Europe · Company formation
Company formation in Iceland
This suits founders who want an EEA-based operating company, outside the EU itself, with a modest capital requirement and a clean 20% corporate rate. They need to satisfy the EEA/OECD-resident board-majority rule.
At a glance
- Entity
- Private limited company (einkahlutafélag, abbreviated 'ehf.') — the standard closely-held vehicle, governed by Act No. 138/1994
- Corporate tax
- 20% flat on worldwide profits for limited companies (ehf./hf.), as of 2026. Note the wider burden: 22% capital-gains/dividend tax and a 24% standard VAT sit on top of the headline rate.
- Incorporation time
- ~3-5 business days when filed electronically through the Skatturinn/RSK portal; paper filings run longer.
- Minimum capital
- ISK 500,000 (~EUR 3,300 / ~USD 3,600), which must be fully paid in before registration.
- Resident director
- No Iceland-resident director is required, but the managing director and a majority of the board must be resident in the EEA/EFTA states, the Faroe Islands, or an OECD member state. A board with no such-resident majority needs an exemption from the Ministry of Culture and Business Affairs.
- Audit
- Small ehf.s are exempt from statutory audit; the obligation is triggered only when the company exceeds size thresholds (balance-sheet total, net turnover, and employee headcount) under the Act on Annual Accounts No. 3/2006. Confirm current thresholds with an Icelandic accountant, as the figures are periodically revised.
- Remote set-up
- Formation can be completed remotely, but electronic self-service filing requires an Icelandic electronic ID (rafræn skilríki); founders without one must file on paper (with signatures) or use a local agent. All founders/directors first need an Icelandic ID number (kennitala).
- Government fee
- ISK 140,500 registration fee to the Register of Enterprises (Fyrirtækjaskrá), which includes issuance of the ID number and publication in the Official Gazette (Lögbirtingablað), as of 2026.
- Best for
- This suits founders who want an EEA-based operating company, outside the EU itself, with a modest capital requirement and a clean 20% corporate rate. They need to satisfy the EEA/OECD-resident board-majority rule.
The process
- Obtain Icelandic ID numbers (kennitala) for all founders and directors, and check/reserve the company name with the Register of Enterprises (Fyrirtækjaskrá) at Skatturinn.
- Draft and sign the founding agreement and articles of association, and pay the ISK 500,000 share capital into a bank account (deposit confirmation is required).
- File the establishment application with Fyrirtækjaskrá — electronically via the RSK portal or on paper — signed by all board members, and pay the ISK 140,500 registration fee.
- Receive the company's kennitala and Official Gazette publication, then register for VAT (VSK) and as an employer if the activity requires it.
What can go wrong
- The EEA/EFTA/OECD-resident requirement for the managing director and a board majority is the main structural constraint for wholly non-resident founders; a purely non-qualifying board needs a discretionary ministerial exemption.
- For non-residents the real bottleneck is not the filing but opening the Icelandic bank account to deposit the share capital and obtaining an electronic ID; both can add weeks and often require in-person or agent involvement.
- The full ISK 500,000 capital must be paid before registration, and operating in a small, volatile currency (ISK) alongside high personal/payroll taxation should be weighed against the modest 20% corporate rate.
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Form a company in Iceland?
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