
Ministry of Industries Establishing a business in Iceland Business operations may be conducted in a variety of forms. Foreigners have customarily established a branch of a limited company in Iceland. It is also possible to establish an independent company (subsidiary) in Iceland or buy shares in Icelandic companies, though not in certain types, such as those engaged in fisheries and primary fish processing. Icelandic company law is in line with the requirements of the company law provisions of the Agreement on the European Economic Area and, consequently, with EU company law. Public limited companies Public limited companies are primarily for many shareholders, seeking capital from the public, for instance, through the stock market. In public limited companies, the minimum is two founders, two shareholders, three directors on the board of directors, and a manager is obligatory. Stricter requirements are laid down in various ways for public limited companies than for private limited companies. Still, the public limited companies are principally intended for business operations of many parties who even intend to have their shares admitted to trading on a regulated market. In case the stock exchange trade is not aimed at, there is no obstruction to prevent private limited companies from having numerous shareholders and a high share capital. The minimum share capital in public limited companies is ISK 4 million, and share certificates shall be issued by the companies (electronic registration of shares is possible under certain conditions). There shall be at least two founders, a minimum of two shareholders, at least one manager and no fewer than three persons on the board of directors. The registration of a public limited company with the Register of Limited Companies at Laugavegi 166, 150 Reykjavik costs ISK 256,000, including the costs of obtaining an identity number and registering in the "Legal Gazette". Income tax is 20%. The liability of individual shareholders is limited to their share capital. Various other rules are similar to those of private limited companies. Private limited companies In private limited companies, on the other hand, the minimum is one founder, one shareholder, and one director; if there are four or fewer shareholders, there is no obligation to have a manager. In one-party private limited companies, meetings of the board of directors and shareholders are not held. The provisions on branches are similar for both types of companies, except that disclosure requirements are somewhat stricter for public limited companies, and private limited companies must, upon establishment, disclose whether there is one or more shareholders. Private limited companies are registered with the Register of Limited Companies operated by the Director of Internal Revenue, Laugavegi 166, 150 Reykjavik (office hours 9.30 a.m. – 3.30 p.m. on weekdays, tel.:- (354) 442 1250, fax:- (354) 442 1279, e-mail: fyrirtaekjaskra@rsk.is). The registration fee amounts to ISK 130,500, including costs for an identity number and the publication of notification in the "Legal Gazette". A single party may establish a private limited company and be a shareholder. In such instances, a single principal may constitute the board of directors, and there is no need to hold board or shareholder meetings, as is the case elsewhere. It is not obligatory to appoint a manager in private limited companies. The minimum share capital, ISK 500,000, must be paid into the company before its recording in the Register of Limited Companies. Liability is limited and confined to the share capital. The income tax is 20%. Special limiting rules apply to the payment of dividends out of private limited companies, and, in addition thereto, there is a general prohibition against granting loans and the like to shareholders of private limited companies. Share certificates are not issued in private limited companies. Still, certificates from the company's share register concerning ownership, and even certificates of shareholdings, are not negotiable instruments, unlike share certificates in public limited companies in general. Special limiting rules apply to the payment of dividends out of private limited companies, and, in addition thereto, there is a general prohibition against granting loans and the like to shareholders of private limited companies. Share certificates are not issued in private limited companies. Still, certificates from the company's share register concerning ownership, and even certificates of shareholdings, are not negotiable instruments, unlike share certificates in public limited companies in general. Residence Requirements Residence Requirements for Board of Directors and Management. As for citizens of OECD countries not residing in Iceland but residing in one of those countries, they can, under a general exemption from the Minister of Industry and Commerce, freely form limited companies in Iceland and serve as board members and managers. It is also conceivable to register an individual's firm with District Commissioners (on an individual´s identification number) and obtain a special name. The individual's liability is unlimited. Registration of an individual's firm with a District Commissioner costs ISK 66,500 (Icelandic krona). In addition thereto, there is a fee for the notification of the registration of the individual's firm, which shall be published in the "Legal Gazette", ISK 1,000. The individual's liability is unlimited. General income tax levied on individuals (including individual firms) amounts to 22.9% for monthly income up to ISK 230,000 in 2012, 25.80% for the next monthly income of 474,367, and 31.80% for monthly income above 704,367. Thereto will be added the municipal tax of 14.44% (prepayment rate). Accordingly, the tax percentage for individuals in prepayment, on the basis of monthly payments, is 37.34 % in the year 2012 for the first 230,000 kr., 40.21% of the next 474,367 kr. and 46.24 % above 704,367 kr. For further information, see announcement. Partnerships Partnerships of two or more parties may be established with District Commissioners. The registration costs ISK 83,000 minimum but the fee on account of the publication of notification in the "Legal Gazette" costs to ISK 1,000. The identity number at the Director of Internal Revenue, Laugavegi 166, 150 Reykjavik, costs ISK 5,000. The liability of members of partnerships is in general unlimited, i.e. they guarantee the company's liabilities by means of their entire assets. The income tax levied on partnerships amounts to ISK 36% if it has upon request been registered as an independent taxpayer, but alternatively individual members are taxed according to shares owned in the partnership. Liability in private limited companies, on the other hand, is limited to the share capital, as will subsequently be discussed, and the income tax is 20%. Co-operative Societies Co-operative Societies are recorded with the Register of Co-operative Societies operated by the Director of Internal Revenue (at the same place as the Business Register and the Register of Limited Companies). There shall be a minimum of fifteen founders. The liability of members will be limited to the payment of a membership fee and the share of ownership of the society's funds. The registration of a co-operative society at the Register of Co-operative Societies costs ISK 256,000 including the costs for an identity number and registration in the "Legal Gazette". Income tax is 20%. Register of Firms In order to establish companies for business operations it is necessary, according to the foregoing, to apply to the Register of Firms with the District Commissioner concerning the establishment of individual's firms, partnerships, limited partnerships and European Economic Interest Groupings, the Register of Limited Companies at the Director of Internal Revenue at Laugavegi 166, 150 Reykjavik, on account of the establishment of public or private limited companies and European Companies, and the Co-operative Societies' Register, at the selfsame place, on account of the establishment of co-operative societies and European Co-operative Societies. In addition to going thus to the company registers concerned an identity number needs to be obtained from the Business Register at the Director of Internal Revenue and thereupon a value-added-tax number from the Director of Internal Revenue, Laugavegi 166, 150 Reykjavik. Special licences may be necessary for the business operations, yet no longer a trading permit, but trade is now connected with registered firms and shall be registered e.g. in the Register of Firms or the Register of Limited Companies. Table of Contents Overview Business and industry Responsible business conduct Competition The EEA Agreement Energy Establishing a business in Iceland Establishment of Company Fisheries in Iceland Industrial Property Rights Industry Innovation Restrictions on investments Tourism in Iceland

