Iceland

Economic and Legal Climate

Iceland is known for its stable economy, high standard of living, and favorable business environment. The country has strengths in sectors such as renewable energy, fisheries, tourism, and technology. Iceland's legal system is based on civil law, providing comprehensive legal protections and a transparent regulatory framework. The country ranks highly in global ease of doing business indices due to its efficient regulatory environment and strong legal protections for investors.

Official Languages

The official language of Iceland is Icelandic. However, English is widely spoken and used in business, government, and legal matters, making Iceland accessible for international investors.

Banking System

Iceland has a well-regulated banking system overseen by the Central Bank of Iceland and the Financial Supervisory Authority (FME). The country hosts a variety of local and international banks offering comprehensive financial services. The banking sector has undergone significant reforms since the 2008 financial crisis, leading to increased stability and stronger regulatory oversight.

Maintenance Costs

Maintenance costs for companies in Iceland are moderate. Annual compliance requirements include renewing business licenses, filing tax returns, conducting audits, and maintaining proper accounting records. These processes are relatively straightforward but can involve some administrative efforts and costs, which are generally manageable with the assistance of local professionals.

Setting Up Costs

Setting up a company in Iceland involves several costs, including incorporation fees, legal fees, and registration with the Icelandic Company Register. The process includes drafting the company’s articles of association, obtaining a tax identification number, and registering for VAT. The incorporation process is efficient and can typically be completed within a few days if all documentation is in order.

Corporate Tax Rate

Iceland offers a competitive corporate tax rate of 20% on taxable profits. The country also provides various tax incentives and deductions for research and development (R&D), innovation, and investments in specific sectors, which can enhance tax efficiency for businesses.

Territorial or Non-Territorial Principles

Iceland operates a worldwide tax system, meaning resident companies are taxed on their global income. However, extensive double taxation treaties and incentives are available to help mitigate the impact of double taxation and enhance tax efficiency for foreign investors.

Currency Regulation

Iceland imposes certain restrictions on foreign exchange transactions to maintain economic stability. The currency used is the Icelandic króna (ISK). While there are regulations in place, recent liberalizations have eased some of the restrictions, facilitating better capital flow for businesses.

Advantages of Setting Up a Company in Iceland

1. Stable Legal System: Iceland’s civil law system provides strong legal protections and clear regulations for businesses.
2. Renewable Energy: Access to abundant and inexpensive renewable energy sources, particularly geothermal and hydroelectric power.
3. Skilled Workforce: Access to a well-educated and skilled labor force, particularly in technology, engineering, and renewable energy sectors.
4. High Quality of Life: Iceland offers an excellent standard of living, with high safety standards, excellent healthcare, education, and a clean environment, making it an attractive destination for expatriates.
5. Business-Friendly Environment: Transparent regulatory framework and supportive government policies facilitate easy company setup and growth.

Disadvantages of Setting Up a Company in Iceland

1. High Costs: The cost of living and doing business in Iceland can be relatively high, particularly in the capital, Reykjavik.
2. Market Size: Iceland’s domestic market is relatively small, which may limit local growth opportunities.
3. Geographic Isolation: Iceland’s geographic location can present logistical challenges for some businesses.

Conclusion

Iceland offers a highly attractive environment for setting up a company, with its stable legal system, renewable energy resources, and high quality of life. Despite challenges such as high costs and a small market size, the overall advantages make Iceland a compelling choice for international investors. Global Expand can assist you in navigating the complexities of setting up a company in Iceland, ensuring a smooth and successful entry into this unique and dynamic market.