Last night Althingi (Icelandic parliament) passed a legislative bill from the Minister of Business Affairs, amending the Foreign Exchange Act of 1992. This new Act authorizes the Central Bank, upon consultation with the Minister, to adopt rules restricting cross-border movement of capital.

In the midst of the economic turmoil affecting the globe it is important to not only look at the short term but to look further down the road. Even though the credit crunch has affect Iceland more severely than most western countries the long term economic outlook in Iceland is very positive. The untapped renewable energy sources, the highly advanced, comprehensive infrastructure and a young population with a high education level supports positive outlook for the future.

The Global Competitiveness Report 2008 – 2009 rates Iceland as the 20th most competitive economy in the world. Iceland jumps 3 places from the previous year overtaking both Ireland and Malaysia.

In a breakfast meeting this morning, held by Invest in Iceland Agency, Laurence Naraina a tax expert with PwC-Belgium, introduced his findings on the competitiveness of the Icelandic tax legislation regarding moveable investments.

On May 14th Althingi, the parliament of Iceland, passed a bill on participation exemption for domestic legal entities making corporations exempt from paying taxes on capital gain. This new legislation is yet another step toward making Iceland an ideal location for financial activity and coupled with a low corporate tax rate of 15% and a simple and transparent tax system it fortifies Iceland’s position as one of the world’s most competitive business environments.

The highly competitive fiscal system in Iceland is both simple and effective, and has been recognized as such by a number of international companies that have decided to relocate their business to Iceland in the past few years. The main attraction has of course been the low 18% flat tax rate levied on corporate net gain. But Iceland has become even more competitive.

The Invest in Iceland Agency has just published Doing Business in Iceland 2008, the sixth edition of the popular Doing Business in Iceland handbook.  A PDF file of Doing Business in Iceland can be down-loaded from our website www.invest.is/publications, and a hard copy will be available on February, 21st.

Last week PricewaterhouseCoopers in Belgium, released their study on incentives schemes applied in Europe and Canada. The study was initiated by the Invest in Iceland Agency both to emphasize the importance of incentives to attract foreign investors into remote areas and also to instigate dialog on how incentives could benefit foreign direct investment in Iceland in general.