The Government of Iceland has announced a 1.6bn USD response package to the COVID-19 crisis. It includes state-backed bridging loans for companies, defferal of tax payments, financial support for the tourism sector and up to 75% of salaries paid as part-time unemployment benefits.
The first-phase response measures were announced March 21 by Prime Minister Katrín Jakobsdóttir, Bjarni Benediktsson, Minister of Finance and Economy and Sigurður Ingi Jóhannsson, Minister of Transport and Local Government. The package is equivalent to just under 8% of Iceland's GDP. The aim is to safeguard the economic livelihood of people and business, protecting the welfare system and generating demand in the economy.
These economic measures are additional to Pandemic Response Plan aimed at ensuring that the Iceland health care system can cope with the spread of COVID-19.
To avoid job losses and encourage businesses to keep employees on their payroll, rather than lay them off, part-time workers can claim up to 75% of unemployment benefits.
To improve liquidity companies can postpone payment of taxes until next year.
Hotel taxes on overnight stays will be abolished till end of 2021.
To encourage lending and allow companies to continue business, there will be reductions in bank taxes and state guarantees introduced on loans to eligible companies.
Icelanders will be encouraged to travel domestically to support the tourism industry, both with a marketing initiative and fiscally.
Promote Iceland will organise an international marketing initiative for Iceland as a destination to help the industry come back.
People under quarantine have been secured income.
People can withdraw a monthly sum from their voluntary pension savings, to a maximum of ISK 800,000.
VAT reimbursement for construction and maintenance work will increase to 100% and extended to third sector organisations including charities and sports associations.
A one-off child benefit payment, to all families with children under the age of 18, will be made on June 1, 2020.
The government and local municipalities will initate a special investment project with focus on transport, public construction and technology infrastructure.
Contribution to research and science will also be increased.
Iceland focuses on a favorable business environment, including low corporate tax, availability of land and green energy at competitive prices and efficiency within European legislative framework. New direct investment projects can apply for an investment agreement, ensuring generous regional incentives, including a corporate tax rate ceiling of only 15%.
Along with having one of the lowest corporate tax rate in Europe, Iceland has a highly educated workforce which is ranked among the highest in the world, offers competitively priced renewable energy with an advanced infrastructure making Iceland an ideal location for investors