How to Do LLC Company Registration in Iceland

Can You Register an LLC in Iceland?

Yes, LLC company registration in Iceland is possible. However, the local legal structure used is known as Einkahlutafélag (ehf.) in Icelandic. This structure functions similarly to a limited liability company in Iceland, providing liability protection to shareholders and allowing flexible ownership.

Advantages of Forming an LLC in Iceland

Below are some of the most important advantages of LLC formation in Iceland and why many businesses choose this Nordic jurisdiction.

• Limited Liability Protection for Owners: One of the biggest advantages of establishing a limited liability company in Iceland is the legal protection provided to shareholders. In this structure, the company is treated as a separate legal entity, meaning owners are not personally responsible for the company’s debts beyond their invested capital.
• Competitive Corporate Tax Rate: Another major benefit is the country’s favorable corporate tax system. Compared with many European countries, Iceland maintains a relatively moderate corporate tax rate (20%), helping businesses retain more of their profits.
• Access to European Markets Through the EEA: Another key advantage is the country’s membership in the EEA. This gives businesses a valuable gateway to the European market without being a full member of the European Union (EU).
• Business-Friendly and Transparent Legal System: When considering how to form an LLC company in Iceland, one major advantage is the country’s strong legal framework and transparent governance system. This environment helps build trust among investors and international partners.

Steps to Register an LLC in Iceland

Below is a step-by-step guide explaining how to form an LLC company in Iceland:

Step 1: Choose and Verify the Company Name

The first step is selecting a unique company name that complies with Icelandic business naming rules. This name must not be identical or too similar to an existing registered company.

• Conduct a company name search with the Register of Enterprises.
• Provide details such as the company name, legal address, and founding date.
• The system checks existing company names and trademarks before approval.

Step 2: Prepare the Required Formation Documents

Before submitting an application, prepare official incorporation documents. These documents establish the legal structure and governance of the LLC company in Iceland.

Typical documents include:

• Notice of establishment (Form RSK 17.21)
• Memorandum of Association
• Articles of Association (company bylaws)
• Minutes of the founding meeting
• Notification of beneficial owners (Form RSK 17.27)

All company formation documents must generally be submitted in Icelandic according to the Act on Private Limited Companies.

Step 3: Deposit the Minimum Share Capital

Another important requirement when forming an LLC in Iceland is depositing the required share capital before submitting the registration application.

• The minimum capital for a limited liability company in Iceland (ehf.) is ISK 500,000.
• The entire capital amount must be paid at the time of company formation.
• Capital contributions can be cash or certain approved assets.

Step 4: Submit the Application to the Register of Enterprises

Once all documentation and capital requirements are fulfilled, the next step is to officially apply for LLC company registration in Iceland.

• Applications are submitted to the Register of Enterprises (Fyrirtækjaskrá) under Iceland Revenue and Customs.
• The application can be filed electronically through the Skatturinn service portal.
• Electronic registrations typically take 3–5 working days to process.

Step 5: Receive Company Registration Number and Certificate

After approval, the authorities issue official documentation confirming the existence of the LLC in Iceland.

• The company receives an identification number (kennitala).
• Founders receive a registration certificate confirming the legal status of the business.
• This certificate allows the company to begin operations and conduct transactions.

Step 6: Register for VAT and Employer Obligations

After establishing the LLC company in Iceland, the company must complete additional registrations before starting operations.

• Businesses selling taxable goods or services must register for VAT.
• Companies hiring employees must also register in the Employer Register.
• VAT registration must generally be completed before business activities begin.

Documents Required for LLC Registration in Iceland

Below is a detailed overview of the documents typically required for LLC registration in Iceland:

• Notice of Establishment Form (RSK 17.21)
• Memorandum of Association (Agreement of Incorporation)
• Articles of Association
• Minutes of the Founding Meeting
• Beneficial Owner Declaration (RSK 17.27)
• Proof of Identity for Founders and Directors:
  • Valid passport (color copy)
  • Proof of residential address
  • Signature specimen
• Proof of Registered Office Address in Iceland:
  • Office lease agreement
  • Property ownership certificate
  • Written consent from the landlord for the use of the registered office
• Proof of Share Capital Deposit:
  • A bank confirmation or an accountant’s affidavit verifies that the share capital has been paid.
  • This document is submitted with the registration application.

Tax Obligations After LLC Registration in Iceland

Below is a detailed overview of the main tax responsibilities for a limited liability company in Iceland:

1. Corporate Income Tax (CIT)

Once you complete LLC formation in Iceland, the company becomes subject to corporate income tax on its profits.

• The corporate income tax rate is 20% for limited liability companies such as private limited companies (ehf.).
• This tax applies to the company’s net income after deductible business expenses.
• Resident companies pay tax on worldwide income, while non-resident companies pay tax on income generated in Iceland.

2. Value-Added Tax (VAT)

Businesses operating an LLC in Iceland that sell goods or services must usually register for VAT and collect it from customers.

• The standard VAT rate is 24%.
• A reduced VAT rate of 11% applies to specific goods and services such as food, accommodation, and passenger transportation.
• Businesses must register for VAT before beginning taxable activities.
• VAT returns are typically filed every two months.

3. Social Security Contributions for Employees

If your LLC company in Iceland hires employees, the company must also pay employer social security contributions.

• Employers contribute approximately 6.35% of employee salaries to social security.
• These contributions support Iceland’s welfare and pension systems.
• Companies must report and remit these payments regularly through the tax authority’s system.

4. Capital Gains and Withholding Taxes

Certain financial transactions related to an LLC registration in Iceland may also trigger additional taxes.

• Capital gains, dividends, and certain investment income may be taxed at approximately 22%.
• Withholding taxes may apply to cross-border payments such as dividends, interest, and royalties.
• Tax rates may be reduced if Iceland has a double taxation treaty with the investor’s country.

Understanding the tax scenario helps entrepreneurs successfully manage their LLC company registration in Iceland and avoid unexpected costs.

Set Up Your LLC Today with Commenda

Starting a business in a new country can be complex, especially when trying to understand the regulations, documentation, and tax requirements. If you’re planning LLC company registration in Iceland, using a professional formation service can significantly simplify the process. 

Commenda offers a technology-driven platform that helps entrepreneurs and global companies manage incorporation, compliance, and tax obligations from one place.

Its key services typically include:

• Global Expertise for Cross-Border Businesses: Commenda’s platform is designed for cross-border companies. Businesses can manage incorporation, tax registrations, and compliance across several countries through a single system.
• Social Proof and Industry Trust: Commenda has become a trusted partner for international business expansion and compliance management. The company supports hundreds of cross-border companies with incorporation and tax compliance services across multiple markets.
• Dedicated Support for Entrepreneurs: Another reason many founders choose Commenda when forming an LLC in Iceland is the level of support provided throughout the process. Businesses benefit from:
  • Expert guidance on company formation and compliance
  • Multilingual customer support for international founders
  • Transparent pricing and streamlined documentation workflows
  • Technology-driven compliance management tools

By helping you avoid common mistakes and speed up the incorporation process, Commenda makes it easier to establish and manage your LLC in Iceland.

Book a consultation today to start LLC formation in Iceland and launch your business with confidence.