Iceland has slowly moved itself out of recession since the economic crash of 2008 – Standard & Poor’s credit rating for Iceland currently stands at A with stable outlook, Moody’s credit rating was last set at A3 with stable outlook, while Fitch’s credit rating was last reported at A- with positive outlook.
The country has a long and trusted trading relationship with the UK, and is an educated and technologically advanced society that appreciates high quality products and services – if you’re thinking of doing business there, here’s everything you need to know about exporting to Iceland…
What are the pros and cons of exporting to Iceland?
Although Iceland isn’t part of the EU, doing business in Iceland is similar to in the UK – there are no major challenges to doing business, so if you’re doing well over here there’s no reason you won’t have the same success over there.
The benefits of doing business in Iceland include:
- UK is the closest neighbouring country with good logistic connections
- English widely used as business language
- familiarity with British goods as UK is the preferred shopping place
- little manufacturing of consumer goods in Iceland
- compact market as high concentration of consumers in Reykjavik
While the strengths of the Icelandic market are:
- high purchasing power
- quality minded consumers
The UK is Iceland’s eighth largest import market, and the top exports from the UK to Iceland include:
- food and beverages
- industrial supplies
- fuels and lubricants
- capital goods
- transport equipment
- consumer goods
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How does tax work in Iceland?
A double taxation agreement exists between the UK and Iceland, so tax isn’t paid twice – once in each country – on exported goods and services.
The main tax rates include:
- Corporate Tax – set at a rate of 20%
- Income tax – ranges from 37.3% to 46.24%, depending upon income.
- Capital Gains Tax – set at a rate of 18%.
- Valued Added Tax (VAT) – charged at 25%.
How will I be affected by customs in Iceland?
Although not part of the EU, Iceland is part of the European Economic Area (EEA), which means there is generally free movement of goods to and from the UK. It’s worth noting that the agreement applies mainly to industrial goods, certain farm products, and specific species of fish.
Any goods not covered by the agreement are levied with the same duties as goods from outside the EEA. For more information, contact the Directorate of Customs,or visit the Market Access Database for more on tariffs.
