Founding a business in Iceland is relatively simple and quick, particularly if you already have
a kennitala. Most startups opt for the private limited company structure (einkahlutafélag or ehf), which requires a minimum share capital of ISK 500,000 ($1090). Registration is done through the Directorate of Internal Revenue (skatturinn.is), and all documents can be submitted online.
You’ll need your business plan, founding documents, board member details and proof of share capital. The required share capital must be deposited into a temporary holding account at a local bank, which will issue a confirmation letter. Once your company is officially registered, you can convert this account into a regular business bank account and register for VAT if applicable.

Hiring employees requires compliance with labor laws, collective agreements and employee rights regarding vacation, parental leave and pensions. New founders often seek guidance from legal or accounting professionals to navigate these regulations.

Major banks include Landsbankinn (landsbankinn.is), Arion Bank (arionbanki.is)
and Íslandsbanki (islandsbanki.is), all of which offer English-language services.

To open an account, you’ll need your kennitala, passport, residence certificate and proof of address. If you’re in temporary housing and don’t yet have any proof of address, ask your landlord or housing provider for a confirmation letter. Most banks allow you to apply online, but you must visit a branch in person to verify your identity. Iceland is largely cashless, so a debit card and banking app are essential.

Iceland operates a Nordic-style universal healthcare system. Public health insurance automatically covers citizens and legal residents after six months of legal residence. However, all newcomers, regardless of nationality, must show proof of private health insurance for their initial six months. Policies can be purchased through international providers or local Icelandic insurance companies such as Sjóvá (sjova.is) or VÍS (vis.is).

Once you have a kennitala, you’re automatically enrolled in the Icelandic Health Insurance system (sjukra.is), which covers general healthcare, specialist visits, hospital stays and some prescriptions. Patients usually pay a small fee for services, though children under 18 are exempt.

Taxation is relatively straightforward but varies by income. Individuals are taxed progressively, with income tax rates ranging from approximately 31.45% to 46.25%. If employed, taxes are withheld from your salary by your employer. Freelancers and business owners must register with the Directorate of Internal Revenue (skatturinn.is) to receive a tax number and report their income quarterly. VAT (value-added tax) registration is required for businesses with revenues exceeding a certain threshold.

Written by Yessica Klein
Main photo by Business Iceland