Company Formation in Iceland
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Iceland Company formation
Incorporation in Iceland follows this 5-stage process:
- Create a company name using the company name database. This takes one day.
- Deposit the capital in the company bank account. This also takes one day.
- Registration with the Register of Limited Companies. This process includes the publication if the incorporation notice in the Official Gazette. The fees are approximately 95,000 ISK.
- For companies that plan to sell goods or services with a value of 500,000 ISK and above a year need to obtain a VAT number. This takes a day.
- Notify the tax authorities of the employment of any staff. This takes a day.
The most common type of business in Iceland is the Limited Company. Other types of structure are partnerships, cooperative societies, official limited companies, businesses run by the self-employed and branches of foreign limited companies.
Limited Companies and Branches of Foreign Companies
There are two types of limited companies in Iceland; public and private. Foreigners investing in Iceland usually chose to establish limited companies or branches of limited companies in view of tax considerations. Furthermore, corporate form offers the benefits of limited liability, while partnerships have full and unlimited liability for all partners.
Limited companies and branches are registered with the Internal Revenue in the Register of Enterprises division.
A public limited company must have at least two founders, one of whom must reside in Iceland or be a resident and citizen of an EEA or OECD country. A private company may be founded by one or more persons, one of whom must reside in Iceland or be both a citizen and resident of an EEA or OECD country. There are no limits on the number of shareholders.
Articles of Association for Limited Companies
When a limited company is established a Memorandum of Association must be prepared containing a draft of Articles of Association, names and addresses of founders, subscription price of the shares, deadline for subscription, and payment of capital. The draft of Articles of Association must contain:
- The name and location of the company
- The company's objectives
- share capital
- board of directors
- legal venue
- The financial year
A public limited company must be registered with the Register of Limited Companies within six months of the date of the Memorandum of Association and for a private limited company it must be registered within two months.
Branches of Foreign Companies
Branches of limited companies need to be registered with the Internal Revenue in the Register of Enterprises department and the head office of the company must file the following documents (submitted in certified Icelandic translation):
- A copy of the Articles of Association of the head office
- The incorporation certificate of the head office
- A written commitment to abide by Icelandic law and jurisdiction
- A letter of representation for the branch manager along with documentation that the branch manager meets the requirements regarding residency, citizenship and solvency
- Financial Statements for the preceding year
- A registered branch must have a name which includes the name of the foreign limited company
By choosing to incorporate an offshore company, business owners and investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.
The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:
- Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
- Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
- Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
- Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability
Characteristics of an offshore company:
- Memorandum and Articles of Association
- Certificate of Incorporation
- Registered Office/Agent
- Shareholders / Members
- Directors / Managers
- Company secretary
- Statutory Register
Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.
Organisations that can assist with Company Formation
Need to register a company or setting up a company?