Quick answer: To start a business in Iceland, most founders register a private limited company (ehf.) with Skatturinn, the Iceland Revenue and Customs agency that runs the Register of Enterprises (Fyrirtækjaskrá). An ehf. needs at least ISK 500,000 (about EUR 3,580) in fully paid share capital and a registration fee of ISK 140,500 (about EUR 1,010). Electronic applications are generally processed in 3 to 5 working days, and profits are taxed at 20%.
Iceland is a small, high-income market of under 400,000 people, but it is a full member of the European Economic Area, so company law follows EU rules and businesses can trade across the EEA single market. The registration process is mostly digital, the paperwork is short, and the fees are published. The parts that catch foreign founders out are practical: Icelandic-language documents, electronic ID, the national ID number (kennitala) and bank onboarding.
This guide covers company formation in Iceland step by step: which legal form to choose, what it costs, how registration works, and what you owe once you are trading, from VAT to payroll tax and pension contributions. All figures are 2026 rates unless we say otherwise. For more Iceland lists and guides, visit our Iceland hub.
Which Company Type Should You Choose?
Iceland offers a sole proprietorship, two partnership forms, two limited company forms and the branch of a foreign company. Island.is lists the options as sole proprietorships and corporate entities such as ehf., hf., sf., slf. and ses. For most small and mid-sized businesses the choice is between a sole proprietorship and an ehf.
Private Limited Company (Einkahlutafélag, ehf.)
The ehf. is the standard vehicle for company formation in Iceland. It can have one founder and one shareholder, and owners are liable only up to their share capital. Skatturinn states that the minimum share capital is ISK 500,000 and that all of it must be paid in when the company is established. Non-cash contributions need a declaration from a lawyer or certified accountant confirming the assets exist. According to Arion Bank, an ehf. must publish annual accounts and have them reviewed by a certified auditor or two inspectors.
Public Limited Company (Hlutafélag, hf.)
An hf. is designed for larger companies and those planning to list shares. Skatturinn sets the minimum share capital at ISK 4,000,000 (about EUR 28,650) and requires at least two shareholders. The registration fee is also roughly double that of an ehf. Unless you need to raise capital from the public, an ehf. is usually the simpler choice.
Sole Proprietorship
A sole proprietor trades under their own kennitala and has full, unlimited personal liability for the business. Island.is notes there is no minimum share capital and no registration fee to trade under your own ID number. If you want to register a separate trade name for a one-person firm (firma eins manns), the Register of Enterprises tariff lists a fee of ISK 73,500. Self-employed income is taxed at personal rates, so a sole proprietorship tends to make sense only for low-risk, lower-income activity.
Partnerships (sf. and slf.)
General partnerships (sf.) need two or more owners with unlimited liability, while limited partnerships (slf.) need at least one partner with unlimited liability. Neither has a minimum capital requirement. The registration fee for an sf. is ISK 95,500. PwC Worldwide Tax Summaries (reviewed June 2026) puts the tax rate for partnerships and other legal entities at 37.6%, compared with 20% for limited companies.
Branch Of A Foreign Company (Útibú)
A foreign company can operate through a registered branch instead of a subsidiary. Skatturinn requires the branch name to be the foreign company name plus “branch in Iceland”, an Icelandic address, a named branch manager, a registration certificate for the parent issued within the last three months, the parent’s latest annual accounts, a board mandate for the branch manager and a beneficial owner notification. Branch documents can be in Icelandic, English, Danish, Swedish or Norwegian. The registration fee is ISK 276,500.
Form
Minimum Capital
Registration Fee
Owner Liability
Tax On Profits
Private limited (ehf.)
ISK 500,000, fully paid
ISK 140,500
Limited to capital
20%
Public limited (hf.)
ISK 4,000,000
ISK 276,500
Limited to capital
20%
Branch of foreign company
None in Iceland
ISK 276,500
Parent company liable
20% on branch profits*
General partnership (sf.)
None
ISK 95,500
Unlimited
37.6%
Sole proprietorship
None
None, or ISK 73,500 for a trade name
Unlimited
Personal income tax rates
Fees are from the Register of Enterprises tariff as published in 2026. *Branch taxation depends on the parent company’s structure and any tax treaty; confirm with an Icelandic accountant.
How To Register A Company In Iceland Step By Step
The official island.is checklist sets basic eligibility first: founders must be at least 18, legally competent and not in bankruptcy proceedings or a suspension of payments. After that, registering an ehf. follows five steps.
