2023 Investment Climate Statements: Iceland

Policies Towards Foreign Direct Investment

The government of Iceland maintains an open investment climate. The Act on Incentives for Initial Investments, which came into force in 2015, is intended to “promote initial investment in commercial operations, the competitiveness of Iceland and regional development by specifying what incentives are permitted in respect of initial investments in Iceland, and how they should be used.” The Act does not apply to investments in airports, energy production, financial institutions, insurance operations, or securities. For more information, see the English translation of the act: https://www.stjornarradid.is/library/01–Frettatengt—myndir-og-skrar/ANR/Act-on-incentives-for-initial-investments-in-Iceland-English-2015.pdf .

As part of its investment promotion strategy, the Icelandic government operates a public-private agency called “Invest in Iceland” that facilitates foreign investment by providing information to potential investors and promoting investment incentives. There is a debate, however, within Iceland over balancing energy-intensive FDI with the environmental impact associated with certain projects. That said, energy-intensive industries long dominated by aluminum smelting, have expanded to include silicon production plants and data centers. For further resources see: http://www.invest.is/doing-business/incentives-and-support .

Tourism has been a growing force behind Iceland’s economy in the past decade, with opportunities for investors in high-end tourism, including luxury resorts and hotels. The number of tourists in Iceland reached more than 2.3 million in 2018. However, tourism in Iceland contracted in 2019 with visitor numbers around 2 million, which can be largely attributed to the fall of Icelandic budget airline WOW Air. The COVID-19 pandemic had drastic effects on tourism, as well as on Iceland’s overall economy, which contracted by 7.1 percent in 2020, according to Statistics Iceland. Less than half a million tourists visited Iceland in 2020, with the number of tourists reaching around 700,000 in 2021. New airline Play Air had its first flight that same year. Play Air offers low-cost tickets and operates flights to North America and Europe. Industry stakeholders reported a strong recovery in 2022, with approximately1.8 million tourists visiting and hotels reporting full bookings for the spring and summer seasons and good booking positions for the autumn and winter seasons. Statistics Iceland projects 2.3 million tourists will visit Iceland in 2023.

The startup and innovation communities in Iceland are flourishing, with IT and biotech startups seeking investors. Innovation hubs have been forming around Iceland, with the largest one, Groska, being in Reykjavik. The Icelandic Ocean Cluster (IOC), also in Reykjavik, is a cluster collaboration with over 70 companies, and the IOC house is a popular location for entrepreneurs.

Limits on Foreign Control and Right to Private Ownership and Establishment

The 1991 Act on “foreign investments for commercial purposes” limits foreign ownership of fishing rights and fish processing companies (only Icelandic citizens or companies that are controlled by Icelandic citizens and have less than 25 percent foreign shareholders can own or control fishing companies); of hydropower and geothermal utilization rights other than for personal use, energy processing, and transportation (only Icelandic citizens and legal persons, and individuals and legal persons who reside in the European Economic Area [EEA] can hold those rights); and of aviation operators (Icelandic ownership of aviation companies needs to be at least 51 percent, and this does not apply to individuals and legal persons that have EEA citizenship). The law further stipulates that foreign states, sub-national governments, or other foreign authorities are prohibited from investing in Iceland for commercial purposes, although the Minister of Culture and Business Affairs may grant exemptions. The responsibility to inform the relevant ministry of both new investments and investments in companies that the party in question has already invested in lies with the investor, or with the Icelandic company that the foreign individual or entity invested in (this does not apply to EEA citizens or residents).

The 1991 Act does not stipulate how foreign investment is screened or monitored by relevant authorities, only that the Minister of Culture and Business Affairs handles permits and monitors the execution of this legislation. The Minister can block foreign investments if s/he considers it a “threat to national security or goes against public policy, public safety or public health or if there are serious economic, societal or environmental complications in specific industries or in specific areas, that are likely to persist…” The law further states that the “Minister has the authority to stop foreign investment in systematically important companies if such investment entails systematic risk.” If an investment has already taken place, the Minister of Culture and Business Affairs has the authority to compel the foreign person or entity in question to sell.

