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
Information verified against Icelandic Directorate of Internal Revenue (Skatturinn)