Opening a business in Iceland can be an exciting opportunity. Iceland is positioned between the UK and US, making it a great middle ground for businesses looking to operate in both markets.
But opening a business in Iceland takes more than just turning up and setting up shop. Here, we talk you through everything you need to think about before starting a business in Iceland.
Things To Think About Before Moving
Moving to Iceland isn’t just about working in another country, it’s about starting a new life abroad. Some of the things it might be worth thinking about include:
Language
While most Icelanders speak great English, a lot of official guidance and documents are in Icelandic. You might need to hire a translation service for these documents, but general socialising and network should be okay in English.
Daylight Hours
Iceland is incredibly far north, which means long summer days (sometimes reaching 23 hours) and very short winter days. At its peak, the sun is only in the sky for just over 4 hours. Whilst this might sound like a decent trade off, you should definitely take it into consideration when thinking about the move.
Cost of Living
Like many island nations, the cost of living in Iceland is very high, around 25% higher than the US. Whilst salaries tend to be aligned to this, if you are hiring employees you should probably think about the wages that you will need to pay them.
The Population
Iceland’s population is small (around 394,000) so if you are planning to trade within the country, think carefully about this reduced customer base. However, it can also work to your advantage, as competition is limited.
Taxes
If you are planning to operate within Iceland, you’ll need to pay tax there. The rates are:
- Corporate income tax: 20% for limited companies.
- VAT:
- Standard rate: 24%.
- Reduced rate: 11% (e.g. for essentials like books and food).
- Personal income tax: Rates from 35.04% to 46.24% depending on how much you earn.
Visas
For EEA Nationals: No residence permits are needed before moving, but you will need to register with Registers Iceland if staying for over three months.
For Non-EEA Nationals: You’ll need to get a residence permit and work visa before starting a business.
Setting Up A Business in Iceland: What Are The Structures Available?
Individual Company – Einstaklingsfyrirtæki: Run by a single person, kind of like a sole trader. It has no registration cost and no minimum share capital.
Private Limited Company – Einkahlutafélög (ehf.): A popular choice with business owners with a minimum share capital of ISK 500,000. The registration cost is ISK 131,000 and the company can have an unlimited number of shareholders.
Partnerships – Sameignarfélög (sf.): Two or more owners. No minimum share capital but a ISK 89,500 registration fee.
How To Start A Business in Iceland
So you’ve decided what structure you’re going for – what next?
Step 1: Get A Personal ID Number (Kennitala)
A Kennitala is a 10-digit identification number that you will need for all business dealings in Iceland, including tax registration and banking.
Step 2: Register Your Business
Register your chosen business structure with the Directorate of Internal Revenue (RSK).
You will need to give them details like the business name, ownership structure and proof that you have deposited your share capital.
Step 3: Get Any Licences and Permits
Depending on what your business does, you might need to apply for a licence.
For example if you work in hospitality, you may need licences to serve food and drink.
Step 4: Register for VAT
If you think your business will earn over ISK 2 million annually, you will need to register for VAT.
The standard VAT rate is 24%, with lower rates for specific goods and services.
Should You Start A Business In Iceland?
Starting a business in Iceland can be a great opportunity to expand your business. With the right planning you can make sure the process is easy and manageable – leaving you to enjoy this beautiful country.
Good luck!
