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Incentives and Support

The Icelandic Government acknowledges that Foreign Direct Investment is paramount to the continued growth of Iceland´s economy. Special emphasis is on generous support and incentives for Research and Development and for foreign experts. Iceland focuses on a favorable environment for businesses in general, including low corporate tax (20% - among the lowest in the EU), availability of land and efficiency in a European legislative framework. 

As a member of the European Economic Area, Iceland adheres to the European State Aid Rules. These allow i.a. for regional incentives for new direct investment in defined areas. In Iceland all the regions outside the capital area are generally eligible for regional investment aid.

Commission Regulation (EC) No 651/2014, on General Block Exemptions, declares certain categories of state aid compatible with the common EEA market, which Iceland is part of. These include: 

  • Incentives as Training aid of up to a maximum of 2 million Euros 
  • Incentives as aid to SMEs investment, up to 10% of investment cost in Medium Sized Enterprises or 20% of investment cost in Small Enterprises , with a ceiling of 7.5 million Euros
  • Incentives as aid to environmental protection investment projects up to a maximum of 15 million Euros. 

The Regulation falls under the Agreement on the European Economic Area

Businesses have the opportunity to negotiate terms individually, based on the company's influence on the overall economy and the merits of the investment in questions.

Applications for incentives and investment agreements can be submitted to the Ministry of Industries and Innovation, for general review. Investment agreements, with defined incentives, are subject to legislative authorisation from the Parliament and approval from the EFTA Surveillance Authority.

Tax incentives for foreign experts

Foreign experts, hired to work in Iceland, do enjoy personal tax incentives. A special tax deduction allows that only 75% of the income is considered taxable for the first three years of employment, if the foreign expert is hired with a legal person, which has domicile or a fixed place of business in Iceland and that legal person is the actual salary-payer; the foreign expert has not been domiciled in Iceland the previous 5 years before his recruitment; and the foreign expert has knowledge that is limited in Iceland.

Incentives for R&D

Iceland offers incentives for research and development in the form of tax credits for innovation companies as outlined in Act No 152/2009, approved by the EFTA Surveillance Authority. The aid is granted as a reimbursement of the companies´ paid income tax. The tax credit is 35% of the actual R&D cost within small and medium sized companies and 25% within other. There is an annual ceiling of a total actual cost of ISK 1,100 million which may include outsourced cost of up to ISK 200 million. Under the scheme companies that carry out research and development projects can apply for a tax credit to the Icelandic Centre for Research (Rannís).

Support for investments and grants

Icelandic authorities and industry organisation are keen to encourage innovation and investment in research and development.

Direct R&D grants

The Technical Development fund operated by RANNÍS (The Icelandic Center for Research) offers a R&D grant to companies that are working on innovative projects. The maximum amount that will granted towards each company is 45 million ISK divided over a 3 year term. Companies applying for this grant must offer a 50% matching contribution towards the amount applied for. Application guidelines can be found in following link.

Direct Startup Grants for SME´s

The Innovation Center in Iceland offers startups and SME´s assistance and guidance with various different issue that arise when starting a company, this includes information on different grants available from the Innovation Center as well as other public and private grants. Do gain more information about these grants you can click on the link below.

Landsbanki Íslands offers innovation grant for companies in the the amount of 10 million ISK per year (80.000 USD). Companies can apply for grants for advanced projects in the amount of 500.000 – 2.000.000.- ISK. Startup projects can apply for grants from 200.000 – 500.000 ISK

Film and TV production

Producers of films and TV material can apply for a 25% reimbursement of all cost associated with producing a film or TV program in Iceland, fulfilling certain criteria. 

Get in touch

For further information on the benefits of establishing a business in Iceland please feel free to contact us.