Set up a Company in Iceland
Updated on Tuesday 22nd May 2018
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Iceland is considered to offer a good business environment and the business sectors provide good incentives for foreign investors, as the taxes are quite low. Foreign entrepreneurs willing to set up a company in Iceland are treated as the domestic ones and there is no discrimination treatment in this country. Even though Iceland is not a member of EU and does not use the euro currency, it has profitable partnerships with different states and unions. Setting up a company in Iceland is an easy task, as the process itself does not require much bureaucracy and the period of time needed to establish a business is short.
Preliminary activities prior to registering Icelandic private and public limited liability companies
The first step needed to set up a company in Iceland consists in finding a unique name for the business and the founders may check the uniqueness by accessing the Internal Revenue web site. The founders must then open a bank account needed to deposit the minimum share capital provided by the law. The same account can be used for future transactions. For a private liability company there must be deposited as share capital a minimum sum of ISK 500.000 and for a public liability company, the founders must inject at least ISK 4 million. The bank institution will issue a certificate needed to prove the share capital deposit.
The next phase in setting up a company in Iceland consists in drawing up all the needed documentation: of association, company charter, specimen signatures, and other relevant documentation. These are needed in order to apply for registration at the Register of Limited Companies.
Registering Icelandic private and public limited liability companies
The next step in setting up a company in Iceland is the registration with the Icelandic Register of Limited Companies. The founders must submit certain documents, such as the notification of incorporation form, the agreement of incorporation, the record of the meeting of the shareholders where the decision of setting up the company was taken, the articles of association and an affidavit on the payment of the capital, issued by the bank.
The Icelandic Register of Limited Companies processes the file for incorporation and issues the registration certificate and to the company is attributed an identification number. This procedure should not last more than a day unless the Register of Limited Companies asks for further documents and information. After the company is registered, the Register of Limited Companies notifies the Official Gazette of the company's incorporation. There are certain taxes which must be paid in this procedure, a fee for issuing a company registration number (ISK 5,000 for a private limited liability company) and another fee for publishing the incorporation in the Official Gazette (ISK 1,000 for private limited liability company).
Notifying the Tax Authorities
In order to comply with the law’s provisions, any entrepreneur who has set up a company in Iceland must notify the Tax Authorities of employment of workers. There are no taxes charged for this procedure and it consists in submitting information for each employee along with the registration certificate of the company. The procedure does not last more than a day and the company is registered for paying taxes.
Hire employees in Iceland
When an entrepreneur has accomplished all the actions required to set up a company in Iceland and the business is legal functional, he has the right to hire the needed personnel. The Icelandic Labor Law regulates the working conditions, the relationship between employer and employee and provides other rulings in order to assure the decent work. In Iceland, an employee can work 8 hours per day, 40 hours per week, with a daily paid break of 35 minutes.
The minimum wage is negotiated each year by collective bargained agreements and approved by the state authorities. In this sense, the minimum wage is established either for each branch, either for each sector or for certain institutions (public or private). However, the minimum wage levels are set for each occupation, in accordance with several characteristics, for example, studies, working conditions, and risks.
Registering for VAT
When a company conducts transactions (sell goods or services) valued more than ISK 1000,000 a year must register for VAT purposes. The founders must submit an application before the Tax Authority along with certain documents, for example, the certificate of registration and signatures of managing members are required. This action can be accomplished in one day and it is free of charge.
Setting up an Icelandic company from abroad
Iceland welcomes foreign investment, being regarded as valuable actions and the government encourages it by guaranteeing a non-discriminatory treatment. Furthermore, there is not made any legal distinction between an Icelandic entrepreneur and a foreign one. A foreign entrepreneur willing to set up a company in Iceland can establish his business by an authorized representative and he has the duty to provide the signatures of the managing board of the company. In Iceland, it is not mandatory to have a registered office in order to conduct business activities through an Icelandic company. Other viable options for a foreign investor are the subsidiaries or branches, but these types of legal entities are desired only by companies who can take full responsibility for their actions and can provide the necessary capital in order to register the business.
How long does it take to set up an Icelandic company?
Setting up a company in Iceland is an easy task, as there are not so many procedures to accomplish and each of them does not require more than one day to be completed. There are also the on-line procedures that reduce the time frame for setting up an Icelandic company. So, an entrepreneur does not need more than five days to set up his company, when the documentation is complete and properly submitted.