Setting up a business

Iceland ranks among the top countries in the world when it comes to the ease of establishing a business according to the World Bank.

Registration of VAT and Payroll

When establishing a business entity in Iceland you are required to apply for a VAT ID number at RSK (Directorate of Internal Revenue). This is a fairly simple task, it is a two-page form that covers the VAT ID registration as well as a notification of the estimated payroll from the company. These forms need to be filled out and handed in at RSK offices. The form is only available in Icelandic and can be found in the following link.

RSK will process your application into the VAT registration database and issue you a confirmation. The process can take up to 1-7 business days, but is usually 2-3 days.

Any changes in the nature, purpose or ownership of your business needs to be reported within 8 days of the change being made. This also applies to the termination of the business entity.

For more information follow this link

Business Under Sole Proprietorship

Businesses, that are under sole proprietorship, or self-employed persons, are established by simply filling out the VAT ID/Payroll form. The sole proprietor is liable for all transactions made under his/her personal ID numbers.

Private Limited Company

A Private Limited Company (PRLC) can have one or more shareholders and when established the modest minimum requirement of share capital, including registration fee, is paid to RSK (Directorate of Internal Revenue/Register of Enterprises division).

The share capital requirement for a Private Limited Company is 500.000.- ISK (including the registration fee of 130,500 ISK).

Upon establishment of a PRLC with a single shareholder a memorandum of association must be submitted to RSK along with a VAT ID/Payroll form, Company Charter (stofnskrá), board resolutions (samþykktir) as well as a notification of the establishment of a PLC. All of these forms can be found under the following link:

All the forms are in Icelandic and it is necessary to submit them in Icelandic.

If a PRLC has two or more shareholders it is necessary to establish a Board of Directors for the Company. The process is basically the same, there is a slight difference in the forms that need to be submitted in relation to board approval and signatures.

In both cases it is required that at least one of the founders of a PRLC and the majority of the board as well as the managing director need to be domiciled in Iceland or within the EU as part of the EEA agreement or within an OECD country. The Minister of Finance and Economic Affairs can grant an exemption as to the residency stipulations.

The process of establishing a Private Limited Company takes 5-7 days.

Public Limited Company

The procedure for establishing a Public Limited Company is very much the same as establishing a Private Limited Company. There are however some important differences.

First, the initial share capital of a Public Limited Company, including the registration fee, paid to RSK (Directorate of Internal Revenue/Register of Enterprises division), is higher.

The share capital requirement for a Public Limited Company is 4 million ISK (including the registration fee of 256,000 ISK)..

Regarding the registration process, the applicant must submit a memorandum of association along with a VAT ID/Payroll form, Company Charter (stofnskrá), board resolutions (samþykktir), as well as a notification of the establishment of a Public Limited Company. You will find all the necessary forms through the following link.

All the forms are in Icelandic and it is necessary to submit them in Icelandic.

A Public Limited Company is required to have two or more shareholders with a Board of Directors that consists of no fewer than 2 board members. At least one of the founders of a Public Limited Company and the majority of the board as well as the managing director need to be domiciled in Iceland or within the EU as part of the EEA agreement or within an OECD country. The Minister of Finance and Economic Affairs can grant an exemption as to the residency stipulations.

Partnership

A Partnership is an agreement of two or more persons, which covers their mutual financial operation. In the Partnership set up, all parties share equal and unlimited responsibilities towards the company’s liabilities. There is no fee for starting a Partnership in Iceland.

Registering a Partnership is simple; relevant parties must submit an agreement of Partnership to RSK (Directorate of Internal Revenue/Register of Enterprises division) along with a notification of an establishment of Partnership. If a Board of Directors is established or a Managing Director is hired the meeting records of the agreements must also be submitted. The forms for starting a partnership can be found in the following link:

All the forms are in Icelandic and it is necessary to submit them in Icelandic.

There are no conditions as to the residency of owners that form a Partnership in Iceland.

Branches of Foreign Companies

A modest registration fee is paid to RSK (Directorate of Internal Revenue/Register of Enterprises division).

Branches of limited companies are registered with RSK and the head office must file the following documents:

  • A copy of the articles of association of the head office.
  • The incorporation certificate of the head office.
  • A written commitment from the head office to abide by Icelandic law and Icelandic jurisdiction.
  • A letter of representation for the branch manager together with documentation that the branch manager meets the requirements as to residency, citizenship and solvency.
  • The Financial Statements of the head office for the preceding year.

A registered branch must have a name, which includes the name of the foreign limited company.

Note that documentation filed with the Icelandic authorities must be submitted in certified Icelandic translation.

The registration fee for establishing a Foreign Owned Branch is ISK 256,000.

Source: Invest in Iceland