Establishing a business in Iceland

Business operations may be conducted in a variety of forms. Foreigners have customarily established a branch of a limited company in Iceland. It is also possible to establish an independent company (subsidiary) in Iceland or buy shares in Icelandic companies, though not in certain types, such as those engaged in fisheries and primary fish processing.
Icelandic company law is in line with the requirements of the company law provisions of the Agreement on the European Economic Area and, consequently, with EU company law.

Public limited companies

Public limited companies are primarily for many shareholders, seeking capital from the public, for instance, through the stock market. In public limited companies, the minimum is two founders, two shareholders, three directors on the board of directors, and a manager is obligatory. Stricter requirements are laid down in various ways for public limited companies than for private limited companies. Still, the public limited companies are principally intended for business operations of many parties who even intend to have their shares admitted to trading on a regulated market. In case the stock exchange trade is not aimed at, there is no obstruction to prevent private limited companies from having numerous shareholders and a high share capital.

The minimum share capital in public limited companies is ISK 4 million, and share certificates shall be issued by the companies (electronic registration of shares is possible under certain conditions). There shall be at least two founders, a minimum of two shareholders, at least one manager and no fewer than three persons on the board of directors. The registration of a public limited company with the Register of Limited Companies at Laugavegi 166, 150 Reykjavik costs ISK 256,000, including the costs of obtaining an identity number and registering in the "Legal Gazette". Income tax is 20%. The liability of individual shareholders is limited to their share capital. Various other rules are similar to those of private limited companies.

Private limited companies

In private limited companies, on the other hand, the minimum is one founder, one shareholder, and one director; if there are four or fewer shareholders, there is no obligation to have a manager. In one-party private limited companies, meetings of the board of directors and shareholders are not held. The provisions on branches are similar for both types of companies, except that disclosure requirements are somewhat stricter for public limited companies, and private limited companies must, upon establishment, disclose whether there is one or more shareholders.

