Iceland

Iceland's inward foreign direct investment (FDI) position remains concentrated in aluminium manufacturing, pharmaceuticals, and holding companies, which together account for approximately 47% of total FDI stock, with Luxembourg, Norway, the Netherlands, the United Kingdom, and Switzerland as the principal source markets as of end-2023. The 2025 Althingi (Parliament) amendments to agricultural land ownership rules now require investors to demonstrate community benefit through job creation or infrastructure improvements, adding a new compliance layer for greenfield entrants in the agricultural segment.

Lloyds Bank Trade / Nordics Today · 2026-05-23

Statutory foreign ownership ceilings remain operative across three key sectors: fishing companies must maintain at least 75% Icelandic ownership; hydropower and geothermal utilisation rights are restricted to Icelandic or European Economic Area (EEA) nationals and entities; and non-EEA investors are capped at 49% in Icelandic airline companies. These restrictions, codified in the 1991 Act on Foreign Investments, continue to define the outer boundary of permissible FDI in Iceland's most capital-intensive natural resource sectors.

UNCTAD Investment Policy Hub · 2026-05-23

The OECD's 2026 Foundations for Growth and Competitiveness report identifies barriers to FDI and services trade as "markedly high in some respects" and calls for their alleviation alongside trade facilitation measures to expand effective market size. The report further flags high administrative and regulatory hurdles to business entry, cumbersome multi-authority licensing, and expensive insolvency procedures for small firms as structural impediments to investment dynamism.

OECD · 2026-05-23

Iceland's services trade restrictiveness index (STRI) for 2024–25 remained unchanged across all sectors, reflecting a stable but above-OECD-average regulatory posture toward third-country services suppliers. Key structural barriers include a residency requirement for half of corporate board members and the manager, a 12-month cap on intra-corporate transferee stays for non-EEA nationals, and a prohibition on contractual services suppliers outside education and R&D activities.

OECD Services Trade Restrictiveness Index 2026 · 2026-05-23

The Icelandic Competition Authority (Samkeppniseftirlitið) submitted Opinion No. 3/2026 to the Parliamentary Committee on Economic Affairs and Commerce on 15 April 2026, raising concerns that a proposed temporary reduction of value-added tax (VAT) on fuel from 24% to 11% for the period 1 May–31 August 2026 may not be passed through to consumers given the oligopolistic structure of the fuel retail sector. The government subsequently enacted the fuel VAT reduction, which the Central Bank of Iceland cited as a partial inflation-mitigation measure in its May 2026 rate decision.

Concurrences / Trading Economics · 2026-05-20

Iceland's NIS2 (Network and Information Security Directive 2) transposition is progressing via amendment of the existing Cyber-Security Act 78/2019, with enforcement expected by July 2027 and full compliance required by October 2028. The anticipated legislative changes include tighter incident-reporting timelines, expanded supervisory powers, and broadened scope to cover cloud services, manufacturing, and public administration—materially raising compliance obligations for foreign operators in digital infrastructure sectors.

Copla · 2026-05-23

The Central Bank of Iceland raised its key policy rate by 25 basis points to 7.75% on 20 May 2026, the second consecutive increase, with all Monetary Policy Committee members voting in favour. The decision was driven by a worsening inflation outlook, with headline inflation at 5.2% in April 2026 and short-term inflation expectations continuing to rise, compounded by rising global oil and commodity prices linked to Persian Gulf tensions.

Investing.com / Bloomberg · 2026-05-20

Economic activity contracted by 0.6% in Q4 2025, and the Central Bank now projects weaker GDP growth and higher unemployment relative to its February 2026 baseline. The Monetary Policy Committee signalled readiness to tighten further if needed, explicitly accepting weaker near-term growth as a cost of returning inflation to the 2.5% target.

Trading Economics / Investing.com · 2026-05-20

The OECD had projected GDP growth of 3.0% for Iceland in 2026, but that outlook is now under pressure given the renewed tightening cycle and external commodity shocks. The OECD also identifies volcanic eruption risk and further tariff escalation affecting Iceland's principal export goods as the two primary downside scenarios for the near-term growth trajectory.

OECD Economic Snapshot / Iceland.org · 2026-05-23

Iceland's three primary export sectors—tourism (37% of total export value in 2024), marine products (21%), and aluminium manufacturing (18%)—continue to anchor the commercial landscape, with the United States representing the single largest trading partner at USD 4.7 billion in total bilateral goods and services trade in 2024, a 41.6% increase year-on-year. U.S. agricultural goods face tariffs up to 30% higher than EU-origin equivalents due to Iceland's EEA Agreement preferences, a persistent asymmetry for non-EEA market entrants.

U.S. International Trade Administration / Iceland.org · 2026-05-23

The OECD's 2025 Economic Survey flags that some domestic legislation may overprotect incumbent firms at the expense of new entrants, with business and occupational licences identified as requiring review and administrative simplification. The construction services sector carries the highest STRI score in Iceland relative to the cross-country sectoral average, driven by a mandatory local licensing examination and a minimum one-year in-country practice requirement for construction engineers.

OECD Economic Surveys: Iceland 2025 · 2026-05-23

Legislative proposals for online gambling sector reform are under active parliamentary consideration as of May 2026, with draft provisions establishing a formal licensing regime, mandatory responsible-gambling tools, and a new taxation framework on operator revenues. The proposals represent a structural market-opening measure for a previously unregulated segment, though the compliance burden may limit the pool of viable entrants.

Surface Protection Art · 2026-05-09