Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

ICELAND

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of December 31, 2004)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: September 19, 1983.
Exchange Arrangement
CurrencyThe currency of Iceland is the Icelandic króna.
Exchange rate structureUnitary.
Classification
Independently floatingThe external value of the króna is determined freely on the basis of supply and demand in the foreign exchange market.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketForward contracts may be negotiated freely in all currencies.
Arrangements for Payments and Receipts
Prescription of currency requirementsn.r.
Payments arrangementsNo.
Administration of controlThe Ministry of Commerce (MC) has ultimate responsibility for imports and, in consultation with the Central Bank of Iceland (CBI), for capital movements and foreign exchange regulation. The MC implements the control on inward foreign direct investment. The CBI licenses foreign exchange dealers on a commercial basis and sets reporting requirements for statistical purposes.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)The authorities notified the IMF that certain restrictions have been imposed on financial transactions based on UN Security Council resolutions.
In accordance with UN sanctionsIn accordance with UN Security Council resolutions, restrictions are imposed on financial assets and transactions of Osama Bin Laden, Al-Qaida, the Taliban, and other individuals and organizations associated with terrorism.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesNo.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyAll accounts in domestic banks must be identified by name and identification number.
Held abroadResidents should inform the CBI on the opening of bank accounts abroad. However, this requirement has not been enforced.
Accounts in domestic currency held abroadn.r.
Accounts in domestic currency convertible into foreign currencyn.r.
Nonresident Accounts
Foreign exchange accounts permittedBanks must report to the CBI the monthly positions of nonresident accounts. All accounts in domestic banks must be identified by name and identification number.
Domestic currency accountsYes.
Convertible into foreign currencyAll accounts in domestic banks must be identified by name and identification number.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresImports of goods and services are permitted freely, except when international agreements or provisions in special legislation provide otherwise.
Negative listLive animals and certain agricultural products require health certificates.
Open general licensesImports by tourists and foreign visitors are duty free within general limits on the total value, as well as on individual merchandise value, and quantitative limits are set on alcohol and tobacco by the customs authorities.
Import taxes and/or tariffsYes.
State import monopolyTobacco may be imported only under state trading arrangements.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasExports of military, fishery, and agricultural products require licenses from the Ministry of Foreign Affairs.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsForeign governments and other authorities are prohibited from issuing debt instruments in Iceland unless permitted by the CBI.
Controls on capital and money-market instrumentsThe purchase of shares or other equity capital may be affected by laws on foreign investment in Iceland.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Bonds or other debt securities
Sale or issue locally by nonresidentsYes.
On money market instrumentsThe regulations governing bonds or other debt securities apply.
On collective investment securitiesThe regulations governing bonds or other debt securities apply.
Controls on derivatives and other instrumentsThe regulations governing bonds or other debt securities apply.
Controls on credit operationsNo.
Controls on direct investment
Inward direct investmentForeign direct investments by nonresidents in business enterprises in Iceland are regulated by a special law on investment, which has the following provisions: (1) foreign ownership of Icelandic legal persons engaged in fishing within Iceland’s jurisdiction or in fish processing is limited to 25%; however, this share can be up to 33% if the share of an Icelandic legal person does not exceed 5%; (2) investments by foreign governments and public authorities are prohibited in Iceland; the MC may grant exemptions from this restriction and the restrictions below, which do not apply to residents of the EEA;(3) restrictions apply on the ownership of, and right to harness, waterfalls and geothermal energy areas where restrictions apply to investment in power production and distribution companies; (4) the combined ownership share of nonresidents in domestic airlines may not exceed 49%; and (5) a special law on investment, as well as other special laws, stipulate conditions for defining the residency of managers and the majority of the voting power in holding companies.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsOwnership of real estate in Iceland is subject to the following conditions: (1) individual owners must have a domicile in Iceland; (2) in the case of unlimited companies, all owners must be Icelandic citizens; and (3) joint-stock companies must be registered in Iceland, with at least 80% ownership by Icelandic citizens, and all of the members of the board of directors must be Icelandic citizens. Icelandic citizens must control the majority of the voting power at annual meetings. The same conditions apply if real estate is to be leased for more than three years or if a lease agreement cannot be terminated with less than one year’s notice. However, a company that is granted an operating license in Iceland may acquire real estate for its own use as long as the license does not include the right to exploit natural resources. Citizens of the EEA and other foreign citizens who have been domiciled in Iceland for at least five years are exempted from these restrictions. The Minister of Justice may grant others exemption from these requirements.
Controls on personal capital transactionsNo.
Provisions specific to commercial banks and other credit institutions
Open foreign exchange position limitsThe CBI regulates the net foreign exchange positions of banks.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsPortfolio investments of pension funds are restricted to listed securities in organized markets within OECD countries and in other markets approved by the Financial Supervisory Authority.
Currency-matching regulations on assets/liabilities compositionForeign exchange exposure of pension funds is limited to 50% of their total assets.
Other controls imposed by securities lawsNo.
Changes During 2004
No significant changes occurred in the exchange and trade system.

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