Private limited companies are registered with the Register of Limited Companies operated by the Director of Internal Revenue, Laugavegi 166, 150 Reykjavik (office hours 9.30 a.m. – 3.30 p.m. on weekdays, tel.:- (354) 442 1250, fax:- (354) 442 1279, e-mail: fyrirtaekjaskra@rsk.is). The registration fee amounts to ISK 130,500, including costs for an identity number and the publication of notification in the "Legal Gazette". A single party may establish a private limited company and be a shareholder. In such instances, a single principal may constitute the board of directors, and there is no need to hold board or shareholder meetings, as is the case elsewhere. It is not obligatory to appoint a manager in private limited companies.

The minimum share capital, ISK 500,000, must be paid into the company before its recording in the Register of Limited Companies. Liability is limited and confined to the share capital. The income tax is 20%. Special limiting rules apply to the payment of dividends out of private limited companies, and, in addition thereto, there is a general prohibition against granting loans and the like to shareholders of private limited companies. Share certificates are not issued in private limited companies. Still, certificates from the company's share register concerning ownership, and even certificates of shareholdings, are not negotiable instruments, unlike share certificates in public limited companies in general.

Special limiting rules apply to the payment of dividends out of private limited companies, and, in addition thereto, there is a general prohibition against granting loans and the like to shareholders of private limited companies. Share certificates are not issued in private limited companies. Still, certificates from the company's share register concerning ownership, and even certificates of shareholdings, are not negotiable instruments, unlike share certificates in public limited companies in general.

Residence Requirements

Residence Requirements for Board of Directors and Management. As for citizens of OECD countries not residing in Iceland but residing in one of those countries, they can, under a general exemption from the Minister of Industry and Commerce, freely form limited companies in Iceland and serve as board members and managers.

It is also conceivable to register an individual's firm with District Commissioners (on an individual´s identification number) and obtain a special name. The individual's liability is unlimited. Registration of an individual's firm with a District Commissioner costs ISK 66,500 (Icelandic krona). In addition thereto, there is a fee for the notification of the registration of the individual's firm, which shall be published in the "Legal Gazette", ISK 1,000. The individual's liability is unlimited.

General income tax levied on individuals (including individual firms) amounts to 22.9% for monthly income up to ISK 230,000 in 2012, 25.80% for the next monthly income of 474,367, and 31.80% for monthly income above 704,367. Thereto will be added the municipal tax of 14.44% (prepayment rate). Accordingly, the tax percentage for individuals in prepayment, on the basis of monthly payments, is 37.34 % in the year 2012 for the first 230,000 kr., 40.21% of the next 474,367 kr. and 46.24 % above 704,367 kr.

For further information, see announcement.

Partnerships

Partnerships of two or more parties may be established with District Commissioners. The registration costs ISK 83,000 minimum but the fee on account of the publication of notification in the "Legal Gazette" costs to ISK 1,000. The identity number at the Director of Internal Revenue, Laugavegi 166, 150 Reykjavik, costs ISK 5,000. The liability of members of partnerships is in general unlimited, i.e. they guarantee the company's liabilities by means of their entire assets.

The income tax levied on partnerships amounts to ISK 36% if it has upon request been registered as an independent taxpayer, but alternatively individual members are taxed according to shares owned in the partnership. Liability in private limited companies, on the other hand, is limited to the share capital, as will subsequently be discussed, and the income tax is 20%.

Co-operative Societies

Co-operative Societies are recorded with the Register of Co-operative Societies operated by the Director of Internal Revenue (at the same place as the Business Register and the Register of Limited Companies). There shall be a minimum of fifteen founders. The liability of members will be limited to the payment of a membership fee and the share of ownership of the society's funds. The registration of a co-operative society at the Register of Co-operative Societies costs ISK 256,000 including the costs for an identity number and registration in the "Legal Gazette". Income tax is 20%.

Register of Firms

In order to establish companies for business operations it is necessary, according to the foregoing, to apply to the Register of Firms with the District Commissioner concerning the establishment of individual's firms, partnerships, limited partnerships and European Economic Interest Groupings, the Register of Limited Companies at the Director of Internal Revenue at Laugavegi 166, 150 Reykjavik, on account of the establishment of public or private limited companies and European Companies, and the Co-operative Societies' Register, at the selfsame place, on account of the establishment of co-operative societies and European Co-operative Societies.

In addition to going thus to the company registers concerned an identity number needs to be obtained from the Business Register at the Director of Internal Revenue and thereupon a value-added-tax number from the Director of Internal Revenue, Laugavegi 166, 150 Reykjavik. Special licences may be necessary for the business operations, yet no longer a trading permit, but trade is now connected with registered firms and shall be registered e.g. in the Register of Firms or the Register of Limited Companies.