Doing business in Iceland involves understanding its legal structures, registration processes, and unique business culture.
Here is a general guide on how to approach doing business in Iceland:
1. Legal Requirements and Company Formation
- Identification Number (Kennitala): Any individual or legal entity starting a business in Iceland must first obtain a ten-digit identification number (Kennitala). This is your gateway to Icelandic society and for tax/social security matters.
- Business Structures: The most common forms of business for foreign investors are:
- Private Limited Company (ehf.): This is the most popular form. It offers limited liability, has relatively simple establishment procedures, and a minimum share capital requirement (which must be demonstrated).
- Public Limited Company (hf.): Suitable for larger businesses, it has stricter requirements, including a higher minimum share capital, and a minimum of two founders and two shareholders.
- Sole Proprietorship: Registered on the owner’s personal ID number. The owner bears full and unconditional liability. No registration fee or minimum share capital.
- Branch of a Foreign Company: Foreign companies can register a branch, although establishing a subsidiary (like an ehf.) is also common.
- Registration:
- Choose a unique company name.
- Submit required documents (e.g., articles of incorporation) and register the company with the Directorate of Internal Revenue (Ríkisskattstjóri / RSK), specifically its Register of Enterprises.
- Electronic registration is often available for private limited companies if all parties have an Icelandic Electronic ID.
- Residency and Management:
- For limited companies, at least one director or the majority of the board, as well as the managing director, generally needs to be resident in Iceland, within the EEA, or in an OECD country, though there are specific rules and potential exemptions.
- There are restrictions on non-resident investment in certain sectors, such as fisheries, primary fish processing, and energy exploitation rights.
- Licenses and Permits: Depending on the business activity (e.g., tradesman, tourism, health), a special permit or license may be required from relevant entities like municipalities, the Administration of Occupational Safety and Health, or the Tourist Board.
- Taxation:
- The corporate income tax rate is generally 20% for limited companies and their branches.
- A standard VAT rate applies to goods and services, often 24%.
2. Employment and Labor
- Employment Contracts: These are often based on collective wage agreements negotiated by trade unions, which stipulate minimum terms for wages, working hours, vacation, and more.
- Employer Obligations: Employers must adhere to high standards of occupational health and safety and are responsible for deducting and reporting wage-related taxes and contributions to pension funds.
- Work-Life Balance: Icelandic workplaces value a healthy work-life balance, often featuring flexible hours and encouraging time for family and leisure.
3. Icelandic Business Culture
- Egalitarian and Flat Hierarchy: The business environment is typically very egalitarian with flat organizational structures. Superiors are generally accessible, and there is less emphasis on formal titles; first names are commonly used.
- Communication:
- Directness and Honesty: Communication is direct, straightforward, and values transparency. Avoid excessive small talk and get to the point. This directness is seen as respectful and efficient.
- Consultative Decision-Making: Decision-making is often collaborative, seeking input and consensus from relevant parties.
- Work Style:
- Punctuality is highly valued for meetings.
- Icelanders are generally pragmatic, adaptable, and open to new ideas, but the culture also values planning.
- Building personal trust and reliability is key, particularly for long-term partnerships. Socializing over coffee or lunch can help foster connections.
- Attire: Business attire is generally smart-casual and practical for the climate.
It is highly recommended to consult with a qualified accountant, auditor, or lawyer in Iceland when establishing a company to ensure compliance with all legal and tax requirements. You can also find detailed information on the official Icelandic government service portals.