The retail sector in Iceland

The Icelandic economy has grown by more than 33% in the last 10 years. Consumer spending and retail trade in Iceland have been growing at the same or even faster pace. Foreign ownership of companies is welcome in Iceland, with a few exceptions in fisheries and energy production. It is very easy to start a business in Iceland, which ranks high on the World Bank's list of the best places to start a business. The Swapp Agency can guide you through the entire process of setting up your business in the country.

Retailers Favorite: Cheap Products, Wealthy Locals

One special feature worth mentioning is that 70% of the volume of all goods on the Icelandic retail market is imported. As the Icelandic currency, the króna, is chronically overvalued, foreign goods and services are particularly favourable for locals.

The fact that Hagar, a local retailer, owned more than 50% of the sector's total market share before 2017 has brought new competition into the country. Hagar's shares had fallen by more than 35% when Costco and H&M announced that they were interested in entering the Icelandic market, before partially recovering from this decline. Hagar's shares are still down 10% from 2017 highs as new competition emerges.

As a member of the 28-nation European Economic Area, Iceland offers an ideal platform for duty-free access to the large EU market and is a highly competitive location for EU companies. Low-cost products can be exported to Iceland to realise significant price premiums. Current trends include organic food and products related to healthy living habits. Iceland is regularly ranked among the 30 most competitive countries in the world.

The Icelandic authorities strive to provide a favourable business environment. This includes a low corporate tax rate of 20 and a new, effective system of incentives for foreign investment. The general aid ceiling is 15% of the original investment costs. This ceiling can be raised to 25% for medium-sized companies and 35% for small companies for 10 years. In addition, real estate, equipment and movable assets can be fully depreciated, property tax and general social security contributions are reduced by 50%, building materials, machinery and equipment are exempt from customs duties and levies and there is a tax credit of 20% of actual research and development costs.

Iceland ranks 5th in the world for the quality of its education system and is a world leader in the availability of the latest technologies in companies. The labour force in Reykjavik is well educated and meets OECD standards. 41% of the population have a university degree.

If you start a business in Iceland, you must apply for a VAT number at the RSK (Directorate of the Tax Authority). This is a fairly simple task. It is a two-page form that includes the registration of the VAT number and a notification of the company's estimated payroll. These forms must be completed and submitted to the tax authorities. The form is only available in Icelandic.

Get in touch with Icelandic professionals

For comprehensive commercial and legal advice, contact the Swapp agency . We are a leading group of experts in various fields. Our professional team will be happy to assist you throughout the entire process of investing in Iceland. Whether it's personnel, the sale of goods and services or legal aspects, we are ready to answer all your questions about retail in Iceland.