Other Investment Policy Reviews

Iceland has been a World Trade Organization (WTO) member since 1995 and a member of GATT since 1968. The WTO conducted its fifth Trade Policy Review of Iceland in 2017: https://www.wto.org/english/tratop_e/tpr_e/tp461_e.htm . The review notes that “with a small population and limited natural resources, apart from energy and fish, trade remains important, but the range of exports is limited to tourism, fish and fish products, and aluminum and products thereof. Therefore, the country remains vulnerable to shocks, including the appreciation of the ISK, overheating of the economy, and Brexit. Furthermore, despite uncertainties relating to Brexit, as growth picks up in the EU, Iceland’s main trading partner, opportunities for trade in goods and services should continue to improve.”

The Organization for Economic Cooperation and Development (OECD) and UN Cooperation for Trade and Development (UNCTAD) have not conducted Investment Policy Reviews for Iceland.

Business Facilitation

Businesses are registered with Iceland Revenue and Customs (Skatturinn) ( http://www.rsk.is/english/ ). Applications for the registration of businesses can be filled in online, but some forms are in Icelandic only, and it is therefore necessary for foreign businesses to contract a local representative to complete the paperwork. The website of the Business Registry in Iceland is: http://www.rsk.is/fyrirtaekjaskra  (Icelandic only). More information on establishing a business in Iceland can be found on the government’s website: https://www.government.is/topics/business-and-industry/establishing-a-business-in-iceland/ .

Services offered by Invest in Iceland, a public-private agency that promotes and facilitates foreign investment in Iceland, are free of charge to all potential foreign investors ( http://www.invest.is ). Invest in Iceland can provide information on investment opportunities in Iceland; collect data on the business environment, arrange site visits, and plan contacts with local authorities; arrange meetings with local business partner and professional consultants; and influence legislation and lobby on behalf of foreign investors ( https://www.invest.is/at-your-service/what-we-do ). Invest in Iceland offers detailed information on how to establish a company on its website: http://www.invest.is/doing-business/establishing-a-company . Its sister agencies, Business Iceland (formerly Promote Iceland) ( https://www.businessiceland.is/ ) and Film in Iceland ( http://www.filminiceland.com ), aim to enhance Iceland’s reputation as a tourist destination and as a destination for filming movies and television productions. Other agencies include Creative Iceland ( https://www.islandsstofa.is/en/marketing-projects-creative-iceland ), which works towards increasing awareness of Icelandic Art and creative industries.

Outward Investment

The Icelandic Government along with other stakeholders promote exports of Icelandic goods and services through the public-private agency Islandsstofa, also known as Business Iceland ( https://www.businessiceland.is/ ). Business Iceland assists Icelandic businesses in the main industry sectors to export products and services, including fisheries (seafood and technology), agricultural produce (including organic lamb meat), high-tech products and solutions (software, prosthetics, etc.), and services (tourism). Business Iceland has been very active in the United States and Canada in recent years, with total exports to the United States eclipsing $562 million. A trade commissioner represents the Icelandic Ministry for Foreign Affairs in New York, facilitating exports to the United States and promoting business relations between the two countries. Business Iceland also promotes exports to the United Kingdom, Europe, and Asia.

Iceland imposed capital controls following the economic collapse in late 2008, which largely prevented Icelandic investors and pensions funds from investing outside of Iceland. The government lifted capital controls on March 14, 2017.

Transparency of the Regulatory System

The system is transparent, although bureaucratic delays can occur. All proposed laws and regulations are published in draft form for the public record and are open for comment. Icelandic laws regulating business practices are consistent with those of most OECD member states. Iceland’s laws are generally based on European Union directives as a result of Iceland’s membership in the European Economic Area (EEA), which legally obligates it to adopt EU directives and law concerning the four freedoms of the EU: free movement of goods, services, persons, and capital.

