Chapter 22. Iceland

Figure 22.1. Structure and performance of the SME sector in Iceland
Figure 22.1. Structure and performance of the SME sector in Iceland

Sources: Charts A, C, D: OECD Structural and Demographic Business Statistics Database 2018,; Chart B: OECD Timely Indicators of Entrepreneurship database 2018; Chart E: OECD Structural and Demographic Business Statistics Database 2018, Employer Business Demography dataset.


SME business conditions and access to strategic resources

Institutional and regulatory framework

Considering the size of its economy and administration, Iceland does not generally issue SME-specific policies. Relative improvements in the burden of administrative procedures have been observed, such as a decrease in the number of tax payments per year from 26 in 2008 to 21 in 2017. However, this is still almost twice the average of high-income OECD countries. In 2016, the Icelandic Committee on Trade Procedures and e-Commerce was appointed to implement a National Interoperability Framework in line with the EU Digital Agenda. The aim is to improve the e-commerce, transparency and user-friendliness linked to e-government procedures and criteria, and simplify administrative and trade procedures for businesses.

Market conditions

Returning to financial normality and establishing prudential economic policies has been Iceland’s priority since the 2008 financial crisis. Capital controls were lifted as of March 2017 after the introduction of a series of gradual measures, such as a bill in 2016 allowing all current account transfers and halting limits to foreign exchange purchases and real estate investments, and the possibility since early 2017 to transfer deposits and securities to and from Iceland. The devaluation of the króna after the crisis facilitated the emergence of the tourism industry. International tourists have quadrupled since 2010, reaching ca. 1.75 millions in 2016, boosting investments in the related industries and new businesses openings.


Iceland ranks first for internet usage among OECD countries, with 98% of Internet users in 2016. The Rural Fibre Project was launched in 2016 to bring fibre networks to 5.500 remote households and businesses, with approximately 1.500 households remaining in 2018. Works to renovate and expand the Keflavik airport to meet increasing demand are also ongoing in 2018, resuming investments in infrastructure after the neglect during the years of the crisis.

Access to finance

Following the 2008 banking crisis, access to finance in Iceland has improved in recent years, with no significant liquidity shortages reported for SMEs. The removal of the majority of capital control measures is expected to enhance business financing and investment. Alternative forms of finance have started to emerge besides banking, such as the VC fund Crowberry dedicated exclusively to women, established in 2016. In addition at the end of 2016, the InnovFin SME Guarantee agreement between the Icelandic Arion Bank and the European Investment Fund was announced, to fund SMEs and small mid-caps aiming at innovative products and services. The Nordic Investment Bank and Landsbankinn’s seven-year loan programme for SMEs finance and environmental projects was launched in 2017.

Access to skills

Several governmental and private initiatives are taking place in Iceland to foster the entrepreneurial ecosystem and attract talented workers. The 2016 Innovation Bill allows foreign specialists a 25% tax break in the first three years of employment, while Northstack, a tech and startup community set up in 2015, has launched the tech sector job board in 2018 to attract international tech labour. Clusters facilitating contacts and exchanges among entrepreneurs are also emerging. The recently opened Tourism Cluster House provides a facility where entrepreneurs, startups and large companies operating in the same industry can network, and where veteran entrepreneurs assist new entrepreneurs..

Access to innovation assets

Iceland relies substantially on international funding and SMEs for its business R&D: in 2015, 35% of related expenditures were funded from abroad and 90% of business R&D was undertaken by SMEs. Incentives for R&D were included in the 2016 Innovation Bill, including tax credits for innovation with an annual ceiling. From 2019, annual ceilings are planned to be removed to establish a more competitive environment for innovation, so that a 20% R&D tax credit will be applied without limitations.

The full country profile is available at


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European Investment Bank (2018), EIB to Support Isavia in Development of Keflavík Airport, (accessed on 15 November 2018).

European Investment Fund (2016), EIF and Arion Bank sign EUR 107 Million Agreement for Innovative Icelandic Businesses, (accessed on 15 November 2018).

Hillenius, G. (2018), Iceland Fibre Network Focuses on Final 1500 Remote Sites, (accessed on 15 November 2018).

Hróbjartsson, K. (2018), “Iceland is Sold Out” and the Competition for Tech Talent, (accessed on 15 November 2018).

Invest in Iceland (n.d.), Incentives and Support, (accessed on 15 November 2018).

Isavia (n.d.), Masterplan 2014-2050.Keflavik International Airport, (accessed on  November 2018).

Lár, K. (2016), “Innovation Bill” Passed in Parliament, (accessed on 15 November 2018).

Nordic Investment Bank (2017), NIB and Iceland’s Landsbankinn Start New SME Facility, (accessed on 15 November 2018).

Nordic Startup Bits (2016), Crowberry Capital has Sights Set on Early Stage Startups in the Nordics, (accessed on 15 November 2018).

Norðurskautið (2017), Crowberry Capital is the Newest VC Fund in Iceland., (accessed on 15 November 2018).

OECD (2017), Highlights from the OECD Science, Technology and Industry Scoreboard 2017 - The Digital Transformation: Iceland, (accessed on 15 November 2018).

OECD (2017), OECD Economic Surveys: Iceland 2017, OECD Publishing, Paris,

Romei, V. and H. Murphy (2017), Boom, Bust and boom Again: Iceland’s Economy in Charts, (accessed on 15 November 2018).

Sigfusson, T. (2018), The Idea Behind the Cluster House, (accessed on 15 November 2018).

Sigurdardottir, R. (2018), Iceland Spending $1 Billion on Boosting Airport Capacity, (accessed on 15 November 2018).

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World Bank Group (2018), Economy Profile of Iceland, World Bank, Washington, DC, License: CC BY 3.0 IGO.

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