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Doing Business in Iceland

Forms of Business Organisation

The most common and economically important type of business in Iceland is the limited liability company (corporation). Other structures are partnerships, cooperative societies, businesses run by the self-employed and branches of foreign limited companies. Iceland has adopted the EU directive No. 21572001 on Societas Europaea (SE) with Act No. 26/2004 on European Companies (SE).

Limited Liability Companies & Branches of Foreign Companies

There are two types of limited liability companies in Iceland, public and private, regulated by two separate Acts. These Acts are in line with the requirements of the company law provisions of the EEA agreement.

Foreigners investing in Iceland have customarily chosen to establish limited liability companies or branches of foreign limited companies (corporations). Publicly traded enterprises are allowed to issue their share capital in a foreign currency, and so may other nonpublic companies, if certain requirements are met. Books and records can also be kept in a foreign currency. Tax considerations have played a large role when choosing a type of business entity since the income tax rate for limited companies and their branches is now 18%, compared to 26% for partnerships. Furthermore, the corporate form offers the benefits of limited liability.

Foreign public or private limited companies and companies in a corresponding legal form having legal domicile within the European Economic Area may engage in activities with the operation of a branch in Iceland. Corporate income tax: 18%.

Limited liability companies and companies in a corresponding legal form domiciled outside the European Economic Area may operate a branch in Iceland, if this is permitted in an international treaty to which Iceland is a party or by the Minister of Commerce. Corporate income tax: 18%.

Limited liability companies and branches are registered with the Register of Limited Companies (Hlutaféagaskrá).

Establishment Procedures

Incorporation Fees

The registration fee is ISK 174,980 for a new public limited company and ISK 98,480 for a new private limited company.

Time Required

A completed application to establish a company is generally handled in one day.

Number of Founders

A public limited company must have at least two founders, at least one of whom must reside in Iceland or be a resident and a citizen of an EEA or OECD country. A private company may be founded by one or more persons. At least one entity must reside in Iceland or be both a citizen and resident of an EEA or OECD country.

Maximum Number of Shareholders

No limits are set on the number of shareholders.

Initial Capital Requirements

A public limited company must have an initial capital of at least ISK 4 million, and a private limited company at least ISK 500,000.

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