The Competition Authority is responsible for enforcing anti-monopoly regulations and promoting effective competition in business activities. This includes eliminating unreasonable barriers and restrictions on freedom in business operations, preventing monopolies and limitations on competition, and facilitating new competitors’ access to the market. The Consumer Agency holds primary responsibility for market surveillance of business operators, transparency of the markets with respect to safety and consumers’ legal rights, and enforcement of legislation concerning protection of consumers’ rights. For more information see the Competition Authority’s website: ( https://en.samkeppni.is/ ) and the Consumer Agency website ( https://www.neytendastofa.is/English ).

The Icelandic Parliament (Althingi) consists of a single chamber of 63 members; a simple majority is required for ordinary bills to become law. All bills are introduced in the parliament in draft form. Draft laws and regulations are open to public comment and are published in full on the parliament’s web page ( http://www.stjornartidindi.is ) and on the websites of the relevant ministries (often in English). Invest in Iceland also maintains an information portal website that includes information on industry sectors, the business climate, and incentives that foreign investors may find useful ( http://www.invest.is ).

Ministries or regulatory agencies develop bills, which are available to the public. Ministries or regulatory agencies publish the text of the proposed regulations before their enactment on a unified website ( https://www.stjornartidindi.is/ ). Ministries or regulatory agencies solicit comments on proposed regulation from the public. Laws and regulations are published on both the parliament’s website ( https://www.althingi.is/ ) and separate website managed by the Ministry of Justice ( https://www.stjornartidindi.is/ ).

The OECD published their economic snapshot report on Iceland in September 2019. One of the findings of the report was that regulatory barriers were high in Iceland. The report states: Regulation should be more commensurate with the needs of a small open economy. Product market regulation is stringent and the administrative burden for start-ups is high, holding back investment and innovation. Restrictions to foreign direct investment are among the highest of the OECD, dampening employment and productivity gains through international knowledge transfer. The government should set up a comprehensive action plan for regulatory reform, prioritizing reforms that foster competition, level the playing field between domestic and foreign firms, and attract international investment. ( http://www.oecd.org/economy/iceland-economic-snapshot/ ). OECD conducted an economic survey of Iceland in 2021, with key findings showing: “the pandemic-related collapse of foreign tourism and international travel, which account for almost a fifth of GDP, highlighted the need to diversify the economy. Iceland needs to improve resilience and find new drivers of productivity and employment growth, in particular given the objective of emission reductions. Boosting skills across the population is hence the top priority, along with reforms to strengthen competitive forces.”

The Iceland Chamber of Commerce operates an independent arbitration institute, the Nordic Arbitration Centre (NAC). The NAC provides for a dispute resolution mechanism, allowing parties to solve their dispute efficiently and safely. Both the arbitration process and the Arbitral Tribunal’s final awards are strictly confidential. There have been no known cases of discrimination against U.S. investors. For more information visit the Iceland Chamber of Commerce’s website: https://www.chamber.is/arbitration .

Environmental, social, and governance (ESG) disclosures are mandatory under three acts: Act on equal status and equal rights of the sexes; Law on equal treatment outside the labor market; and Act on equal treatment in the labor market regardless of race, ethnic origin, religion, outlook on life, disability, reduced work capacity, age, sexuality, gender identity, and gender characteristic or gender expressions. The Equality Office operates under the authority of the Prime Minister. Volunteer ESG disclosures are encouraged through institutions or third parties, such as the Federation of Icelandic Industries’ quality assurance certification.

Iceland scores 4.75 out of 5 (best possible) on The World Bank’s Global Indicators of Regulatory Governance index: https://rulemaking.worldbank.org/en/data/explorecountries/iceland# .

International Regulatory Considerations

Icelandic laws regulating business practices are generally consistent with other OECD members. Iceland’s laws are generally based on EU directives as a result of Iceland’s membership in the EEA, which legally obligates it to adopt EU directives and law concerning four freedoms of the EU: free movement of goods, services, persons, and capital.

