Selection of business entity

Non-resident investors can normally choose between a variety of legal structures when establishing a company in Iceland, for example limited companies, partnerships, co-operative societies, etc. The investor can also operate a permanent establishment - branch or buy stocks in Icelandic companies, except where there are certain restrictions as discussed in Section 33 above. Foreign investors have customarily established a branch of a limited company or a limited company in Iceland.

As of 1995, there is one Act regulating public limited companies and another regulating private limited companies. These Acts are in line with the requirements of the company law provisions of the EEA agreement. Public Limited Companies are mainly for many shareholders, where the aim is to seek capital from the general public. The size of minimum stock required for a public limited company is 4.000.000 ISK. Other minimum requirements are that the company has two founders, two shareholders, three directors on the board of directors, and a manager. The majority of the founders and at least half of the board's members and the director must be domiciled in Iceland or in a country that is a member of the European Economic Area or be a citizen and resident of a member state of the OECD. Private Limited Companies operate by rules, which are simpler than those for the public ones. The minimum stock required is 500,000 ISK and other minimum requirements include one founder, one shareholder and one director.

Foreign public or private limited companies and companies in a corresponding legal form having legal domicile within the European Economic Area and in a member state of OECD may engage in activities with the operation of a branch in Iceland. Similar legal provisions apply to branches of both public and private limited companies, except that disclosure requirements for the Register of Limited Companies are somewhat stricter with respect to public limited companies. Limited companies and branches thereof are registered with The Registry of Limited Companies.

Limited companies and companies in a corresponding legal form domiciled outside the European Economic Area and OECD can operate a branch in Iceland, if this is permitted through an international treaty to which Iceland is a party or if permitted by the Minister of Commerce.

Both branches and foreign-owned companies are taxed as resident companies, unless their business activities in Iceland are treaty protected.