Entity Formation in Iceland

Ready for a permanent Icelandic presence? We help you incorporate the right way, and stay alongside you for the accounting, payroll, and compliance that follow. Independent advice, including on the best time to make the move.

  • Independent advice
  • Vetted partners
  • Honest timing

What incorporating in Iceland means

An ehf. (einkahlutafelag, private limited company) is the standard vehicle for a permanent business presence, formed by filing a memorandum of association with Fyrirtaekjaskra, Iceland’s Register of Enterprises, administered by Skatturinn. There is no deed-execution step in front of a legal officer and no separate court registry step. Larger operations sometimes use an hf. (hlutafelag, public limited company). When you form an ehf., you become the legal employer and operator in Iceland, with full control and no per-employee EOR fees, in exchange for the setup time and the ongoing obligations.

01

Your own company

Your own ehf. makes you the legal employer and operator in Iceland, with full control of employment terms and a local brand presence.

02

Lower cost at scale

No per-employee EOR fees. For permanent, proven headcount in a small, high-employment market like Iceland’s, owning the entity is more cost-effective than ongoing EOR arrangements.

03

Setup takes time

Incorporation itself moves quickly once your documents and capital are in order, but you cannot legally employ anyone until Fyrirtaekjaskra registration completes. If your founding team is based entirely outside the EEA, resolving the director-residency condition first can add real time to the plan. Timing the move matters, which is why many companies bridge with an EOR first.

How incorporating in Iceland works, step by step

From structuring the company to operating it compliantly.

01 — Structure & prepare

We confirm incorporation is right for you, then prepare the memorandum of association, run the company-name availability check, and confirm your registered Icelandic address and a board that already satisfies the director-residency condition below.

02 — Capital & filing

There is no deed-execution step in front of a legal officer. The minimum share capital, ISK 500,000, must be paid in full before incorporation completes, there is no phased or nominal-capital route here. Once it is paid in, the memorandum of association and supporting documents go to Fyrirtaekjaskra.

03 — Register the company

Once Fyrirtaekjaskra approves the filing and issues the company its kennitala (registration number), Skatturinn registers the ehf. for corporate tax and, if required, VAT, so you can operate and employ compliantly.

04 — Operate & stay compliant

Business bank account, then ongoing accounting, payroll, filings, and annual accounts, all of which we can run for you.

What incorporating in Iceland costs

Two kinds of cost: the one-off formation, and the ongoing operating obligations. Iceland’s own fee schedule is revised periodically, so we confirm the live figure before you commit.

Share capital & formation

Minimum share capital for an ehf. is ISK 500,000, and it must be paid in full at incorporation. The current Fyrirtaekjaskra/Skatturinn filing fee is ISK 140,500; fee schedules are revised from time to time, so treat this as the current published figure and we will confirm the live one when we scope your filing. There is no separate deed-execution fee to budget for, Icelandic formation does not require one.

Corporate tax

20% standard flat rate for ehf. and hf. limited companies. Partnerships and other non-limited entities are taxed differently, at 37.6%, one more reason most founders choose the limited company route.

VAT

Standard VAT is 24%, with an 11% reduced rate for categories such as accommodation, food and catering, books, and passenger transport. Registration is mandatory once turnover passes ISK 2,000,000 within a rolling 12-month period, not a fixed calendar year.

Ongoing obligations

Annual accounts and a corporate tax return filed with Skatturinn, monthly payroll withholding (income tax and tryggingagjald, Iceland’s employer-only social charge), and VAT filings if you are registered, all of which we can manage for you.

Why form your Icelandic company through Bradford Jacobs

Why companies incorporate in Iceland through us rather than a one-off formation agent.

We advise you on the best time to incorporate

We are independent: we assess what you actually need, place you with the right vetted partner, secure pricing you will not get going direct, and stay on your side to escalate or renegotiate. You get advice, not a product pitch.

  • Independent advice
  • Vetted partners only
  • On your side at renewal

End-to-end, not just the paperwork

We do not disappear once Fyrirtaekjaskra confirms your registration. We stay on for the accounting, payroll, and compliance that keep an ehf. compliant, so your company runs, not just exists.

  • Beyond registration
  • Ongoing compliance
  • One team throughout

The right specialists, in place

Registration, tax, and accounting partners we have vetted and worked with, coordinated for you, so the process moves and nothing gets missed.

  • Vetted specialists
  • Coordinated for you
  • Nothing gets missed

Two decades of formations

Two decades forming and running entities across global markets, including inside the EEA/EFTA framework Iceland sits in, with the local knowledge to keep you compliant and out of the common traps.

