act - No. 37/1993. The main rule is that a party to a case shall have the right to complain to a higher authority within three months of the notification to a party of an administrative decision.

Publishing and handing over of information

The Icelandic Tourist Board may publish on its website a list of licensed travel agencies holding sufficient insolvency protection.

The Icelandic Tourist Board may also hand over information and documentation necessary in the enforcement of insolvency protection to administrative agencies of other countries.