Iceland has been a member of the World Trade Organization (WTO) since January 1, 1995. Iceland and the United States signed a Trade and Investment Framework Agreement (TIFA) in January 2009.

Legal System and Judicial Independence

The Icelandic civil law system enforces property rights, contractual rights, and the means to protect these rights. The Icelandic court system is independent from the parliament and government. Foreign parties must abide by the same rules as Icelandic parties, and they enjoy the same privileges in court; there is no discrimination against foreign parties in the Icelandic court system. When trade or investment disputes are settled, the settlement is usually remitted in the local currency.

Iceland has a three-tier judicial system, eight District Courts (Héraðsdómstólar), the Court of Appeal, (Landsréttur), and the Supreme Court (Hæstiréttur Íslands). All court actions commence at the District Courts, and conclusions can then be appealed to the Court of Appeal. In special cases, the conclusions of the Court of Appeal can be referred to the Supreme Court. A new public agency, the Judicial Administration (Dómstólasýsla), along with the Court of Appeal (Landsréttur) began operating on January 1, 2018.

The Landsdómur is a special high court or impeachment court to handle cases where members of the Cabinet of Iceland are suspected of criminal behavior. The Landsdómur has 15 members — five supreme court justices, a district court president, a constitutional law professor, and eight people chosen by parliament every six years. The court assembled for the first time in 2011 to prosecute former Prime Minister Geir H. Haarde for alleged gross misconduct in the events leading up to the 2008 financial crisis. He was found guilty of failing to hold regular cabinet meetings during the crisis but was not convicted of gross misconduct.

Laws and Regulations on Foreign Direct Investment

Icelandic laws regulating and protecting foreign investments are consistent with OECD and EU standards. As Iceland is a member of the EEA, most EU commercial legislation and directives are in effect in Iceland. The major law governing foreign investment is the 1996 Act on Investment by Non-residents in Business Enterprises, which grants national treatment to non-residents of the EEA. The law dictates that foreign ownership of businesses is generally unrestricted, except for limits in the fishing, energy, and aviation sectors. Icelandic law also restricts the ability of non-EEA citizens to own land, but the Minister of Culture and Business Affairs may waive this. The managers and the majority of the board of directors in an Icelandic enterprise must be domiciled in Iceland or another EEA member state, although exemptions from this provision can be granted by the Minister of Culture and Business Affairs.

Iceland has no automatic screening process for investments that trigger national security concerns (similar to the Committee of Foreign Investment in the United States), although bidders in privatization sales may have to go through a pre-qualification process to verify that the bidder has the financial strength to participate. Investors that intend to hold more than 10 percent of shares (“active” shareholders) in financial institutions are subject to approval from the Central Bank of Iceland ( http://en.fme.is/ ). Investment screening legislation, led by the Prime Minister, was introduced in Iceland’s parliament in 2022.

For information on incentives and doing business in Iceland see Invest in Iceland’s website: https://www.invest.is/doing-business/incentives-and-support .

Competition and Antitrust Laws

Competition Law no. 44/2005 is currently in place to promote competition and to prevent unreasonable barriers on economic operations. Depending on the turnover of the companies in question, the Icelandic Competition Authority is notified of mergers and acquisitions. The Authority may annul mergers or set conditions to prevent monopolies and limitations on competition. For more information see the Competition Authority’s website: https://en.samkeppni.is/ .

Expropriation and Compensation

The Constitution of Iceland stipulates that no one may be obliged to surrender their property unless required by the government to serve a public interest, and that such a measure shall be provided for by law and full compensation be paid. A special committee is appointed every five years to review and proclaim the legality of expropriation cases. If the committee proclaims a case to be legal, it will negotiate an amount of compensation with the appropriate parties. If an amount cannot be agreed upon, the committee determines a fair value after hearing the case of all parties.

