PAYROLL SERVICES IN ICELAND

It is essential for companies planning to run Payroll Services in Iceland to have a clear plan and make the right moves from day one. Companies moving into Iceland as a base for further International Expansion open up many opportunities in Scandinavia, Northern Europe, and the United Kingdom. Challenges come alongside the potential benefits, however. Payroll management is among those challenges, whether your company is considering moving employees abroad or hiring new staff in-country. Employment laws, payroll and income tax regulations are areas where you cannot afford mistakes.

Setting up a subsidiary in Iceland to run payroll is one option, but this involves a protracted process of registration, and poses many challenges – but at Bradford Jacobs, we have all the answers. Our Professional Employer Organisation (PEO) and Employer of Record (EOR) services provide complete solutions to every issue your company will face before your planned move into the Icelandic Market. Our teams step in from the start, locating top-rated talent in Iceland then guiding you through such procedures and navigating the administration of the Icelandic payroll system for you.

The different Payroll Options available in Iceland

Remote payroll – This option allows businesses to operate under a single payroll system by adding employees in Iceland to the parent company’s payroll. However, these employees must operate under different regulations, which is likely to cause problems.

Internal payroll – You may operate payroll for your subsidiary, especially if you are committed to growing your company’s presence in Iceland. However, this does require hiring dedicated HR staff who understand Iceland’s employment and compliance laws.

Iceland payroll processing company – If you are considering outsourcing, then working with an Icelandic payroll company will help in processing your payroll – but not when it comes to compliance.

Iceland payroll outsourcing – However, another option is available to solve both concerns – by working with Bradford Jacobs. We can handle payroll and compliance for all your employees in Iceland. We lift the administrative stress from your shoulders so you can focus on what you do best.

Payroll Services in Iceland

We recruit the staff in-country and then implement our comprehensive knowledge of tax and payroll regulations. As part of our service, we file returns and remits associated payments for tax and social security contributions directly from our payroll system to the relevant authorities. Outsourcing your payroll in Iceland will streamline your operations by dealing with the following:

  • Obtaining employees identification number (kennitala, kt), both the Personal ID and the System ID, registered with Registers Iceland. The System ID enables state and regional authorities to obtain information on individuals.
  • Registering employees with the Directorate of Internal Revenue and Customs (Skatturinn)
  • Ensuring staff are covered by the provisions of Iceland’s State Social Security Institute (Tryggingastofnun) for pensions, health, and disability insurance
  • Electronically submitting the employee’s Form, A-271, with all required documentation for registration on the National Registry.
  • Submitting Form, A-272 confirming the employer’s agreement with the employee
  • Assisting any foreign employees to attend the Registration Office on their arrival with the correct documentation
  • Ensuring incoming employees staying longer than six months are registered as legally domiciled with Registers Iceland. Different rules may apply to non-EEA citizens and other Nordic nationals.
  • Ensuring non-EU citizens have the correct residence permit from the Directorate of Immigration, that Registers Iceland are notified so the individual can be entered on the Population Registry
  • Ensuring employees comply with Iceland’s multi-layered state personal tax system, which has three categories, plus municipal taxes
  • Remitting taxes to the Iceland Directorate of Revenue and Customs each month and collecting refunds or making extra payments on five dates each year
  • Filing returns by March 10 of the year following the calendar tax year, preferably electronically
  • On June 1, taxpayers receive the collection and assessment notification from Regional Tax Directors.

Requirements to set up Payroll in Iceland

International companies planning to hire staff in Iceland and run payroll can open a legal entity in the country. The typical choice is establishing a private limited liability company as a subsidiary, an Einkahlutafélag, or Ehf. This company type requires a minimum share capital of 500,000 Icelandic kronor (ISK), the equivalent of €3,434 or US$3,874.

Some other requirements include the following:

  • Choose a unique company name by researching the Business Register
  • The minimum share capital of ISK 500,000 (€3,434, US$3,874) must be deposited in a bank account before recording the name in the Register of Limited Companies.
  • Register the name with the Register of Limited Companies; if it is a limited liability company, the name does not display the suffix Ehf in its title or brand.
  • Inform the Register of Limited Companies of the number of shareholders – fewer than four require only a minimum of one founder and one director.
  • In the case of one founder and director, they must be residents of Iceland or a member nation of the Organisation for Economic Cooperation and Development (OECD) or the European Economic Area (EEA). If there is more than one founder or director, at least one must fit this criterion.
  • Payment of registration fee of ISK 130,500 (€895, US$1,010), which also covers the cost of the ID number and publication in the Legal Gazette
  • Register with the Iceland Directorate of Internal Revenue and Customs (Skatturinn) and Register of Enterprises Division (RSK)
  • Companies expecting to provide goods or services each year above a value of ISK 2,000,000 (€14,040, US$16,074) must register for Value Added Tax with the Directorate using form RSK 5.02
  • The Directorate of Internal Revenue and Customs must be informed as soon as staff are employed.
  • The Memorandum of Association, including a draft of the Articles of Association
  • Articles of Association must include the company’s name and registered legal location, share capital and names of directors, business plan, and auditors.

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