Restrictions on investments and operations
Foreign direct investment is welcomed in Iceland and as Icelandic is part of the common European market, via the European Economic Area Agreement, all residents and entities within the European Union and EFTA, enjoy in most cases the same rights to invest as Icelanders do. There are some sector based restrictions that apply to all non-residents (including EEA residents) and some requirements are made regarding investments of residents outside EEA.
Sector based restrictions
The right to conduct fishing operations within the Icelandic fisheries jurisdiction, or own or run enterprises engaged in fish processing, does only apply to Icelandic citizens or Icelandic entities that are wholly owned by Icelandic entities or legal entities that are controlled by Icelandic entities, not under more than 25% ownership of foreign entities (up to 33% in certain circumstances), are in other respects under the ownership of Icelandic citizens or Icelandic legal entities controlled by Icelandic entities.
Only Icelandic citizens and other Icelandic entities, as well as individuals and legal entities residing in other European Economic Area countries, are permitted to own energy exploitation rights relating to waterfalls and geothermal energy for other than domestic use. The same applies to enterprises, which produce or distribute energy.
The maximum total share capital owned by non-residents in Icelandic airline companies is 49%.
Public Foreign Ownership
Special permission must be applied for from the Ministry of Culture and Business Affairs in the case of investment in Icelandic enterprises by foreign states, foreign municipalities or other foreign authorities involved in enterprises.
EEA and OECD Citizens
An individual domiciled within the EEA and/or OECD may run a business or take part in a business enterprise with unlimited liability in Iceland, while those from non-member countries need to apply for permission from the Ministry of Culture and Business Affairs or the relevant authority.
Companies outside of the EEA and OECD
Limited liability companies and other legal entities with domicile outside the EEA and the OECD may operate in Iceland provided that this is permitted in an international treaty to which Iceland is a party or if permission is granted by the Ministry of Culture and Business Affairs. Board membership of Icelandic companies by individuals with residence outside the EEA/OECD is subject to restrictions (residence requirements) but the Ministry of Culture and Business Affairs may grant exemptions.
The right to own and control property
Residents and legal entities, domiciled outside EEA or EFTA, are subject to restrictions on real property purchases in Iceland, as explained below. Large scale investment project are generally exempted from these restriction via standard clauses in an investment agreement with the Ministry of Higher Education, Science and Innovation (see chapter on incentives). The Minister of Justice can also grant exemptions, to those that are permitted to run a business in Iceland (EEA and OECD entities and those having received a permission as described in the chapter on Business Enterprises), when the property is to be used as business premises or a permanent residence, or when other reasons apply.
For others the basic restrictions are that private individuals may purchase real property if they are either Icelandic citizens or have their legal residence in Iceland. Partners of legal entities or businesses, who have unlimited liability for the debts of the entity or business concerned, must be Icelandic citizens, or individuals domiciled in Iceland for at least 5 years, in order to purchase a real property. In the case of a limited liability company or an institution, the company, or the institution, must be domiciled and have its venue in Iceland. Furthermore, the members of the board and directors must be Icelandic citizens or domiciled in Iceland for at least 5 years. In case of corporations, 4/5 of the share capital must be owned by Icelandic citizens and Icelandic citizens must exercise the majority of the votes at shareholder meetings.