The Icelandic government has never expropriated a foreign investment. However, some private investors described actions by the Icelandic government before and during the October 2008 financial crisis (related to the takeover of three major banks and offshore krona assets) as a type of indirect expropriation.

Dispute Settlement

ICSID Convention and New York Convention

Iceland has ratified the major international conventions governing arbitration and the settlement of investment disputes.

Iceland is a member state to the International Center for the Settlement of Investment Disputes (Washington Convention), as well as a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).

Investor-State Dispute Settlement

Iceland has ratified the major international conventions governing arbitration and the settlement of investment disputes.

There was a public dispute in 2016 and 2017 between hedge funds based in the United States and United Kingdom and the Icelandic Government concerning offshore krona owned by these hedge funds and capital controls in effect following the economic collapse in 2008. These hedge funds filed a case against the Government of Iceland at the EFTA courts, but later dropped the case.

An Icelandic company that operates airports in Iceland grounded an airplane owned by an American leasing company in April 2019, due to outstanding debt towards the airport operator that an airline had accumulated. The airline had just declared bankruptcy and owed the airport operator around 2 billion ISK (approx. $16 million) in landing fees. The airport operator decided to ground the American plane that had been leased by the airline and insisted that the American company settle the airline’s debt. The American company took the airport operator to court, won the case, and the plane was released.

International Commercial Arbitration and Foreign Courts

Iceland has ratified the major international conventions governing arbitration and the settlement of investment disputes. Iceland accepts binding arbitration of investment disputes.

The Icelandic Chamber of Commerce operates an independent arbitration institute, called the Nordic Arbitration Centre. The awards of the Arbitral Tribunals are final and binding for the parties. Furthermore, due to Iceland’s ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the Tribunal’s awards are enforceable in over 144 countries. For more information see the Iceland Chamber of Commerce’s website: http://chamber.is/services/NAC .

Bankruptcy Regulations

The 1991 Act on Bankruptcy states that “the provisions of this Act on the right to obtain a license of financial reorganization or for composition with creditors, and on bankruptcy, shall only apply to a debtor who is a natural person if the debtor’s legal domicile is in Iceland and the debtor is not exempted from the jurisdiction of the courts of Iceland. The provisions of this Act shall however be applied to Icelandic nationals not having their legal domicile in Iceland if they are exempted from the jurisdiction of the courts of other states. Where the debtor is a company or an institution the provisions of this Act on his right to obtain a license of financial reorganization or for composition with creditors, or on bankruptcy, shall only apply if the following conditions are fulfilled: in the case of a registered company, if its registered venue is in Iceland, and in the case of an unregistered company, if its venue is in Iceland according to its articles or as provided for by law, or in the nature of the matter. The same shall apply, as applicable, to institutions.” For more information, refer to the Act on Bankruptcy: https://www.government.is/publications/legislation/lex/2018/01/15/Act-on-Bankruptcy-etc.-No.-21-1991/ .

Investment Incentives

Iceland welcomes foreign direct investment. Iceland has, through the public-private agency Invest in Iceland, identified the following “key sectors” in Iceland: food and natural products, data centers, energy and green solutions, innovation, fisheries, creative industries, and life sciences. Authorities reimburse up to 35 percent of cost incurred during the production of television programs and films in Iceland. For more information visit ( www.invest.is ) and ( www.filminiceland.com ) for information specific to the film industry.

The 2015 Act on Incentives for Initial Investments in Iceland was implemented to “promote initial investment in commercial operations, the competitiveness of Iceland and regional development by specifying what incentives are permitted in respect to initial investments in Iceland and how they should be used.” For more information see the English translation of the act: https://www.government.is/topics/business-and-industry/incentives-and-investment-agreements/ .

There is significant debate regarding the appropri8ate types and level of FDI in Iceland, particularly within the energy sector and with regard to job creation and the environmental impact associated with certain projects. Historically, foreign investment has been in energy-intensive industries, such as aluminum smelting, although investments in tourism, life sciences, and information technology have grown as a proportion of total FDI in recent years.

