Restrictions on investments by non-residents in Iceland

Non-residents are permitted to invest in business enterprises in Iceland within the limitations stipulated in Article 4 of the Act No 34/1991.

Article 4

Investment by non-residents in Iceland is subject to the following restrictions:

1.     Only the following may conduct fishing operations within the Icelandic fisheries jurisdiction according to existing laws on Fishing Rights within the Icelandic Territorial Waters or own or run enterprises engaged in fish processing:

a. Icelandic citizens and other Icelandic persons. 

b. Icelandic legal persons which are wholly owned by Icelandic persons or Icelandic legal persons which:

• i. are controlled by Icelandic entities;
• ii. are not under more than 25% ownership of foreign residents calculated on the basis of share capital or initial capital. However, if the share of an Icelandic legal person in a legal person conducting fishing operations in the Icelandic fisheries jurisdiction or fish processing in Iceland is not above 5%, the share of the foreign resident may be up to 33%;
• iii. are in other respects under the ownership of Icelandic citizens or Icelandic legal persons controlled by Icelandic persons.

Fish processing under this paragraph 1 means freezing, salting, drying or any other processing which protects fish and other marine products from decay, including the production of fish-oil and fish-meal. However, processing in this context does not include smoking, pickling, canning and retail packaging or further processing designed to render products more suitable for distribution, consumption, or cooking.

2.     Only Icelandic citizens and other Icelandic persons are permitted to own energy exploitation rights as regards waterfalls and geothermal energy for other than domestic use. The same applies to enterprises which produce or distribute energy. Individuals domiciled in another member state of the European Economic Area and legal persons which are domiciled in another EEA member state shall have the same right. Investment agreements between Iceland and non-member states of the EEA may stipulate that residents of such state or legal persons domiciled in such states shall also have the same right provided that such agreements are submitted to the Althingi for ratification by resolution.

A non-resident who obtains ownership or utilization rights over real estate in accordance with the provisions of law on ownership and utilization rights of real estate may utilize geothermal energy for direct use in his enterprise within the limits set by The Energy Act.

3.     The combined share of non-residents in Icelandic airline companies may not at any time exceed 49%. Individuals domiciled in another member state of the European Economic Area and legal persons there domiciled are exempted from the provisions of this subparagraph.

4.     Investment in Icelandic enterprises by foreign states, local authorities or other foreign authority involved in enterprises is prohibited except with a special permission from the Minister of Commerce.

5.     Non-residents may acquire title to real estate in Iceland for direct use in his enterprise in accordance with the provisions of the Act governing the ownership and utilization rights of real estate.

Icelandic person in this Article means the State Treasury and local governments as well as institutions, enterprises and funds in Iceland which are wholly under their ownership, Icelandic citizens resident in Iceland and legal persons domiciled in Iceland which are wholly owned by Icelandic public institutions, Icelandic citizens resident in Iceland or other legal persons domiciled in Iceland and which are wholly owned by Icelandic citizens resident in Iceland. Icelandic legal person in this Article means a legal person domiciled in Iceland irrespective of the form of legal identity or ownership of the enterprise. A legal person is regarded as being domiciled in Iceland if it is registered as domiciled in this country, if its articles of association state its domicile in this country or if its effective management board is in Iceland. Icelandic legal person controlled by an Icelandic person or persons in this Article means an Icelandic legal person which is under the majority ownership of an Icelandc person, as through majority of share capital or majority of initial capital, which holds the majority vote or has effective control of the said legal person.