1. Choose And Check A Company Name
The name must not be too similar to an existing company and must end in the legal form, for example “Dæmi ehf.” You can search existing names in the Skatturinn company register before filing.
2. Prepare The Founding Documents
For an ehf., Skatturinn lists the notice form RSK 17.21, a memorandum of association (or founding agreement where there are two or more founders), minutes of the founding meeting, articles of association and a beneficial owner notification on form RSK 17.27. All company documents must be in Icelandic. Scanned copies are accepted by email, so originals are not needed.
3. Pay In The Share Capital
The ISK 500,000 minimum must be paid in full before registration, usually into an account opened for the company in formation, or contributed as assets backed by a lawyer or accountant declaration. This money is not a fee: it stays with the company as working capital.
4. File With The Register Of Enterprises
You can file electronically through Skatturinn’s service pages or on paper. Electronic filing requires every party to have Icelandic electronic ID (rafræn skilríki), and the system generates the founding documents from the data you enter. Skatturinn says electronic applications are generally processed in 3 to 5 working days, and paper applications in about 2 to 3 weeks once the file is complete and payment is received. The fee schedule notes that registration fees for new ehf. and hf. companies must be paid in full up front and cannot be paid by credit card.
5. Receive The Company Kennitala
On registration, the company is given its own ten-digit kennitala, the identifier used by the tax authority, banks, customers and suppliers. You need it to open a bank account, register for VAT and register as an employer.
Kennitala And Electronic ID For Foreign Founders
Every director, CEO and procuration holder needs an Icelandic identification number. If they do not have one, the register may request a system ID number (kerfiskennitala) using form RSK 17.62 with a passport copy. Registers Iceland explains that a system ID is issued to people staying in Iceland for less than 3 to 6 months or not at all, that it is applied for by a public authority rather than by the individual, and that it grants no rights in Iceland. In practice, founders without electronic ID file on paper or through an Icelandic lawyer or accountant, which adds time.
Can Foreigners Own And Run An Icelandic Company?
Yes, with some conditions. Under Announcement No. 848/2013, citizens of OECD, EEA and EFTA states and the Faroe Islands do not need to live in Iceland to be founders, directors or managers of Icelandic limited companies, or branch managers of foreign companies, as long as they reside in one of those states. The list includes the United States, the United Kingdom, Canada, Australia, Japan and all EEA countries. Founders from outside that group should take legal advice before filing.
The Government of Iceland notes that foreign ownership is restricted in certain sectors, such as fisheries and primary fish processing. Owning a company also does not give you the right to live or work in Iceland. Non-EEA citizens need a residence and work permit before working in the country; Work in Iceland explains that the Directorate of Immigration (Útlendingastofnun) issues the residence permit and the Directorate of Labour (Vinnumálastofnun) issues the work permit, which is tied to a specific employer.
VAT Registration And Thresholds
Iceland’s standard VAT rate is 24% and the reduced rate is 11%, which applies to items such as hotel accommodation, food, books and passenger transport. Skatturinn states that businesses whose taxable sales are ISK 2,000,000 (about EUR 14,300) or less in each twelve-month period from the start of activity are exempt from registering. Above that, you must notify the tax authority no later than eight days before VAT-liable operations begin and obtain a VAT number (VSK-númer) before trading.
Standard filing is every two months, with the return and payment due one month and five days after the period ends.
Businesses with taxable sales under ISK 4,000,000 a year can apply for annual filing before 15 February.
A foreign company selling taxable services in Iceland without a permanent establishment must appoint a representative domiciled in Iceland to collect and remit VAT.
Corporate Tax And Dividends
Limited companies (ehf. and hf.) pay 20% income tax on profits, according to both island.is and PwC. When profits are paid out, individual shareholders pay capital income tax, which Skatturinn lists at 22% for 2026 on dividends, interest and gains. Owners who also work in the business must pay themselves a reasonable salary, which is taxed at personal rates.
Payroll, Pension And Employer Obligations
Before you pay any wages, including your own, register in the wage payers register with Skatturinn. Island.is says the start of operations must be reported at least eight days before activities begin, and employers must withhold income tax from all wages. Self-employed owners must calculate and report a deemed salary for themselves.