Subsidiaries of foreign companies are able to participate in government-subsidized research and development programs, but only to cover R&D costs that are borne in Iceland. For further information see: http://en.rannis.is .

Foreign Trade Zones/Free Ports/Trade Facilitation

For information on importing to Iceland and customs procedures, please visit the Iceland Revenue and Customs website: https://www.skatturinn.is/english/companies/customs-matters/importing-to-iceland/ .

Performance and Data Localization Requirements

Iceland follows the EU General Data Protection Regulation and is a member of the U.S.-EU Privacy Shield arrangement for transatlantic data transfers. The Icelandic Data Protection Authority (DPA) monitors the implementation of Regulation 2016/679 of the European Parliament and of the Council on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and of the Act on Data Protection and the Processing of Personal Data no. 90/2018. DPA’s law-enforcement work includes “monitoring data controllers and ensuring that they take appropriate security measures, in accordance with law.” For more information see the Icelandic Data Protection Authority’s website: https://www.personuvernd.is/information-in-english/ .

Real Property

Only Icelandic citizens and foreign citizens that have permanent residency in Iceland can acquire the right to own or use real property in Iceland, including fishing and hunting rights, water rights, or other real property rights, whether by free assignation or enforcement measures, marriage, inheritance, or deed of transfer. However, special rules apply for citizens of the EEA. The Minister of Justice may grant exemption from these conditions based on application showing the need of ownership for business activities. The Minister’s permission is not necessary if leasing real property for less than three years or when the party involved enjoys rights in Iceland under the rules of the EEA. For more information, please see the Act on the Right of Ownership and Use of Real Property: https://www.government.is/Publications/Legislation/Lex/?newsid=353f66b8-f153-11e7-9421-005056bc4d74 .
Property rights are generally enforced in Iceland. There is good access to mortgages and other financing to purchase real property in Iceland from commercial banks, pension funds and private lenders.

Intellectual Property Rights

Iceland is not listed in the USTR’s 2021 Special 301 Report, but the country is listed in the Notorious Markets for Piracy and Counterfeiting 2022 Report, as Iceland allegedly hosts servers for hosting provider FlokiNET.

Iceland adheres to key international agreements on property rights. Trademarks, copyrights, trade secrets, and industrial designs are all protected under Icelandic law. Iceland is a signatory of the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty (PCT), and of the European Patent Convention (EPC). For further information see: https://europa.eu/youreurope/business/running-business/intellectual-property/patents/iceland/index_en.htm . Iceland is also a member of the European Patent Organization, the World Intellectual Property Organization (WIPO), and a party to most WIPO-administered agreements. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/ .

The Icelandic Intellectual Property Office’s (ISIPO) is a government agency under the auspices of the Minister of Higher Education, Science, and Innovation. ISIPO is responsible for “issues relating to patents, trademarks, design protection, municipal emblems, and other comparable rights as provided for by law, regulations, and international agreements on the protection of intellectual property rights in the field of industry.” For more information visit the ISIPO webpage in English: https://www.isipo.is/ .

Illegal downloading and distribution of films and TV shows has decreased in recent years due to widespread access to international streaming services, such as Netflix, Disney Plus, and Icelandic streaming services. Purchasing low-cost, counterfeit consumer goods on Chinese websites, namely AliExpress.com, is popular in Iceland, although that trend has declined somewhat due to increasing fees imposed by Iceland Post on incoming international deliveries. Customs seize counterfeit products if found and contact the owner of the intellectual property who then decides whether to press charges against the importer. If the owner of the intellectual property does not want to take legal actions, customs clears the items and sends them to the importer. Iceland Revenue and Customs has on a few occasions seized counterfeit consumer goods that led to charges being pressed against the importer, including shipments containing counterfeit Nike shoes and Arco designer lamps in 2014. Iceland Revenue and Customs participated in the United Nations Office on Drugs and Crime’s campaign against counterfeit products in 2014: https://www.tollur.is/embaettid/frettir/frett/2014/03/13/Althjodlegt-atak-gegn-eftirlikingum/ .

