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Doing Business in Iceland

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Doing Business in Iceland Doing Business in Iceland March 2021 Online version in pdf format Published by Business Iceland Invest in Iceland is a one stop information centre for foreign investors and provides information on investment opportunities in Iceland and the business environment. Invest in Iceland is a part of Business Iceland. Invest in Iceland’s team provides free of charge information and expert confidential service on all aspects of investments, arranges site visits and plans contacts with local authorities as well as local business partners and professional consultants. Business Iceland assists Icelandic companies in doing business and exporting their products, services and expertise in the international marketplace. Published by Invest in Iceland © Invest in Iceland & Business Iceland First edition 1999 Eighth edition April 2010 Fifteenth edition March 2017 Second edition Feb 2002 Ninth edition February 2011 Sixteenth edition February 2018 Third edition Feb 2004 Tenth edition April 2012 Seventeenth edition April 2019 Forth edition Sept 2005 Eleventh edition March 2013 Eighteenth edition, April 2020 Fifth edition Feb 2006 Twelfth edition April 2014 Nineteenth edition, March 2021 Sixth edition Feb 2008 Thirteenth edition April 2015 Seventh edition Feb 2009 Fourteenth edition July 2016 The first edition of this book was written in cooperation between the Invest in Iceland Agency and major accounting firms in Iceland, with assistance from the Internal Revenue Directorate, the Ministry of Industry and Commerce (now, the Ministry of Industries and Innovation), and other government bodies. Subsequent editions were updated by Anna Linda Bjarnadóttir, Attorney at Law, LL.M. While every effort has been made to ensure that the information in this book is correct, the publishers cannot accept liability for any errors or omissions. Reproduction for non-commercial distribution is allowed provided that the source is acknowledged. Editor: Þórður Hilmarsson Text editors: First, second and third edition: Bernard Scudder. Updates and revisions in fourth, fifth and tenth till nineteenth edition: Arnar Guðmundsson. Updates and revisions in sixth till ninth and eleventh edition: Kristinn Hafliðason. Contents A. Executive Summary ........................................................................................................ 7 A.1 Incentives and Official Attitude ................................................................................................. 7 A.2 Regulatory Constraints and Reliefs .......................................................................................... 7 Exchange Controls .......................................................................................................................... 7 Foreign Ownership of Business ...................................................................................................... 7 A.3 Tax System .................................................................................................................................. 7 Some characteristics of Icelandic tax law: ...................................................................................... 8 Taxes on Businesses ...................................................................................................................... 8 Personal Income Taxes ................................................................................................................... 8 B. General Background ....................................................................................................... 9 B.1 Physical Background ................................................................................................................. 9 Geography, Climate and Geology ................................................................................................... 9 Resource Base ................................................................................................................................ 9 History ............................................................................................................................................. 9 Language......................................................................................................................................... 9 B.2 International Framework ............................................................................................................ 9 B.3 Government and Political System .......................................................................................... 10 National Government .................................................................................................................... 10 Local Government ......................................................................................................................... 10 B.4 Legal Environment ................................................................................................................... 10 Legislative Process ....................................................................................................................... 10 Courts ............................................................................................................................................ 10 C. Business and Economic Background ..........................................................................11 C.1 Investment and Business Environment ................................................................................. 11 C.2 Economic Growth ..................................................................................................................... 11 C.3 Currency .................................................................................................................................... 12 C.5 Relationship of Government and Business ........................................................................... 12 Privatization and Economic Restructuring .................................................................................... 12 Regulatory Environment ................................................................................................................ 12 C.6 Financial Sector ........................................................................................................................ 12 Introduction .................................................................................................................................... 12 Central Bank .................................................................................................................................. 12 Financial Supervisory Authority ..................................................................................................... 13 Commercial- and Savings Banks .................................................................................................. 13 Financing Investments .................................................................................................................. 14 Mortgage Finance ......................................................................................................................... 14 NASDAQ OMX Iceland ................................................................................................................. 15 Institutional Investors ..................................................................................................................... 15 Interest Rates ................................................................................................................................ 15 Exchange Rate .............................................................................................................................. 15 Iceland’s Sovereign Credit Ratings ............................................................................................... 15 C.7 Main Sources of Finance ......................................................................................................... 16 C.8 Energy and Other Resources .................................................................................................. 17 C.9 Foreign Trade ............................................................................................................................ 17 International and Regional Trade Associations............................................................................. 17 D. Foreign Investment in Iceland .......................................................................................19 D.1 Investment Incentives .............................................................................................................. 19 Incentives for R&D ........................................................................................................................ 19 Tax incentives for foreign experts ................................................................................................. 19 Invest in Iceland Doing Business in Iceland 2020 2 Regional Incentives in Iceland ...................................................................................................... 19 Data Centers ................................................................................................................................. 20 General incentives allowed under European legislation ............................................................... 20 D.2 Exchange Controls lifted ......................................................................................................... 20 D.3 Restrictions on Foreign
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