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Investment in Iceland:Everything You Need to Know

Investment in Iceland:Everything You Need to Know

Subject: Iceland:Favorable Investment Destination

Why Invest in Iceland?

Iceland is a northern European nation primarily known for its naturally beautiful landscapes and the warmth of its people. But it barely gets enough acknowledgement for being a rapidly growing European economy. Although Iceland is not an EU member state, it is a major manufacturing and trade hub.

Iceland is among the top 10 richest countries in Europe today. Its robust economic advancement has resulted from tourism, technology and the country’s achievements in harnessing green energy. Iceland is attracting a steady stream of investors from across the globe now. It is a competitive marketplace offering a favorable business climate, along with a lot of economic perks.

If you are an entrepreneur considering an investment in Iceland, there are many motivating factors. Take a look at some of them below.

Why Iceland is a Favorable Investment Destination

1. Abundance of quality labor - Iceland has one of the smallest populations in Europe but offers a diverse selection of skilled labor. The country has a very low unemployment rate as large sections of the population opt for higher education. Finding suitable labor resources for your business requirements is quite convenient. Icelandic labor can drive up the productivity of manufacturing. A large section of Icelandic workers are English speaking individuals, and also well versed in technical

2. Green and efficient energy resources
- Iceland is rich in geothermal and hydroelectric energy, two of the major forms of green energy resources. It can provide competitive energy prices for commercial and industrial energy use. In terms of energy efficiency and cost, Iceland has recently been a key player in Europe. It can be the ideal marketplace if you are a manufacturer or supplier aiming to leave a low carbon footprint. Business organizations can opt for profitable long-term energy contracts that enable considerable cost savings.

3. Strong and diverse infrastructure - Iceland excels in terms of infrastructure if considered from the point of doing business. The country has a well-connected network of roadways connecting to its industrial hubs and major ports. Due to its proximity to both North America and the rest of the EU, flight durations are also reasonably minimal. Accessible and well-established freight ports lining the coasts are another key aspect of Icelandic infrastructure. Iceland also has robust Internet connectivity and telecommunications infrastructure.

4. Corporate tax is comparatively low - Corporate business organizations operating in Iceland have to pay income tax as low as 20 percent. This figure is quite low compared to other major economies in Europe and North America. Prospective investors should also note that foreign (non-resident) and resident organizations are subjected to similar rates. Corporate tax savings each year can dynamically bolster your finances in the long run. A reasonable taxation structure helps Iceland draw investors from various industry sectors. Running your business operations in Iceland can be a sustainable model.

5. An encouraging business climate - The Icelandic economy provides and encouraging and highly flexible business climate for foreign investors. Governmental policies are regulations that help businesses prosper. Iceland is ranked as one of the top 20 European countries in the Ease of Doing Business Index, beating the likes of Germany, France, Switzerland and Spain. The country’s government has a positive stance toward foreign direct investment. Key business policies ensure that businesses can start operating soon and with the minimum regulatory hassle.

6. The location of the island
- Iceland is located right in between America and Europe, which contributes to its geostrategic importance as a key marketplace. Keflavík Airport, in the proximity of the capital Reykjavik, connects the island to many locations across the globe with daily flights. The approximate flying time from Canada and the US East Coast is about 5-6 hours, while European flying distances are about 3-5 hours. The island nation’s busy freight ports handle voluminous imports and exports to and from both the USA and Europe. Shipping operations from Iceland to both Europe and America take approximately a week (or even less).

7. The country is within the EEA - Iceland is a member of the European Economic Area (EEA). So, Iceland enjoys all the perks that EU nations enjoy, including free goods, services, persons and capital movement. So, an investor can expect to receive the same advantages offered by EU member states, apart from the cost efficiency and business ease benefits. Additionally, Iceland is also a member nation of the World Trade Organization (WTO) and the Organisation for Economic Co-operation and Development (OECD). Such a scenario creates quite an investment-conducive environment for SMEs and enterprises.

8. Incentives to sweeten the deal - Direct investors in the Icelandic marketplace can expect to receive a set of encouraging incentives. It all comes down to the pro-FDI stance of the country’s government. One of the key aspects that direct investors can look forward to is regional incentive, through the processing of an investment agreement application. Since it enjoys many of the EU perks, investors can also experience environmental and R&D incentives.

A specific legislative act i.e. the Act 41/2015 set Regional Incentives benefits for all locations (excluding Reykjavik). Some of its benefits include - machinery, construction materials, and equipment grant exemptions, fixed low income tax ceilings, depreciations and low property taxation. One can experience these benefits with investments in Iceland. 

9. It enjoys free trade with China - Iceland enjoys a Free Trade Agreement (FTA) with China. This agreement is instrumental for the needs of North American and EU businesses aiming to gain a foothold in the booming Chinese consumer market. This advantage proves to be more meaningful for prospective investors, coupled with its infrastructure strength, policies and environment. If your business objective is to produce products for China, establishing manufacturing operations in Iceland can be the best way forward. On the flip-side, Chinese investors can also harness this marketplace for realizing their European business aspirations. 

10. Iceland’s high quality of life - Another encouraging factor for prospective foreign investors is the quality of life Iceland offers. It should ideally play a role in deciding to invest in the country, as entrepreneurs can enjoy living in one of the most progressive societies in the world. Some of the encouraging aspects include a good business culture, an advanced education system that produces high-quality labor, gender equality, and optimal safety for both individuals and business interests. Iceland offers breathtaking natural beauty, ample resources and incentives, and favorable terms for investment. 

The above-mentioned points highlight some of the most important perks of choosing to invest in Iceland. The country is a lot more than just a tourist hub due to the benefits it offers to businesses.

Author: (Abhi Chauhan)
Date: 25/10/2019


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