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/. 

Capital Markets and Portfolio Investment

Capital controls were lifted in March 2017 after more than eight years of restricting the free movement of capital. New foreign currency inflows fall under the Rules on Special Reserve Requirements for new Currency Inflows, no. 223/2019 which took effect on March 6, 2019, and replaced the older Rules no. 490/2016 on the same subject. The rules contain provisions on the implementation of special reserve requirements for new foreign currency inflows, including the special reserve base, holding period, special reserve ratio, settlement currency, and interest rates on deposit institutions’ capital flow accounts with the Central Bank of Iceland and Central Bank certificates of deposit. For more information see the Central Bank of Iceland’s website: cb.is. 

Foreign portfolio investment has increased significantly over the past few years in Iceland after being dormant in the years following the 2007 economic crash. U.S. investment funds have been particularly active on the Icelandic stock exchange. The Icelandic stock exchange operates under the name Nasdaq Iceland. Companies listed on Nasdaq Iceland are reported on its website: http://www.nasdaqomxnordic.com/hlutabref/Skrad-fyrirtaeki/iceland . The private sector has access to financing through the commercial banks and pensions funds.

The IMF 2019 Article IV Consultation report states that “the de jure exchange rate arrangement is free floating, and the de facto exchange rate arrangement under the IMF classification system is floating. In the period from November 2018 to October 31, 2019, the Central Bank of Iceland (CBI) intervened in the foreign exchange market on 14 of the 248 working days. The CBI publishes daily data on its foreign exchange intervention with a lag. Iceland has accepted the obligations under Article VIII, Sections 2(a), 3, and 4 and maintains no exchange restrictions subject to Fund jurisdiction under Article VIII, Section 2(a). Iceland continues to maintain certain measures that constitute exchange restrictions imposed for security reasons based on UN Security Council Resolutions.” (Source: https://www.imf.org/en/Publications/CR/Issues/2019/12/19/Iceland-2019-Article-IV-Consultation-Press-Release-and-Staff-Report-48891) )

Foreign Exchange and Remittances

Foreign Exchange

The Act on Investment by Non-residents in Business Enterprises no. 34/1991 and no. 46/1996 states that “non-residents who invest in Icelandic enterprises shall have the right to convert into any currency for which the Central Bank of Iceland maintains a regular exchange rate any dividends received or other profits and proceeds from sales of investments.” ( https://www.government.is/publications/legislation/lex/2018/02/14/Act-No-34-1991-on-Investment-by-Non-residents-in-Business-Enterprices-/ ). The Central Bank temporarily imposed capital controls following the collapse of the financial sector in 2008; those restrictions were largely lifted in 2017. Transactions involving imports and exports of goods and services, travel, interest payments, contractual installment payments, and salaries were still permitted under the capital controls.

The Annual Report on Exchange Arrangements and Exchange Restrictions 2018, published by the International Monetary Fund (IMF), states that “Iceland fully eliminated exchange restrictions on conversions and transfers related to current international transactions with bonds.” “Iceland progressively relaxed and finally eliminated restrictions on withdrawing foreign currency cash from resident’s domestic foreign exchange accounts and eased rules governing transfers abroad for some financial transactions. It also gradually eased and eventually removed the requirement that residents repatriate foreign currency acquired abroad.” The report is available through this link: https://www.imf.org/en/Publications/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions/Issues/2019/04/24/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions-2018-46162 .