Item (2026)
Rate Or Amount
Paid By
Income tax, up to ISK 498,122 per month
31.49%
Employee, withheld by employer
Income tax, ISK 498,123 to 1,398,450 per month
37.99%
Employee, withheld by employer
Income tax, above ISK 1,398,450 per month
46.29%
Employee, withheld by employer
Personal tax credit
ISK 72,492 per month
Reduces employee tax
Payroll tax (tryggingagjald)
6.35% of wages
Employer
Mandatory pension, employee share
4% of wages
Employee
Mandatory pension, employer share
At least 11.5% of wages
Employer
Tax brackets, the personal credit and payroll tax are from Skatturinn key rates and amounts 2026. Pension rates are from Lífeyrismál.is, which puts the minimum total contribution at 15.5% for workers aged 16 to 70. Many jobs are also covered by collective wage agreements that set minimum pay and add union and other wage-related fees, so check the agreement that applies to your sector.
Opening A Business Bank Account
Iceland’s three main banks are Landsbankinn, Arion Bank and Íslandsbanki. You need the company kennitala before a business account can be opened, and every individual involved needs a kennitala as well. Landsbankinn says customers without Icelandic electronic ID can book a branch appointment to become a customer. Banks run anti-money laundering checks: the Íslandsbanki due diligence form for legal entities asks for shareholders, all beneficial owners (generally anyone controlling more than 25%), the source of funds, expected monthly deposits, expected foreign transfers and valid identification. Foreign-owned companies with no local director should expect this step to take the longest.
Ongoing Compliance And Annual Accounts
An ehf. must file an annual tax return and submit annual financial statements to the Annual Accounts Register by 31 August, or within one month of approval at the annual general meeting if that is later. Island.is warns that missing or incomplete statements carry an administrative fine of ISK 600,000, and that the board and managing director are responsible even when an accountant files. Micro-entities that meet two of three tests (assets under ISK 20 million, revenue under ISK 40 million, three or fewer full-time staff) can generate their statements automatically from tax return data.
How Much Does It Cost And How Long Does It Take?
Company Formation Iceland Costs At A Glance
The table below sets out the official costs of company formation in Iceland for a single-founder ehf. Euro and dollar figures use 1 EUR = ISK 139.60 (ECB reference rate, September 2026) and 1 USD = ISK 121.58 (November 2026) and are rounded.
Cost Item
ISK
Approx. EUR
Approx. USD
Registration fee, ehf.
140,500
1,010
1,160
Minimum share capital (stays in the company)
500,000
3,580
4,110
Total cash needed at formation
640,500
4,590
5,270
Late annual accounts fine (to avoid)
600,000
4,300
4,940
Lawyer or accountant fees for drafting articles, translation and filing are extra and are quoted per job; we did not find published fixed prices, so ask two or three firms for a quote. A realistic timeline for a founder with Icelandic electronic ID is one to two weeks from name check to registration, plus the eight-day notice period for VAT and employer registration. For a foreign founder filing on paper, allow 3 to 6 weeks including bank onboarding.
FAQ
Can I Start A Business In Iceland Without Living There?
Yes, if you are a citizen of, and live in, an OECD, EEA or EFTA state or the Faroe Islands. You can be a founder, director or manager of an ehf. without Icelandic residence. Non-EEA citizens who want to move to Iceland and work in the business still need a residence and work permit.
What Is The Minimum Capital For An Ehf. In Iceland?
ISK 500,000, paid in full at formation. A public limited company (hf.) needs ISK 4,000,000. Partnerships and sole proprietorships have no minimum.
Do I Need To Register For VAT Straight Away?
Only if you expect taxable sales above ISK 2,000,000 in a twelve-month period. If you do, notify Skatturinn at least eight days before you start and get your VAT number before trading.
Do Company Documents Have To Be In Icelandic?
For an ehf. or hf., yes: Skatturinn requires all company documents in Icelandic. Branch registrations accept English and the Scandinavian languages.
What Is The Corporate Tax Rate In Iceland In 2026?
20% for private and public limited companies. Partnerships and other legal entities are taxed at 37.6%, and dividends paid to individuals are taxed at 22%.
Conclusion
For most founders, the way to start a business in Iceland is an ehf.: ISK 640,500 in cash at formation, of which ISK 500,000 stays in the company, a few working days for electronic registration and a 20% tax on profits. Plan for Icelandic-language documents, get kennitala and electronic ID sorted early, register for VAT and payroll eight days before you trade, and diarize 31 August for annual accounts. With those in hand, company formation in Iceland is one of the more predictable setups in the Nordics.
