Can I cancel a package holiday and get a refund?
Yes — you always have the right to cancel a package holiday before it starts, but as a rule against a reasonable fee stated in the terms of the trip. The rights rest on the Package Travel Act no. 95/2018, which implements EU Directive 2015/2302. The main rule is clear: you may cancel at any time before departure and get a refund of the price of the trip minus a reasonable termination fee. The myth is that package holidays are "non-refundable" because flight seats are — but a package holiday is governed by its own law, which gives stronger rights than a single flight booking. The strongest tool is the exception: if unavoidable and extraordinary circumstances arise at the destination or its immediate vicinity that significantly affect the trip or the transport, you may cancel without paying a fee and are entitled to a full refund. A refund must arrive within 14 days. If the seller goes insolvent, travel insurance protects your payments, and the Consumer Agency oversees the cancellation rules.
📋 The rules
- The Package Travel Act no. 95/2018 (implementing EU Directive 2015/2302) gives a traveller the right to cancel at any time before departure against a reasonable fee stated in the terms.
- If unavoidable and extraordinary circumstances arise at the destination (or its immediate vicinity) that significantly affect the trip, you may cancel with no fee and are entitled to a full refund.
- A refund for cancellation or termination must arrive within 14 days of the contract being ended.
- If the seller cancels the trip you are entitled to a full refund, and to compensation where relevant, unless the cancellation is due to extraordinary circumstances or too few participants with proper notice.
- If a travel company goes insolvent, your payments are protected by travel insurance (the Icelandic Tourist Board oversees the insurance), while the Consumer Agency oversees the cancellation and termination rules.
🔓 Exceptions
- A reasonable fee for ordinary cancellation may reflect how far off departure is and the seller's expected saving; it should be standardised, moderate amounts, not a penalty charge.
- The right to free cancellation for extraordinary circumstances turns on conditions at the destination — the traveller's personal reasons (illness, work) do not fall under it unless travel insurance covers them.
- A single flight booking or accommodation alone is not a package holiday and does not enjoy these rights; the protection applies to package holidays and linked travel arrangements within the meaning of the Act.
⚠️ Penalties & fines
Cancellation is not a criminal matter but about money — how much you get back and how fast. For an ordinary cancellation, expect the seller to keep a reasonable fee; it should be moderate and tied to real cost, but unreasonable or penal cancellation charges do not stand up under the Act. If the trip falls through because of unavoidable circumstances, or the seller cancels it, you are entitled to a full refund within 14 days — and if it drags on you may have a claim to default interest and can complain to the Consumer Agency. The hidden cost and the commonest traps are three. First, people confuse a package holiday with a single flight booking and wrongly think nothing is refundable. Second, a travel company's insolvency can put payments at risk — then the travel insurance comes into play, and it helps to know the Icelandic Tourist Board oversees it. Third, many rely on credit-card or travel insurance to cover cancellation for personal reasons, which Act no. 95/2018 does not — it addresses conditions at the destination, not the traveller's illness or change of mind. So it pays to read the cancellation terms before you pay.
📎 Official sources
- Althingi · Package Travel Act (lög um pakkaferðir) no. 95/2018 →
- Consumer Agency (Neytendastofa) · cancelling and cancellation of a package holiday →
- Icelandic Tourist Board (Ferðamálastofa) · travel companies and guarantees →
❓ Frequently asked
Can I always cancel a package holiday before departure?
Yes, under the Package Travel Act no. 95/2018 you always have the right to cancel a package holiday at any time before it starts. As a rule, though, expect the seller to keep a reasonable fee stated in the terms, so you get the price of the trip refunded minus that fee rather than losing everything or keeping everything.
When do I avoid a cancellation fee?
You may cancel with no fee and are entitled to a full refund if unavoidable and extraordinary circumstances arise at the destination or its immediate vicinity and significantly affect the trip or the transport. This turns on conditions at the destination, so personal reasons such as illness or work do not fall under it unless a separate travel insurance covers them.
How long until I get my refund?
A refund for cancellation or termination must reach you within 14 days of the contract being ended under Act no. 95/2018. If the refund drags on beyond that deadline you may have a claim to default interest and can turn to the Consumer Agency, which oversees the cancellation and termination rules for package holidays.
What happens if the travel company goes bankrupt?
If a travel company goes insolvent, your payments for a package holiday are protected by statutory travel insurance meant to secure a refund and repatriation if needed. The Icelandic Tourist Board oversees this insurance, so you should not lose the money even if the seller fails, unlike what often applies to a single booking made directly with a provider.
Does this apply to a flight I book myself?
No, a single flight booking or accommodation alone is not a package holiday and does not enjoy the rights under Act no. 95/2018, which apply to package holidays and linked travel arrangements. That is why it matters whether you actually bought a package holiday, because the protection against cancellation loss and insolvency is far stronger there than for single bookings you put together yourself.
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