The Central Bank of Iceland publishes the official exchange rate on its website: https://www.cb.is/statistics/official-exchange-rate/ . According to the Central Bank of Iceland, the exchange rate of the Icelandic krona is determined in the foreign exchange market. Once a day, the Central Bank of Iceland fixes the official exchange rate of the krona against foreign currencies, for use as a reference in official agreements, court cases, and other contracts between parties that do not specify another reference exchange rate; cf. Article 19 of the Act on the Central Bank of Iceland and fixes the official exchange rate index at the same time. Under extraordinary circumstances, the Central Bank may temporarily suspend its quotation of the exchange rate of the krona. The exchange rate of the Icelandic krona (ISK) to the U.S. dollar was 138.62 ISK = $1.00 as of April 3, 2023.

Remittance Policies

Most restrictions on foreign exchange transactions and cross-border movement of domestic and foreign currency were lifted on March 14, 2017, when capital controls were lifted. New foreign currency inflows fall under the Rules on Special Reserve Requirements for new Currency Inflows, no. 223/2019 which took effect on March 6, 2019, and replaced the older rules no. 490/2016 on the same subject. The rules contain provisions on the implementation of special reserve requirements for new foreign currency inflows, including the special reserve base, holding period, special reserve ratio, settlement currency, and interest rates on deposit institutions’ capital flow accounts with the Central Bank of Iceland and Central Bank certificates of deposit. The rules set the interest rate on capital flow accounts with the Central Bank of Iceland and Central Bank certificates of deposits at 0 percent and specify the Icelandic krona as the settlement currency. The Foreign Exchange Act no. 87/1992 and the Act no. 42/2016 Amending the Foreign Exchange Act state that the holding period may range up to five years and that the special reserve ratio may range up to 75 percent; however, the aforementioned rules set the holding period at one year and the special reserve ratio at 0 percent. For more information see the Central Bank of Iceland’s website: www.cb.is .

Sovereign Wealth Funds

Iceland does not have a sovereign wealth fund.

Privatization Program

Icelandic authorities are more than halfway through the process of privatizing Islandsbanki, one of Iceland’s three commercial banks. Authorities sold 35 percent shares in Islandsbanki in 2021, and 22.5 percent in 2022. The government currently owns 42.5 percent of the bank. The government of Iceland currently owns 99.8 percent in Landsbankinn and has no immediate plans to privatize it. The government took ownership of the banks when the Icelandic banking system collapsed in 2008. Minister of Finance and Economic Affairs Bjarni Benediktsson has publicly declared his intentions to sell all government shares in Islandsbanki but wants the government to remain a large shareholder in Landsbankinn, with around 40 percent of shares.

Climate Issues

Iceland’s 2018 Climate Action Plan (CAP), which was updated in 2020, is designed to achieve national climate goals of making the country carbon neutral by 2040 and cutting greenhouse gas emissions by 40 percent by 2030 under the Paris Agreement. The MIT Technology Review’s Green Future Index ranked Iceland first out of 76 economies in 2022. The MIT report stated that Iceland has been “a global leader in geothermal energy for decades” and has constructed the world’s largest direct air capture CO2 capture and storage plant.

Focus from the Government of Iceland on electric vehicles has been ongoing in recent years, with tax incentives for buying electric cars extended through 2023. This approach has been successful in increasing the total number of electric cars, and electric charging stations. The CAP prohibits new registration of diesel and gasoline vehicles after 2030.  In 2022, 30 percent of all new registrations were electric or hybrid vehicles, according to the Federation of Automotive Companies in Iceland, up from 24 percent in 2021.

The rise in sea traffic has convinced port authorities to develop a new docking system, especially targeted at cruise ships and expedition ships. This docking system will be fitted with the environmental port index, ranking ships that dock from zero points to 100 points. The more points a ship receives, the less they must pay. Older, more polluting ships will have to pay more, and will eventually be excluded from docking. The Icelandic government also has discussed mandating that cruise ships and other vessels use electricity while at port to eliminate emissions from the vessels.

Private companies have made progress themselves without direct influence from the authorities, as larger companies like Dominos have completely revamped their car fleet, using only electric cars.

Resources to Report Corruption

Contact at the government agency or agencies are responsible for combating corruption: