Iceland

Ease of Doing Business Rank: 26

Overview 

 

Geographic location 

Iceland is a European country consisting of a main island and about 30 minor islands in the Norwegian Sea. 

Greenland lies to the west, Sweden and Norway to the east, and Ireland to the south. Sea surrounds the northern region. 

Spoken language 

The official and national language of Iceland is Icelandic, spoken by 93.2% of the population.  

However, English and Danish (or another Scandinavian language) is mandatory in school and used widely throughout the country. Other languages studied include French, German and Spanish. 

Population 

The 2019 population of Iceland is approximately 339,031. 

About a third of the population lives in the capital city of Reykjavik. The remaining inhabitants live in various small cities and towns along the coastline. 

Popular industries 

The top industries in Iceland are tourism, financial services, aluminum smelting, manufacturing, machinery and electronic equipment for the fishing industry, software and woolen goods.  

Education 

The Times Higher Education World Rankings ranked two Icelandic universities in the top 500 in the world. 

The Legatum Prosperity Index ranks Iceland’s education system 31st out of 149. 

Popular entity types 

The most common type of business entities in Iceland are sole proprietorship, partnershipprivate limited liability company, public limited liability company, and publicly owned company. 

The most common business vehicle in Iceland is the private limited liability company. 

Icelandic incentives for business 

Iceland offers competitive incentives including availability of land and green energy at competitive prices, low corporate tax and efficiency within European legislative framework. 

Additionally, new companies can apply for an investment agreement and regional incentives. Businesses investing outside of the capital area may qualify for a fixed income tax rate of 15% for 10 years.  

They may fully depreciate real estate, equipment and moveable assets. Companies may also benefit from reduced property taxes and social security charges by up to 50%.  

Under regional incentives, Iceland also offers a grant exemption from customs duties on construction materials, equipment and machinery, and other capital goods. Businesses may also lease sites at reduced rates in specified areas. 

Under EU regulations, SMEs, R&D companies, and environmental protection projects may qualify for general incentives. 

Qualified foreign employees working in Iceland may also enjoy a tax reduction of 25% on their income for three years. 

History & Features 

 

Main cities for business 

Reykjavik is the financial and business center of Iceland. 

Popular historical & tourist attractions 

Iceland’s landscape attracts tourists from around the world. Geothermal pools and steamy geysers, glaciers, towering volcanic cliffs, and an eerie moonscape-like terrain are unlike any other on the planet. 

The Golden Circle is a 300 km route through three major attractions: Geysir Hot SpringsGullfoss Waterfall, and Thingvellir National Park. The Geysir Hot Spring Area features boiling mud pits and an active geyser that spouts water 100 feet in the air every few minutes. 

Two-step Gullfoss Waterfall plunges into the Gullfossgjúfur canyon. The canyon walls surrounding the falls reach heights of 230 feet. Thingvellir National Park is the only UNESCO World Heritage Site in Iceland due to its cultural, historical, and geological history. 

Iceland also offers the ideal location to view roughly 20 different species of whales and dolphins and the spectacular Northern Lights. It is possible to see the lights on almost any clear night, expect during the summer. 

Of course, no visit to Iceland is complete without touring Reykjavik. Charming houses, a picturesque harbor, and quirky sculpture hidden in unusual places make a walking or biking tour a must.  

The city also has an excellent interactive Viking Museum and countless small restaurants featuring Icelandic favorites such as pylsur (gourmet hot dog), fermented shark, and skyr (blend of yogurt and cottage cheese). 

History 

Early settlers in the area fled from Norway’s tyrannical leader, Harald the Fairhaired. Initially, they did not form a central government, but relied on a group of powerful lords to regulate their domain instead. 

In 930 AD, they formed a central parliament called the Alþing, which still convenes today. In 1000 AD, the Alþing voted to adopt Christianity as the official Icelandic religion. 

By 1262, the power between the ruling lords had grown uneven. One lord made a pact with a Norwegian king which led to seven centuries of Icelandic domination by foreign powers. 

Norwegian rule fell to the Danes in 1381. By 1550, Iceland was forced to refute Catholicism for Lutheranism which increased the Danish monarchy’s powers. 

Iceland suffered due to poor harvests, epidemics, Danish oppression, and volcanic eruptions. The largest eruption occurred in 1783, destroying half the population. 

During the 19th century, Icelandic peoples fought for independence, chiefly through the political arena of Copenhagen. The statesman and scholar Jón Sigurðsson is considered a national hero for his efforts. 

Iceland did gain ground during the late 19th century. However, they did not achieve independence until 1944 when they became the Republic of Iceland. 

Today, Iceland offers free healthcare and education, a high standard of living, and a guaranteed pension. However, residents are heavily taxed for these benefits.  

Other relevant facts 

Almost 80% of Icelanders are Lutheran, followed by other Christian denominations (5%). Another 5% of people practice Ásatrúarfélagiða traditional Norse religion. 

Approximately 93.0% of residents are of Icelandic origins. A further 3.1% are Polish, and the remainder has various ethnic origins including Lithuanian, Danish, German, and more. 

Additional Information for Business 

According to Forbes’ 2019 Best Countries for Business, Iceland is the 26th best country in the world for conducting business.  

The 2019 Index of Economic Freedom rates Iceland 11th globally and states, “Abundant geothermal and hydropower sources have attracted substantial foreign investment in the aluminum sector. 

World Bank’s “Doing Business” rankings rate Iceland 21st for ease of doing business in the world. 

Iceland Entity Support Services by Blueback Global

Blueback Global provides a one-stop integrated solution to managing all aspects of your global operations. We can take the burden off you or your company’s internal resources by managing Entity Setup, Local Payroll, Accounting, Tax Reporting, HR Admin and Regulatory Compliance matters associated with operating in a foreign country. Our services are designed to be flexible and customized, so whether you are starting from entity registration, or have already registered but need support in setting payroll or hire employees, we can help at every point of the process.

The common scenarios that may give rise to the need for Blueback Global’s services include the following:

With our integrated approach, you can expect the following experience:

We have an initial complimentary meeting to discuss the scope, objectives and plans for your expansion plan into Iceland. After this meeting, you can expect a follow-up proposal from Blueback Global within 1 to 3 business days, that outlines that the approach, scope of work and expected deliverables and outcome. Thereafter, our implementation team will then work closely with your team to register the local entity, set up payroll, accounting process, employee social security and benefits. We will then develop a mutually agreed timeline and approach for ongoing payroll, accounting, tax reporting and HR support. Blueback Global will set up a compliance calendar so that you know exactly what and when compliance items such as tax reporting and payroll returns are due. We will of course facilitate all of these, so you do not have to keep track of the compliance dates.

Our goal is to make the process as smooth, simple and successful as possible, and remove the anxiety of operating in a foreign location, to deliver a great customer experience.

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