The economy of Iceland has grown more than 33% in the last 10 years. Consumer spending and retail in Iceland have kept the same or even faster pace. Foreign ownership of the business is welcome in Iceland, with few exceptions regarding fishery and energy production. It is very easy to establish a business in Iceland, which was listed as a top performer on the World Bank rankings of best places to start a business. Swapp Agency will be able to guide you throughout the process of establishing your company in the country.
Retailers Favorite: Cheap Products, Wealthy Locals
One peculiarity which is worth noting is that in the retail market in Iceland 70% of the volume of all merchandise is imported. As the local currency, the Icelandic Króna is chronically overvalued, foreign goods & services are particularly cheap for locals.
The fact that Hagar, a local retailer, owned more than 50% of the total market share of the sector before 2017, has attracted new competition to the country. The shares of Hagar had dropped more than 35% when Costco and H&M announced that they were interested in entering in the Icelandic market before partially recovering from the fall. Hagar stocks are still 10% down from the 2017 highs as new competition appears.
As a member of the 28-nation European Economic Area, Iceland makes an ideal platform for tariff-free access to the major EU market area, as well as a fully competitive location for EU companies to operate. Low-cost products can be exported to Iceland to gain substantial mark-ups. Current trends include organic foods and healthy habits related products. Iceland is regularly ranked among the 30 most competitive countries in the world.
Icelandic authorities are committed to offering a favorable business environment. This includes a low 20% corporate tax and a new effective incentive regime aimed at foreign investment. The general aid ceiling is 15% of the initial investment cost. The ceiling can be lifted to 25% for medium-sized enterprises and 35% for small enterprises for 10 years. In addition, it is possible to depreciate real estate, equipment and moveable assets fully, there are reduced property tax and general social charges by 50%, exemptions from customs and duties for construction materials, machinery and equipment and a tax credit of 20% of the actual research and development costs.
Iceland ranks 5th globally on the quality of the educational system and is the world leader regarding the availability of the latest technologies in companies. The workforce in Reykjavik is well educated and leads to OECD standards. 41% of the inhabitants have achieved a university degree.
When establishing a business entity in Iceland you are required to apply for a VAT ID number at RSK (Directorate of Internal Revenue). This is a fairly simple task, it is a two-page form that covers the VAT-ID registration as well as a notification of the estimated payroll from the company. These forms need to be filled out and handed in at Tax offices. The form is only available in Icelandic.
Get in touch with Icelandic professionals
To have an extensive commercial and legal relating consultation, contact Swapp Agency. We are a leading group of experts in diverse fields. Our professional team will be happy to assist you throughout the process of investing in Iceland. Whether it is personnel, the selling of goods & services or legal aspects, we are prepared to solve all your inquiries regarding retail in Iceland.