  • Incorporations
  • Legal & tax partners
  • Traps avoided

We run it after you form it

Incorporation is the start, not the finish. We stay on for accounting, payroll, tax filings, and annual accounts, so your company operates from day one without you building a local back-office team.

  • Full back office
  • Accounting & payroll
  • Annual accounts

The Iceland incorporation trap: the residency condition

A growing business hits a good quarter and someone says, let us just set up a proper Icelandic company. It usually is the right call, once one condition is planned for properly rather than discovered after filing. Here is what people expect against what happens in practice.

Director & board residency

Expectation: we will just appoint our own team as directors, wherever they live. Reality: under Log nr. 138/1994, the managing director(s) and at least half the board must be resident in Iceland or elsewhere in the EEA (or EFTA/Faroese) state. A director resident anywhere in the EEA satisfies this, so an all-non-EEA founding team, a US or post-Brexit UK team, for example, needs at least one qualifying director in place before filing, not after.

Tax, filing & reporting obligations

Expectation: we can always reverse it, and ISK 500,000 in share capital is a low bar so under-capitalising costs nothing. Reality: winding up an ehf. needs a shareholder resolution and a formal liquidation process, it is not a quick unwind. And once the company exists, the obligations do not stop: annual accounts, a corporate tax return, and, if registered, VAT filings, are due every year regardless of trading activity. ISK 500,000 is legally sufficient to incorporate, but it is often thin relative to what local landlords, banks, and creditors expect from a company that looks permanent. None of this is a reason not to incorporate. It is a reason to do it at the right time, with the right partners already in place.

What we handle for your company

Beyond incorporation, we can run the full back office for your company.

Compliant payroll

Compliant Icelandic payroll and employment administration, issued and maintained for you.

Payroll & filings

Monthly payroll run, with income tax and tryggingagjald, Iceland’s employer-only social charge, calculated, withheld, and filed each month.

Statutory benefits

All statutory benefits administered: annual leave, sick pay, parental leave, notice and severance.

Compliance & support

Ongoing HR compliance and a single point of contact, for the life of the engagement.

Your questions answered

Straight answers on incorporating and running a company in Iceland.

How long does it take to incorporate in Iceland?

There is no fixed court-filing timeline here, formation is a Fyrirtaekjaskra registration, not a court process. In practice it moves quickly once the memorandum of association, fully paid share capital, and a compliant board are in place, but if your founding team is entirely outside the EEA, arranging a qualifying director first can add real time. You cannot legally employ anyone until registration completes, which is why timing matters and why many companies bridge with an EOR first.

ISK 500,000, and it must be paid in full before incorporation completes, there is no phased or nominal-capital route. The current Fyrirtaekjaskra/Skatturinn filing fee is ISK 140,500 (fee schedules move from time to time, so we confirm the live figure when we scope your filing). The real cost is the ongoing accounting and compliance, which we can run for you.

Yes, for shareholders there is no residency or citizenship requirement at all. Directors are different: the managing director(s) and at least half the board must be resident in Iceland or elsewhere in the EEA (or EFTA/Faroese) state. A director resident anywhere in the EEA satisfies this, so a founding team based entirely outside the EEA, a US or post-Brexit UK team, for example, needs at least one qualifying director in place before filing. We help structure this, and arrange your registered Icelandic address.

Incorporate when you have permanent, proven headcount and want full control, and the per-head savings justify the ongoing costs. Use EOR while you are still validating the market, need people working quickly, or don’t yet have an EEA-resident director in place. Most companies start with EOR and incorporate later. We advise on the crossover.

Annual accounts and a corporate tax return filed with Skatturinn, monthly payroll withholding (income tax and tryggingagjald), and VAT filings if you are registered. We can run all of it so the entity stays compliant without you building a local back-office team.

Yes, and it is how most companies use us. Beyond incorporation we provide ongoing accounting, payroll, and compliance, so your Icelandic company operates smoothly from day one without hiring locally for back office.

Ready to form your company in Iceland?

Tell us your plans for Iceland and we will tell you honestly whether now is the time to incorporate, then handle it end to end if it is, usually scoped within a day. No formation-mill upsell, just the right call.

Tax, company, and labour data verified July 2026 (Skatturinn, Fyrirtaekjaskra, Log nr. 138/1994 via althingi.is). The ehf. filing fee shown (ISK 140,500) is the current published figure; fee schedules are revised periodically, so we confirm the live position when we scope your formation.