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There are many first associations when it comes to Iceland. Iceland's extraordinary and beautiful nature, with its impressive glaciers and hot springs basking in the glow of the Northern lights, would leave anyone speechless. Only then does one remember Iceland's people and the economy of this picturesque island.
Iceland has one of the world's highest GDP per capita rank (8th at the moment) and retains a great position in the ranking of eco-friendly countries. Furthermore, according to the United Nations World happiness report, Iceland's residents hold 4th place. Considering all these facts, we're certain that Iceland contains perfect working conditions.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
The sole proprietorship registration process in Iceland
Business name registration in Iceland
Sole proprietorship's name has to be registered under your full name, but first names may be abbreviated, according to the Act respecting Firms. On the Icelandic government's website, you can find the information that you can also register your firm with the Business Register at the Directorate of Internal Revenue, and obtain a special name. This registration process costs around EUR 435.
Taxation process for sole proprietors in Iceland
In Iceland, sole traders are taxed on their corporate income and all other additional income. Also, every employed person between the ages of 16 and 70 should contribute to a pension fund. Of course, anyone who owns a business in Iceland is required to report to the tax authorities.
Income tax can go up to 46,24%, but it depends on the annual income:
- If the income is lower than ISK 290,000, the tax rate is 37.30%
- For monthly income from ISK 290.001 up to ISK 784,619, the tax rate is 39.74%
- For income higher than ISK 784,619, the tax rate is 46.24%
The first thing you will need to complete if you're establishing a business in Iceland is applying for your VAT ID number. You will need to fill out the form on this page (only available in Icelandic, so you might need some help with the translation) and after you fill it out, take it to the tax office. Tax offices are located in several locations, and you can check which one is nearest to you on the Directorate of international revenue (RSK) website.
The registration process normally takes 2-3 days, and when it is completed, the authorities will provide you with your VAT number.