Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

ICELAND

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: September 19, 1983.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
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.
Other security restrictionsIn 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.
References to legal instruments and hyperlinksAnnouncement No. 776 of October 2001.
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.
References to legal instruments and hyperlinksAct on the Central Bank of Iceland No. 36 of May 2001; www.sedlabanki.is.
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 control on inward foreign direct investment. The CBI licenses foreign exchange dealers on a commercial basis and sets reporting requirements for statistical purposes.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesNo.
References to legal instruments and hyperlinksAct No. 87/1992 on Foreign Exchange; www.vidskiptaraduneyti.is.
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 of 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.
References to legal instruments and hyperlinksRules on the Obligation to Provide Information Regarding Foreign Exchange Transactions and Capital Movements Between Countries, No. 13, of January 1995; www.vidskiptaraduneyti.is.
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.
References to legal instruments and hyperlinksRules on the Obligation to Provide Information Regarding Foreign Exchange Transactions and Capital Movements Between Countries, No. 13, of January 1995; www.vidskiptaraduneyti.is.
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.
References to legal instruments and hyperlinksAct No. 87/1992 on Foreign Exchange; www.vidskiptaraduneyti.is.
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.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsForeign governments and other authorities are prohibited from issuing debt instruments in Iceland unless permitted by the CBI.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsThe purchase of shares or other equity capital may be affected by laws on foreign investment in Iceland.
Bonds or other debt securities
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsForeign governments and other authorities are prohibited from issuing debt instruments in Iceland unless permitted by the CBI.
On money market instruments
Sale or issue locally by nonresidentsForeign governments and other authorities are prohibited from issuing debt instruments in Iceland unless permitted by the CBI.
On collective investment securities
Sale or issue locally by nonresidentsForeign governments and other authorities are prohibited from issuing debt instruments in Iceland unless permitted by the CBI.
Controls on derivatives and other instruments
Sale or issue locally by nonresidentsForeign governments and other authorities are prohibited from issuing debt instruments in Iceland unless permitted by the CBI.
Controls on credit operationsNo.
Controls on direct investment
Inward direct investmentControls apply to investments (1) exceeding ISK 250 million a year by a single investor, unless an authorization is granted; (2) raising above 25% the nonresident share of the total stock of investment in trade and services, aquaculture, communications, and manufacturing other than power-intensive industries, unless an authorization is granted; (3) that seriously reduce competition between enterprises in any sector or are otherwise likely to have an undesirable effect on the Icelandic economy; (4) by foreign states or state-owned enterprises, unless an authorization is granted; (5) in real estate, except by a legal entity that has acquired rights to conduct a business enterprise and provided the real estate is accompanied by only normal rights to land and does not include other rights, such as fishing or water exploitation rights; (6) in fishing and primary fish processing (i.e., excluding retail packaging and later stages of preparation of fish products for distribution and consumption); (7) in subsidiaries of foreign banks, and investment in domestic banks exceeding 25% of share capital; (8) in an air transport company exceeding 49% of share capital; and (9) including (a) acquisition of rights to natural resources or energy exploitation, and investment in energy production or distribution; and (b) ownership of Icelandic flag vessels except through an enterprise incorporated in Iceland.
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 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.
References to legal instruments and hyperlinksAct No. 87/1992 on Foreign Exchange; www.vidskiptaraduneyti.is.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Investment regulations
In banks by nonresidentsControls apply to establishment of subsidiaries of foreign banks and investment in domestic banks exceeding 25% of share capital.
Open foreign exchange position limitsThe CBI regulates the net foreign exchange positions of banks.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
Pension funds
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.
Limits (max.) on investment portfolio held abroadn.a.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionForeign exchange exposure of pension funds is limited to 50% of their total assets.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksRules on Foreign Exchange Balance No. 318 of April 25, 2006; Act on Pension Funds No. 129/1997; www.sedlabanki.is.
Changes during 2006
No significant changes occurred in the exchange and trade system.

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