Iceland company structures: at a glance

Hawksford

Last updated: 16 December 2025 |

Europe | Iceland

Options for registering companies in Iceland

As a member of the EEA and EFTA, Iceland offers a stable and transparent business environment with access to European markets. The corporate income tax (CIT) rate for limited liability companies is a competitive 20%. The most common corporate entities are registered with the Directorate of Internal Revenue (Skatturinn).

Iceland offers international companies the following legal structures for establishing a local presence:

Private limited company (Einkahlutafélag - ehf.)

The Icelandic ehf. is the most popular and practical entity for foreign investors and small-to-medium enterprises (SMEs) due to its limited liability and straightforward setup.
It can be established with a minimum of one shareholder (natural person or legal entity), allowing for 100% foreign ownership.
Shareholders are afforded limited liability up to the amount of their capital contribution.
The minimum share capital required is ISK 500,000 (Icelandic Krona), which must be fully paid up at the time of incorporation.
While there is no residency requirement for directors, a local representative may be necessary for certain tax filings and legal correspondence if the board is non-resident.
The company name must end with the abbreviation "ehf.".

Branch office of a foreign company (Útibú)

The branch is a Permanent Establishment (PE) and an extension of the foreign parent company, lacking separate legal personality.
It is permitted to conduct commercial activities and generate revenue in Iceland.
The foreign parent company retains full and unlimited liability for all the branch's operations and debts in Iceland.
The branch is subject to Icelandic corporate income tax (20%) on income generated in Iceland.
The branch name must be the name of the foreign company followed by "a branch in Iceland" (e.g. Hydro Pro Ltd., a branch in Iceland).
Must appoint a Branch Manager and submit the parent company's registration certificate, mandate and last annual accounts to the Register of Enterprises.

Representative office (Non-operating branch)

A formal representative office structure is less common than in other jurisdictions. Non-resident companies engaging in limited activities typically do so either through an unregistered presence or by appointing a local representative for tax compliance purposes.
A non-resident entrepreneur that does not have an office or other fixed place of business is generally required to appoint a representative who is legally obligated to carry out the entrepreneur's duties relating to registration and tax submission.
If the non-resident entity's activities are purely preparatory or auxiliary (e.g. liaison, market research) and do not result in a Permanent Establishment (PE), the entity is generally not subject to Icelandic corporate income tax.

To help you choose the right structure, we have created an ‘at a glance’ summary table for the common company types that outlines key differences in formation processes, requirements and timelines. It serves as a valuable resource for foreign companies looking to set up or expand a business in Iceland.

Comparison of the common types of companies in Iceland

Key information	Private limited company (ehf.)	Branch office	Representative office (non-operating branch)
Commonly used for	All purposes	Specific projects	Marketing and research
Minimum capitalisation (local currency)	500,000 kr	Not applicable	Not applicable
Limited liability	Yes	No	No
Time to incorporate	Two weeks	Two weeks	Two weeks
Tax rate (CIT)	20%	21%	Not applicable (cannot trade)
Resident management	Yes (EEA resident)	Yes (EEA resident)	Yes (EEA resident)
Cost indication	€9,500	€10,000	€9,500